BrainTrust Query: Black Friday Madness – A Strategy for Failure
Commentary by Doron
Levy, president, Captus
Business Consulting
If
the goal of a sale is to bring people in and get them shopping, I
have to question the validity of Black Friday sales and quantity
allocations. Changes in the retail industry are creating an environment
where Black Friday sales are becoming less relevant and can actually
create short-term damage to the brand.
Consumers
have to scrutinize the deal and savvy customers who understand sales
will be the first to pass on these ‘super deals’. I applaud the fact
that retailers have recently begun advertising quantities available
and have been printing conditions and limitations more clearly on
their media. Unfortunately, these disclosures only confirm low availability
and strict limits on the deals. The whole purpose of a ‘big sale’
is to bring people in the doors. Current Black Friday strategies
are flawed and create a hostile retail environment for customers.
The
current economic situation has also turned ‘browsers’ into ‘cherry
pickers’ as more customers scrutinize the use of their shopping dollars.
This shift in customer behavior can wreak havoc for retailers especially
when it comes to Black Friday and other sale execution.
Last
season I was working on a project for a major club chain. To remain
competitive, they were advertising 42″ Sony LCD TVs at an unbelievably
low price. On the day of the sale, I noticed the club manager placed
the 12 units he had in stock on flatbed carts and parked them right
up at the cash registers. I asked him about that and his response
was, “We want to make it convenient for the member.” So I decided
to track the 12 units to see what would happen. Here is a summary:
- At
9 a.m. there were 55 customers waiting for the 12 units. - At
9:05 a.m. the club was sold out of the 12 units. - All
12 units went out on their flatbeds at a loss of $400 each. - Not
one of the 12 members purchased anything else. - Of
the 43 that did not get TVs, 29 of them lodged complaints to the
club manager. - Forty
of the customers who did not get a TV immediately walked out with
no further interactions. - The
three remaining customers browsed the club and walked out with
nothing.
So
to summarize, this club (which is no longer in business) lost $4800
in the first five minutes of opening. No attempt at additional sales.
No merchandising strategy. No way to capitalize on foot traffic in
the club. Something as simple as HDMI cables were nowhere to be found.
Unfortunately, this scenario echoes many Black Friday attempts at
getting people in the door.
Our
current economic climate has created shifts in buying habits that
retailers must understand and take action on. Black Friday deals
that are weak in terms of allocation and model availability will
not create the desired results. Merchants looking for increased basket
size and return visits will not realize those goals. Instead, you
will see Black Friday deals sell out quickly with little or no margin
intake and the alienation of the bulk of you customer base. That
will lead to medium and long-term image problems for your brand.
Discussion
Questions: Do you think Black Friday deals and marketing strategies
have become flawed? How has the downturn changed their effectiveness?
What should and shouldn’t retailers be doing on Black Friday?
The only thing I would argue in this otherwise excellent article is that “shoppers are turned into cherry-pickers.” The people who line up outside the stores for hours are ALREADY cherry-pickers for the most part. As I was telling a reporter yesterday, the notion that people waiting in line for a “doorbuster” are going to buy complimentary products and/or become repeat customers is utter nonsense.
A lot of retailers are in it for the PR buzz anyway. They hope to create a perception of deals and scarce commodities. I think it’s a terribly flawed strategy. At least the creation called “Cyber Monday” doesn’t drive risk of trampling…just creaky servers.
In an exquisite irony, given how tight retailer inventories are, customers probably should shop earlier this year, and not wait for the best deal right before Christmas. But there’s really no way to persuade them of that. We’ve trained them too well.
Great comments Doron. Black Friday originally was to clear out old stuff, draw people to the store and offset the low prices with higher profit merch. Now it seems to attract the cherry pickers and not much else as Doron so clearly pointed out.
Black Friday which, by the way, is a term that was never intended to become a consumer’s term, is still a great retail event because the hype creates a rush of traffic. Unfortunately, the event has become misguided by retailers that mismanage inventories, pricing, and respond erroneously to competition. The opportunity is still in place for retailers to go into the black, or at least…into the gray!
