Consumers are feeling the pinch, but so are retailers. Can Black Friday even happen this year?

By Mark Hook, spokesperson for Inventory Planner by Sage

Black Friday traditionally marks the start of the festive shopping season, with big ticket promotions that seem to get bigger every year. It is now fast approaching, and many retailers are reassessing their strategies for this year’s event in light of the ongoing cost-of-living crisis.

This is at its peak; families in the UK and US are struggling to pay their heating bills and put food on the table due to soaring inflation, out of control energy prices and looming recession.

It’s enough to dampen the festive spirits of anyone – and it means Black Friday this year will be less ‘joyful splurging’ and more ‘stressful scrambling’.  

Holidays (and challenges) are coming

The much anticipated  shopping event is famously focused around discounts and, in a year where cost-of-living pressures are so acute, consumers all over the world are likely to be bargain hunting even more this year - in fact, they’ll be relying on discounts to afford their holiday shopping

Research by our team at Inventory Planner found 41% of UK shoppers and two-thirds of US buyers are ‘depending’ on businesses to discount goods ahead of the festive period to be able to put presents under their trees.

According to research from LoyaltyLion, 68% of consumers are waiting for Black Friday weekend to make holiday gift purchases, due to the cost-of-living crisis.

However, others will be buying less – and some won’t be buying anything. Our own data revealed that 52% of shoppers in the USA, and 26% in the UK, are seriously worried they won’t be able to afford to celebrate Christmas at all this year. 

Left out in the cold

Consumers are of course under huge financial pressures this year, but so are retailers.

In a world fueled by rocketing energy prices, the rising cost of raw materials, packaging, labour, logistics, marketing and inventory, the operating cost pressures for e-commerce and retail are the highest they have been in decades, and discounts are hugely expensive to a retail profit and loss (P&L).

Although consumers may want discounts, many retailers are not in a sufficiently strong financial position to give them. Brightpearl research earlier this year highlighted that one in four brands are just four weeks away from supply chain issues causing ‘crisis point’ issues with cash flow.

A festive fix

For many retailers, all of their annual profit could be made – or lost – in the six weeks running up to Christmas.

So, arguably, one solution for those wanting a more profitable holiday trading period would be to reduce the number and size of discounts - or boycott Black Friday completely.

That could impact on sales though so another approach would be to offer discounts strategically. This means primarily promoting products that are already stacked up in your warehouse or that are proving to be slow movers.

At this time of year it’s also important to get the get the balance right when it comes to inventory – you don’t want to run out of stock and miss out on sales, but you definitely don’t want to tie your cash up in stock you can’t shift once BFCM has come and gone.

With the chaotic nature of peak season, it can be a challenge to forecast accurately – knowing when to replenish goods and when not to, can prove to be very complex. This process is only made harder by what’s been happening in recent years – whether that’s the pandemic or the cost-of-living crisis.

Fortunately, many retailers are planning to take steps to fix inventory planning issues ahead of the holiday season.

Such measures include trying new product lines, internal processes such as more stock checks, and ordering less stock.

One in five are also  planning to adopt technology to optimise stock replenishment and planning, and demand forecasting software can help firms make intelligent decisions about what products to order, when to order stock, and how much to order which can boost the bottom line this festive season.

In my view, most retailers will have to participate in Black Friday - it could be their main opportunity to maximise sales this holiday season. However, they have to go into BFCM with a strategic and intelligent approach, discounting only the slow movers and excess stock.

It may be the only way for retailers to survive the cost squeeze they are enduring, and ensure a more profitable trading period.