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Sun. Jul 14th, 2024

How Australian retailers can avoid the Black Friday nightmare before Christmas

By Vaseline May27,2024

How was your Black Friday weekend last year? No really. Was it actually profitable? On the one hand, consumers spent record amounts during last year’s cyber weekend, leading to big year-over-year growth for the retail industry in November. But, and this is a big but, this was almost entirely accompanied by a big decline in December, which looks even worse when we take inflation into account. So while the sales period may have shown sales and volume growth, digging into the numbers now tells us that i

In many cases, these sales were simply moved forward from the traditional Christmas season – at deep discounts for consumers. The thing is, we predicted exactly this would happen. Last year we wrote an article for Inside Retail about our ongoing research with Associate Professor John Hopkins from Swinburne University of Technology. We’ve studied retailers’ strategies and sentiment towards mega-sales before Christmas – Black Friday, Cyber ​​Monday, Singles Day etc. Through interviews with retail leaders, we’ve consistently heard that many brands are reluctant to engage in these sales participate, realizing that they are training consumers to shop early and demand deep discounts. We used the term ‘Nightmare before Christmas’ to sum up the sentiment in the industry, while also making a nice Christmas movie pun. Even as senior leaders told us they were concerned about consumers becoming addicted to the ‘discount drug’ and eroding their brand perceptions, many brands still opted for deep sitewide discounts, with some taking effect weeks before the actual event started. Of course, we also saw some interesting approaches, such as unique product ranges, tailor-made offers for loyal customers and even anti-sales. Still, overall sales results support the fact that most retailers focused on deep price discounts, and the industry may have suffered as a result. These big sales are clearly here to stay: consumers expect them, and retail leaders admit to being addicted to the sales boost they bring. So what can we do about this? Well, strategy matters. With the industry grappling with multiple external factors and margin pressures, now is the time to plan for the 2024 holiday season. It’s an opportunity to assess the value of these sales events to your brand and develop strategies to maximize their benefits and at the same time avoid some risks. Going back to our research and what we’ve seen since then, here are four things to consider: Look at the bottom line, not just the revenue numbers. One of the sentiments we consistently heard from retail leaders is that it’s hard to see past the top numbers. line numbers when evaluating the impact of these events. This is natural. It feels great to report that website visits and social engagement skyrocketed, and revenue and sales volume grew by several or even a few percent. We all love to see a graph go up. But are these top numbers good if they come from a 60 percent or even 70 percent discount? If you’re losing money with each of these discount offers, do you really want more of them? Of course, this is too simplistic a view of things. There’s a lot to consider when measuring the success of pre-Christmas sales. Our point is that we need to look past the obvious numbers like clicks, engagement and even sales volume and look at the profitability of these sales, which is strongly related to the next point. Think about the long term, not just the weekend Another common theme we heard from retailers is that they are so focused on ‘winning the weekend’ that they can lose sight of the longer term impact to lose. We’ve heard that the focus on price discounts is a race to the bottom, and not many companies can sustain this strategy long enough to see it pay off. So why are they still doing it? Well, many retailers are feeling the pressure to participate in sales out of FOMO. They don’t want to miss out on a share of the wallet in the short term (even at a discount), and they lose sight of the consequences this could have in the long term. This short-sighted view entails risks. Getting sales now can train consumers to wait for discounts instead of buying at full price, and can even impact brand perception and value in the long run. So even if you’re trying to win the weekend, think ahead and make sure you don’t lead yourself down a path you don’t want to tread. Offer more value than just price. Pre-Christmas sales have become synonymous with deep discounts. Consumers now expect them, as we discussed above. Yet price is only part of the value equation. Without bringing you back to year one marketing, price is how much consumers pay for a product or service, while value is the benefits they receive relative to the price. So while customers are trained to wait for a sale to get a better price, there is an opportunity for retailers to move them out of this discount mentality by focusing on value. Finding ways to provide value to customers by surprising and delighting them beyond discounts can maintain customer satisfaction and loyalty without the same detrimental effect on the bottom line. For example, customers respond more than ever to personalized offers. So instead of a one-size-fits-all approach focused on deep discounts, think about how to tailor your strategy to consumers based on their preferences and behavior. Or perhaps you can offer additional (non-price) benefits to loyal customers who shop during the events. Look at what makes your brand unique, beyond the cost of your products. Have a strategy – and stick to it. Our main point from this article boils down to this: if you’re going to participate in pre-Christmas mega sales (and we all know you do), come up with a reason and strategy for it, and stick with it. to it. Whether it’s attracting new customers, rewarding existing customers, or moving old inventory, make sure you have a clear reason for participating in these sales and tailor your strategy to that goal. Don’t just look for sales, as deep discounting is unlikely to be profitable and could set you up for failure later. These sales events don’t have to be a nightmare. Done right, they can be a great way for consumers to check off the gift shopping needs (their “Christmas administration”) while retailers prepare for the traditional holiday season (the “Christmas Cheer”). But getting there means planning, having a clear strategy, and being sincere in the way you approach the period. Now is the time to make sure that strategy is ready to go. So this year is not just a nightmare. This story first appeared in the May 2024 issue of Inside Retail Australia magazine.

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