Doron is right on the money (or, given the topic, the loss of money) with this article. There’s no brand equity to be built by selling a few units at a loss to the first few shoppers in an unruly, panicked, ultra-cost-sensitive mob. The chain creates a very few happy (but one-time-only) customers, at the expense of creating a much larger group of angry people who wouldn’t have been profitable customers anyway. And the promoted brand gets a ridiculously low price advertised in huge numbers next to its products, which sets an unrealistically low “anchor price” in customers’ minds that can discourage future purchases (for a wonderful discussion of “anchor” prices, see Dan Ariely’s terrific book, “Predictably Irrational“). And to top it off, you have the real danger of having injuries or even deaths in your store–where’s the PR value in that?
Stores would be better served to create reasons for real shoppers to come into the store and buy products at real prices. Instead of selling those 12 TVs at a $400 loss each, why not give away 5 of them for free–one each day after Thanksgiving, with each receipt automatically entered into the drawing? The panicked mob of non-buyers would have no reason to line up at 4AM, since they would have the same chance to win if they showed up at noon. Or on Saturday. And the people who came in to the store would actually be looking around to buy something (at a reasonable price). Now they’re actually *looking* at your inventory, *looking* at your prices, and thinking “what do I need that these guys sell?” not “who do I have to shove out of my way to get my TV?”
I also support Doron’s comments regarding the effectiveness of Black Friday super sales to generate additional sales. His observations regarding the club store illustrate the folly of this type of offer.
Black Friday was named because it was the day Friday supposedly began to make money for the year and how do retailers celebrate it by losing money on “door busters”? Am I the only one who sees the irony in this process?
I agree that in order to compete with those that are giving away profits, retailers have to have advertised specials that offer the consumers good value. However, I think they would be far better off to promote something that they has sufficient quantity of to meet anticipated demand and have more customers who were able to complete a purchase.
Great points. Black Friday deals should be sprinkled strategically throughout the store and adjacencies should be carefully planned, just as they would be for any “season.” Otherwise, if convenience is king, you might as well plop everything in the parking lot and erect a self check-out tent. Much more convenient than actually going in the store!
These sales are like crack and unfortunately, even otherwise rational retailers wind up getting addicted. I defy any retailer to convince me that they make or break their year with the profits they bank on Black Friday–if in fact there’s anything to bank.
And you’re absolutely right. The damage to brands in the process can be monumental.
After reading Doron’s fine article and the questions to which it gave birth, I find myself pondering these related questions: What does regular price mean today or is there such a thing as regular price anymore? If Black Friday is so powerful, what are the other “selling” days of that week for? If Christmas season “makes or breaks” a retailer, do they operate the stores the rest of the year to amortize rents and keep our brand name before the public? Have marketing practices become permanently flawed? And lastly, are today’s practices on the road to profitless oblivion?
Current marketing practices are creating a quagmire in the marketplace that begs for the emergence of an innovative, brand-building 21st century version of Sam Walton, John Wanamaker, Stanley Marcus or Barney Kroger. There is lots of room for such marketing leaders today. If one of you readers are that person, please step forward and light up the way.
Great analysis as it illustrates how well retailers train customers to do things that create minimal value for each!
Does anyone still really “go shopping?” So last century, as far as I am concerned.
Did we really expect anything different from these particular customers? If there was a different expectation than the results noted by Doron, they were flawed. They were flawed just like the concept of ‘today’s’ Black Friday.
Black Friday used to simply mean it was the day in which the season began that would put retailers in the ‘black’ for the year. Of late, it’s a day to risk your life, retailers to go further into the red rather than black, and for consumers to become even further disillusioned with retailers.
I can’t see what I used to think about this day being true at all. I used to think there was a small opportunity for retailers to set an image for the season. How wrong I was in that concept!
The entire event has become beyond ridiculi (That’s Scanner speak for the plural of ridiculous! If there could be such a thing!) The line has been crossed and there is no turning back.
Well done, Doron.
I think it’s all about Wall Street. Customers have been on the prowl for holiday gifts for weeks, but retailers seem to want them to shop between Thanksgiving and Christmas. The point of encouraging customers to line up in front of the store at 4:00 a.m. must be to boost comp sales…which means nothing to customers.
I agree with the article that Black Friday strategies are flawed at this point and are counterproductive to companies who otherwise invest in branding and customer experience. The author has some good comments from an operational viewpoint.
