Black Friday is a nail in retailers’ coffin

The shopping holiday is supposed to be a blessing for retailers, but it could actually be a curse for physical stores.

For the Jacob Rees-Moggs of the world, the festive season doesn’t start until we’re in the last month of the year. For shopaholics, that view is dreadfully out of date.

November is hard on its way to replace December as the shopping month of the year.

With the US-imported Black Friday (today) and Cyber Monday (26 November), and China’s “Singles Day” (11 November) going global, the 11th month has increased in importance in the past few years.

November is still a long way off putting Santa Claus out of business. The festive season still runs all the way through December. But the peak is increasingly moving forward.

You’d think that the festive season, which practically obligates consumers to spend lavishly on gifts whether they can afford it or not, is a blessing for every retailer.

Black Friday, after all, is supposed to stand for the day retailers are officially out of the red and into the black for the year.

But in addition to a made-up holiday to boost the economy once a year, it could also be the final nail in the coffin of bricks-and-mortar retailers.

New pagan holidays

The calendar is rapidly gaining in new pagan holidays for worshippers of the 21st century’s most popular religion: capitalism.

With Amazon Prime Day, Alibaba’s Singles Day, Black Friday and Cyber Monday, the calendar is getting more and more “holidays” artificially created for shoppers.

Research firm GlobalData reckons spending during the Black Friday period, which runs from 19 November until 26 November, will increase by 3.1% this year. In just a week, the UK retail sector can look forward to £10.4 billion in sales.

Black Friday is an American tradition. It falls on the day after Thanksgiving, which is a holiday in many US states, and is seen as the start of the Christmas shopping period.

Ever since Amazon introduced the shopping holiday in the UK in 2010, sales have rapidly grown year on year. UK retailers will hope this trend continues into 2018 as they’re experiencing a torrid year so far.

It’s safe to say British bricks-and-mortar retailers have seen better days. Many stores are struggling to keep the lights on. House of Fraser has been brought back from the brink; others are axing stores left and right to stay afloat.

Subdued consumer spending, rising labour costs, higher business property taxes, and growing online competition have put even more strain on ailing high street shops and warehouses.

Marks & Spencer refuses take part in today’s Black Friday madness, perhaps to its own detriment. Most other retailers see themselves forced to adopt the US phenomenon, perhaps also to their own detriment.

At 8am, Debenhams’s flagship store on London’s Oxford Street opened its doors expectantly. It’ll stay open until 11pm this evening.

The struggling warehouse chain is banking on shoppers to give it another lifeline so it can live to fight another day.

On the surface, the arrival of pagan shopping holidays might seem like a blessing to stores of any kind. In reality, it’s reshaped shopping in two fundamental ways – neither of which is advantageous for physical stores.

A curse in disguise

Why would a period specifically designed for retailers to sell their goods be anything but good (for retailers)?

One reason it’s a curse in disguise for physical stores is the fact that the Black Friday period is increasingly becoming an online shopping event.

Armed with smartphones and put off by the chaos of Black Friday 2014, more and more shoppers prefer to take part from the comfort and safety of their own home.

Footfall on the UK’s high street is expected to drop compared to last year while online sales are expected to rise.

It means retailers whose business plans are designed specifically for online shopping win out against established physical stores.

Companies which mainly ship from vast warehouses away from the city centre (like Amazon or ASOS) are winning out over rivals with an expensive high street presence.

In fact, the trend of shopping increasingly turning into an online activity is transforming high street shops into expensive storage locations, thanks to “Boris” (buy online, return in store).

But perhaps an even bigger problem for retailers is that the Black Friday period, which is supposed to boost retailers’ profitability, could actually eat into their profits.

The festive period used to be so rewarding for shopkeepers because they could sell their products at full retail in the period leading up to Christmas. Then after the holidays, they could sell whatever stock they had still left at a bargain.

But thanks to increased online competition and the advent of shopping holidays during which shoppers expect huge discounts, the “sale” period now stretches from November until January.

As IG’s Joshua Warner points out:

“As Black Friday has evolved, extending from a one-day event into weeks of discounted deals and inspiring rival sales that compete for our money all year round, there is evidence that this event designed for the benefit of retailers is in fact having a detrimental effect on the [retail] industry.

“The relentless focus on discounts has led to a sledgehammer approach to pricing and trained consumers to rank their searches by price, encouraging a race to the bottom.

“Many argue the concept is ludicrous because these lower-margin or even loss-making sales shift business away from the more profitable holiday season in the subsequent run-up to Christmas.”

In response to Black Friday, high street shops may therefore echo the words of the Japanese emperor right after the US had hit Nagasaki with an atom bomb:

“The situation has developed not necessarily to our advantage.”

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