Black Friday ‘price war’ to determine fate of retailers this Christmas

UK spending set to increase, but retailers face headache of having to know who is shopping for what product at what price, via what channel and when, to be among ‘the winners’

Black Friday week is set to attract one in five British shoppers, making it more popular than the week before Christmas for festive shopping. Drastic deals and discounts will win over price sensitive consumers, but the ‘price war’ centred around a single day’s trading will make it a very unpredictable Christmas for retailers.

Price is the most important factor in gift-buying, with three in four Brits (75 per cent) ranking it as their most important consideration. Getting a bargain came in second (51 per cent), followed by having the item in stock (46 per cent). This price sensitive on-demand market is very difficult to cater for. Adding to the unpredictability around Black Friday is the fact that 25- to 29-year-olds are the most likely group to shop during that week, with around a quarter expected to be hunting for deals. Younger age groups are notoriously difficult to predict as they are the most likely to compare prices online and are more open to purchases via different channels, including mobile.

Even if retailers tick all three boxes to win over consumers, long queues are one sure way to lose sales. Consumer tolerance for bargain hunting is limited to a one-minute for each one per cent discount when waiting for a store to open. This ‘patience ratio’ drops to about 40 seconds for each per cent discount at the checkout.

Overall, the UK is set for a prosperous Christmas with eight out of 10 consumers planning to spend about the same or more on gifts compared to last year. A fifth of Brits say they have a higher budget this year to indulge family and friends. The most optimistic shoppers are the 18- to 29-old-age group, with 29 per cent planning to spend more. This again adds to the uncertainty for retailers, with buying behaviour for this age group being more difficult to forecast.

“Retailers are facing the most unpredictable Christmas shopping period yet. Black Friday has changed market dynamics from a fulfilment and a predictability perspective, and is set to be the busiest trading day for many this year,” said Andrew Fowkes, Head of Retail Centre of Excellence, SAS UK & Ireland. “Price wars are extremely difficult to forecast and cater for when squeezed into a shorter timeframe. If retailers don’t attract enough customers they lose out, if they can’t deliver on what they promise they lose out. Only by having insights into current and previous shopping behaviour, stock performance and competitive discount ratios, will retailers prosper. While it’s good news that spending is on the rise, not all retailers will feel the Christmas cheer.”

These findings emerge from research by SAS, the global leader in analytics software and services. The 2015 SAS Holiday Shopper Survey underlines how important it is for retailers to use data and analytics to understand who is shopping for what products, at what time and via what channel. Otherwise they cannot make evidence-based decisions and will be relying on pure guesswork that could easily backfire in the new Black Friday environment.

‘Return and run’ trend makes a comeback

A third of Brits are likely to return or exchange gifts after the holiday period. Of those who are planning to return or exchange the gifts, 12 per cent said they will do it by mail, while the remaining 88 per cent said they would prefer to do so in person at the store.

“For the second year running, we expect more consumers to take advantage of ‘Click & Collect’ services for ease of convenience during busy periods. However, retailers must also prepare for shoppers returning online purchases in store. This pattern could become known as ‘Return & Run’ where they simply return unwanted items, or even ‘Drop & Shop’ where shoppers decide to choose something else while they’re in the store,” said Fowkes.

“Demand forecasting can help retailers effectively plan ahead by monitoring the stock inventory and delivery/return schedules in real time. This will ensure they can service demand and have a better grasp of which products to promote. This includes taking account of who will be shopping when and for what products, as highlighted by some of our research. Unfortunately, many shop managers still rely on inaccurate historical data or ‘gut feel’ to run their business, which can have a drastic impact on the bottom line in the New Year.”

Good news for spouse, bad news for pets

The average amount that shoppers are willing to spend on any gift is around £140. When it comes to treating spouses and significant others, the majority of Brits would spend around £175, while six per cent are prepared to splash out more than £400 on their loved ones.

Despite a reputation as pet lovers, Brits are unwilling to spend more than £20 on pet gifts this Christmas. In fact, Britons are set to spend less on their pets than any of the other countries surveyed. Just 21 per cent plan to buy their pets a gift this year, compared to an average of 30 per cent across the other countries.

Fragrance and cosmetics are the top Christmas gifts this year, with more than half of Brits (56 per cent) planning to purchase these products. Toys and games were the second most popular choice, alongside books, music and movies. Apparel and accessories came in fourth, followed by food and beverage. Unsurprisingly, Brits are increasingly turning to e-tailers for their purchases, ranked as the most popular shopping destination followed by department stores and grocery stores.

Charities set to prosper this Christmas

A third of UK shoppers say they are likely to make a charitable contribution in someone’s name as part of their holiday gift choice. And it would seem that their generosity continues long after presents are unwrapped. Four in 10 consumers plan to give unwanted gifts to charity after the festive season, with the 30 to 39 age group being most likely to make such donations.

Compared to other countries surveyed, US consumers are the most generous with 12 per cent of shoppers saying they are “very likely” to donate unwanted gifts to charity. The UK trails very closely behind with one in 10 “very likely” to make a donation.

You can download the survey results here.

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