Hear, Hear! The journey leading to the utter mess that has become “Black Friday” was a long one, and therefore for retailers to “get it” and then move away from some of those destructive practices will also take time. The public’s heightened recognition that the advertised “bargains” are largely elusive if not outright fraudulent–and that the behavior of the BF crowds can make shopping on that day unpleasant if not outright detrimental to life and limb– have trained many consumers to stay as far away from a shopping mall on the day after Thanksgiving as possible.
I’m not one usually one to call for regulation, but I hereby call for the term “door buster” to be outlawed.
Black Friday promotions are beyond flawed. As someone who deals with consumers daily on the receiving ends of the ads and promotions, retailers have this all wrong. In fact, this year, in the face of no less than four cease and desist letters from one retailer alone about early dissemination of their Black Friday ads, and a few from some other retailers, we decided to do a study of consumers and their attitudes about retailers. We asked about the retailers’ handling of Black Friday, as well as the consumer’s intentions to shop, and at what type of store they’d be willing to shop. Early results of the survey aren’t surprising to me but they will be to retailers.
The ads are at best, hype. The chance of being 1 in 3 people who get the swingin’ TV deal is not worth standing outside for hours, when there are real values to be had at smaller stores with no lines and I can accomplish lots of the shopping on my list.
Consumers also don’t like to be told “no” and there’s lots of that happening up to and on Black Friday. When I have to post a note on our website saying “the retailer’s lawyers said you can’t see this information in advance of the sale,” the retailer looks [bad] in the eyes of the consumer.
There are a few retailers who are actively switching tactics this year–Sears and Kmart specifically–and while I don’t think they’ll clean house in sales compared to the 800-pound gorillas in the space, they are winning the perception war in the minds of consumers.
People will always go out on Black Friday, but the strategies to not just get people in the store, but to get people to part with their money, are going to have to change if retailers want to ride what I think is going to be 3-5 more hard years for consumers.
“Black Friday” was a great shopping day years before the retailers gave it hype. The hype that retailers put on this day makes no business sense. Rather than creating frenzy, create a special shopping experience for those folks who want to do real shopping. Maybe the hype that the retailers created has chased away the day after Thanksgiving shoppers because they sense there is nothing special for them to buy and they don’t want to fight with the crazies. Retailers have lost their logic and with it their reason for being.
Doron’s analysis is perfect and will likely be repeated thousands of times on Friday.
An excellent article that explores the total joke that Black Friday has become.
Instead of “loss leaders,” and opening at truly idiotic hours, lets step back in time for a moment when the day after Thanksgiving was a fun (and profitable) day to be in retail.
Try good, basic sales, offered throughout the day, and a realistic opening time, like 9:00 AM. Schedule some fun, Holiday events throughout the day to give shoppers a reason to stay in your store, and offer some low cost, courtesy services like free Holiday themed shopping bags, or totes.
Even in this economy, in my home area many large retail chains still can’t get people to work for them.
Gee, I wonder why…NOT!
Of course, deals and marketing strategies have become flawed. But is it the chicken or the egg? Who is fueling this madness? Is it the retailers or the consumers? Even though we can see the damage this does to both the retailer and consumer confidence, why has it not stopped? My guess is because someone out there still wants it. People are lining up. People are buying things like they are the last products ever to be made. And retailers are feeding this frenzy for short-term gain.
The other reality is that no one who lines up at these frenzied massive sales is shopping. They know what they are there for and likely will not linger in the store to pick up other items and browse leisurely. I agree with the sentiment above that if it is no longer about getting the customer in the store, just put a tent in the parking lot already and be done with it.
What needs to change is the supply and demand of these mismanaged sales and discount events.
Looks like Doron hit a nerve. This string of comments is unusually long and emotional. There’s consensus around the myths of Black Friday, but little commentary about the opportunity. C’mon folks there has to be an opportunity if retailers want to promote Black Friday and people are willing to wait on line at 4 a.m.
