With Black Friday coming up on November 24 and Amazon already running promotions, many entrepreneurial retailers are asking themselves an important question: Should they participate in it at all? The prevailing winds seem to suggest that the answer is yes, but there are reasons to be cautious before diving in.
While many consumers relish the hunt for bargains, others are becoming cynical about overhyped price discounts, disappointing stock availability, and retailers’ tendency to discount stale merchandise, rather than hot new products. Some shoppers don’t like the fact that retailers in certain stores are forced to work on Thanksgiving.
From a business point of view, Black Friday can sometimes fizzle, too. It can be useful for selling big box and tech items but not as much for impulse buys such as fashion, where people prefer to shop spontaneously, rather than in a prescribed sales window. And news reports of crowding and physical fights in stores have tainted Black Friday with an image that can hurt a retail brand. If you run a smaller, entrepreneurial retail business, offering steep discounts can potentially impact your profits more than for a large company that sells a much wider variety of merchandise at higher volume.
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That said, consumers still do spend a lot of money on Black Friday. Everyone loves a bargain, and there is something almost primal about shopping. Last year, more than 154 million U.S. consumers shopped over Thanksgiving weekend, up from 151 million in 2015, according to the National Retail Federation (NRF). All told they spent an average of $289.19.
So what should you consider as you ponder whether to participate in Black Friday?
Here are four key considerations.
Will it help you achieve big-picture business goals? A Black Friday sale may give you a sales bump each year that is easy to get addicted to, but if it only attracts one- time customers, it may not have much long-term benefit.
Participating in a “buy local” effort that is likely to attract repeat customers from your community is a great way around this. One example is Plaid Friday, a buy-local event which started in Oakland, Calif., and has spread to other cities. Those who sign up for notifications from the Oakland group can get special offers from Nov. 1 to Dec. 31.
Another way to reward loyal customers is an extendable deal, which lets those who buy a particular item to get a discount on a future purchase. If the deal expires by Christmas, all the better in helping you bump up pre-holiday sales.
If you do have to compete against Big Box stores with extreme discounting, make sure your overall pricing strategy does not undermine your profit goals. John Lewis, a popular electronics retailer in the U.K., matches competitors’ prices on purchases like TVs and laptops, but doesn’t discount all of its holiday gifts.
Is it possible to keep the sale online? Many customers would rather shop from their computer or mobile device than go to the store on Black Friday, to avoid crowds and long lines at the checkout. Among the 154 million consumers who shopped on Black Friday last year, 44% did so online, the NRF found.
How can you help customers feel smart? Shoppers love to score victories when they go shopping, and deals that reinforce that they are savvy shoppers can go a long way toward getting them to buy and making a sale successful. Look for ways to remind them of how much they’ve saved after they’ve made a purchase — for example, highlighting the discount in a very visible way on receipts. They may be tempted to come back while the deals are still available.
Is there a way to stand out? Instead of the usual full frontal assault on Black Friday, try rolling out creative new discounts gradually, so you can test and learn from them—amplifying the ones that work best. Consider whether you can offer limited-edition or new-release products as part of your Black Friday activity so that everything is not driven by a sales discount. One of the greatest sources of innovation in business is mashups of existing ideas, so don’t be afraid to slice, dice and recombine past promotions that worked into new ones.
Indeed, collaborating with another business often works very well. For instance, if you run a store that sells workout wear, try partnering with a local yoga studio by arranging discounts on its classes to anyone who, for instance, buys a yoga outfit. In return, the yoga studio might offer those who buy membership a great discount on your workout wear. By teaming up with another merchant who serves a similar clientele, you can greatly expand your reach and build loyalty.
Ultimately, the more your Black Friday deals reward the types of customers you want to keep, the greater the rewards you will reap from your efforts.
Neil Munn is Group Chief Executive Officer at Bartle Bogle Hegarty. Follow him at @bbhlondon.
