By Michelle Steyn: Marketing & Sales Director, Bateleur Brand Planning
Black Friday attracts promiscuous, bargain-hunting customers, which ultimately destroys brand loyalty and throws margin down the drain. Can it be that profitability and customer loyalty are bad for business? Of course not. How, then, can Black Friday be good for business?
The discount day hit South Africa’s shores in November of 2012. By 2017, it had become the true American-style Black Friday of the ‘camp outside, break the doors down and mob the store’ to get that discount on a high-tech gadget or luxury item. It’s estimated that this is the time when “30%-40% of all annual retail sales occur”. On the other end of the spectrum, we saw consumers breaking down doors for basic groceries. Sadly, a 2022 Debt Rescue Black Friday survey revealed that “a staggering 84% of South Africans will be bargain-hunting to put more food on the table.”
A recent Payflex survey revealed that more than “90% of South African buy now, pay later (BNPL) customers plan to spend more online this festive season than last year, while 78% plan to shop on Black Friday.”
To meet the demands of high-volume sales for a lower price, Black Friday incurs many operational costs for retailers, including employing more staff, bulking up on stock, sometimes losing damaged stock and repairing damaged stores. Another major factor is that the period cannibalises seasonal shopping promotions, particularly Back To School and Christmas.
Bateleur’s managing director, Gordon Hooper, describes it as the “black curse of discounting”. Black Friday rewards brand disloyalty. Low-value customers do not generate a steady source of revenue. Retailers are, therefore, appeasing the low-value customer while alienating their high-value customers that would have bought the items regardless of the price, be it as it may, maybe fewer items, but items that didn’t come with extra logistical, staffing and damage costs.
High street UK home goods retailer, Argos, claimed that despite a 45% increase in sales achieved on Black Friday in 2014, “demand was high on the day itself but customers demanded deep discounting. Before and after the event, sales were flat.” This growing trend illustrates that many customers refuse to buy unless offered significant discounts. In South Africa, “28% of customers feel that Black Friday offers specials that cannot be matched or found at other times in the year”, according to the Payflex Survey.
Simply Business published this month that more UK retailers are deciding not to participate in Black Friday. A fashion shop owner explained, “I keep my prices fair all year round and offer sales when I need to move stock on.”
SMEs often can’t price-slash like larger retailers. They cannot match those prices and remain profitable. These businesses are expected to uphold the spirit of Black Friday at a cost to their own business. All too often, SMEs are pricing items to get by, keep the company afloat and pay salaries. They are left to make a very difficult decision on if they wish to indulge potential customers with low prices and carry the risk of their investment in Black Friday or give up the opportunity for potential customers. Many SMEs have taken the latter’s standpoint and do not entertain Black Friday. They worry that customers don’t see value for money.
In essence, too many risk factors are associated with Black Friday for it to be “good for business”.