Here I am in the little town of Manchester VT and the outlets (of which there are considerably fewer this year) are going to open at 6 a.m. on Friday. They’re offering early shoppers “…extra bonuses, in-store offers from 6 a.m. – 8 a.m. …free gourmet coffee with each purchase!” Note the majority of the stores sell clothing. I don’t know if this has been tried before, but I’ll definitely conduct an informal survey the day after to see what the retail staff has observed. And I’ll be looking for those seeds of opportunity…for new revenue growth. What’s that you say? “Dream on?”
“…this club (which is no longer in business)…”
And I can see why! An interesting article, and a nice bit of impromptu research (though I’m curious how the many people who “immediately walked out with no further interactions” were tracked.) But are all BF specials this poorly executed? Or is the whole concept silly, and the discounts unneeded, because people are ready to buy anyway? I’m not sure, but I suspect this is an example of fallacy of composition, whereas if one seller offers specials, they will benefit, if all offer them, then no one will…but how to undo the process?
If a retailer offers only 12 items of anything advertised in their ad, shame on them. That is a customer relations disaster in the making. Customers understand “limit 1” or “limit 4” much better than no items available when a sale has been advertised in a big way.
I agree with the article, the deals that are too good to be true usually are. Most of the uneducated American populace feels that there are an unlimited amount of these specific deals in place when there are actually quite a limited number of them. Brands that continue to focus on price, and not loyalty/engagement will be the ones that fail. Creating an engaged group of constituents that are brand advocates should be the goal of every retailer. Those who shop on price have none of that affinity.
Doron is right. Where have all the merchants gone? Everyone is looking at sales, whatever happened to looking at profit?
As on old F.W.Woolworth manager, I can tell you that I would have been reprimanded for putting low gross merchandise in the front of the store. Unfortunately, we do not train managers to merchandise anymore; everyone blindly follows a plan-o-gram.
Black Friday Madness is one in a long line of Thanksgiving traditions; like the Macy’s Thanksgiving Parade or the Detroit Lions and Dallas Cowboys playing on Thanksgiving day (not each other).
At a time when the US consumer is constantly being bombarded with uncertainty and change–from the way we communicate with each other (Twitter, Facebook) to the way we job hunt (online, virtual resumes, video interviews)–there is a great comfort in resorting to something familiar. Whether Black Friday is a day of “incredible” bargains, a reason for staying up all night, or an excuse not to stay at home, eat leftovers, and watch football all day, it still manages to create excitement for retailers and consumers and, most importantly, provide loads of free retail media coverage.
Black Friday has become a shopping tradition–a tradition that degrades customer experience and creates more commodity relationships with shoppers. Unfortunately, like crack (I am told!), once you get on it, it is really, really hard to get off.
You see, if the goal of your retail organization is to create loyal customers, who see value in your company for the relationship and the added value you bring, then a “killer low price” offer that only rewards customers willing to stay up all night is counter-intuitive. Those customers are very likely to be bargain-shopping cherry pickers, who only see value in the lowest possible price and are willing to help drive a company out of business to get the best deal.
Think private sales, think customer-experience, and drive your customers in for something extra, not something less. Only in this way can you minimize the impact of bargain shoppers on your day-to-day performance.
One recent element of Black Friday, which I have noticed the past few years, is the activity of reselling products (particularly electronics) via eBay. Many of those younger folks who get up at 3 a.m. and stand in a line are doing it as a money making venture. They will commonly find a laptop computer for $200-$300 below retail value and then post the item on eBay where it will sell at market value. For a 14-year old kid, making a couple hundred bucks for one day’s work isn’t too bad.
Retailers should definitely limit these promotional items to 1 per customer. If not, they risk having these “resellers” take as much inventory as humanly possible…eliminating most of the reason to offer them in the first place.
I agree with the author. Black Friday is poor retailing at best.
Black Friday smacks of retail desperation. You are buying a crowd that cherry picks your sales items and then moves on to the next retailer.
It’s bad for margins, tough on your retail staff that has a whole Holiday season ahead of them, and for every customer you satisfy you leave many more disappointed.
Some analytics might help retailers better understand this event.
Great article. Unfortunately many retailers see safety in numbers. Monkey see, monkey do–i.e., as long as the rest of the pack is doing it this way, we don’t want to look dumb by not doing so too. This is the “me too” school of retailing.
Let’s not forget that the media is also feeding this Black Friday beast. Next year, if retailers scale back a bit, the media will probably paint them as stingy.