The real winners of Black Friday

David McCorquodale, head of retail at KPMG, looks to Black Friday and the implications for retailers…

If you live outside of the USA, it would be perfectly excusable never to have heard of ‘Black Friday’. However, the American phenomenon, which has routinely been the USA’s busiest shopping day of the year since 2005, has transcended borders thanks to online giants Amazon and Walmart, and now appears to have become a mainstay in the UK sales calendar.

Traditionally occurring the Friday after Thanksgiving, and coinciding with pay day for much of the population, Black Friday presents consumers the opportunity to take advantage of huge sales across the country. This year retailers will look to turn a healthy profit as consumers part with their last pay packet before Christmas.

As well as online retailers, an increasing number of UK high street retailers are now clamouring to kick-start their Christmas shopping sales by cutting prices, with hundreds now ready to jump on the Black Friday bandwagon. But are retailers losing out on higher profit margins by slashing prices at a time when Christmas shoppers will spend regardless of sales?

If all retailers cut prices, arguably the only benefactor will be the customer, with initial profits being swiftly followed by a slump in post-event sales, as prices return to normal.

The US-driven sales day has taken root in the British retail calendar and many have planned for it, buying in lines specifically to discount on the day.

Discounting just as UK consumers have received their last monthly pay packet before Christmas feels very counter intuitive: most have enough inclination to spend without the added impetus of an additional sales day.  If price cuts spread from discount lines to in demand items, then strong businesses will be giving away unnecessary margin at a time when they could easily sell goods at full price.

However, there’s no doubt that Black Friday can be seen as a day to kick-start the run up to Christmas and this year could offer a ‘get out of jail free’ card to fashion retailers, helping them clear any stock overhang caused by the warmer weather.

From a consumer’s perspective, this year’s Black Friday will be bigger and better than ever before.  For retailers it risks being annoying for the strong, but opportune for the weak.

So, while canny retailers might be able to exploit the Black Friday opportunity and offload surplus stock, online giants like Amazon may be unnecessarily losing out on higher profit margins due to a sales day they introduced to the UK in the first place. And with more national discount days in the pipeline, they may soon come to regret it.

Next up, Cyber Monday.

Will the Black Friday sales impact your buying decisions ahead of Christmas this year? Let us know in the comments below.