Online sales in the UK are expected to hit the £1 billion mark on Black Friday (27th November) this year but retailers and parcel carriers need to be better prepared for the flood of orders than last year when it resulted in a massive parcel backlog for some delivery operators, the British e-commerce association IMRG warned.
According to new figures by IMRG and the global information services company Experian, the upcoming Black Friday is estimated to generate £1.07 billion in sales across the UK, which would be the first time ever that UK online retail sales exceed £1bn in a single day. Compared to Black Friday in 2014 when British online shoppers spent £810 million, this would equal an impressive year-on-year increase of 32%.
Due to increased consumer awareness of discounting by retailers around the pre-Christmas shopping dates, Experian and IMRG predict this retail season to rapidly surpass 2014 in revenue terms. The main pre-Christmas shopping days which are expected to generate the largest increases in spending include Black Friday, Cyber Monday (30th November) and Manic Monday (7th December). Boxing Day and New Year’s Day are also expected to see large increases in spend compared to 2014, IMRG said.
Justin Opie, managing director at IMRG, said: “The size and scale of Black Friday 2014 took everyone by surprise, overwhelming some carrier and retailer operations, as order volumes came in at a full 30% higher than expectation. All the indicators point to a much larger Black Friday this year – both in terms of greater numbers of retailers taking part and growing shopper interest – so the opportunity is vast, but there are many things to consider if it is to be managed efficiently and effectively.”
“The first is that we expect Black Friday to become the ‘Black Friday period’ for some retailers, who will run campaigns over several days or even weeks. Also last year anticipation of Black Friday led to a slow start to the Christmas shopping season and panic-discounting by some, which impacted on profit margins. So the availability and rate of discounts will need to be rationalised this year for it to be sustainable,” he added.
“The different types of customer driving the pre- and post- Christmas sales rush must also be taken into account. Retailers should be aware of the strain that will be placed on delivery networks in the run up to Christmas, and also provide a good level of in-store support for the Boxing Day and New Year’s Day rush” he concluded,” James Miller, senior retail consultant at Experian Marketing Services, said.
Research by Experian has identified two different consumer groups driving the growth in festive spending. The driving force behind last year’s pre-Christmas sales and Black Friday in particular turned out to be time-pressed, families with middle income, typically from suburban and more rural locations. In contrast, shoppers on Boxing Day and New Year’s Day are more likely to be younger, urban consumers.
These findings have significant implications for retailers, IMRG explained. Last year, the majority of shoppers in the early-season Black Friday sales period were found to be living outside the major city centres in more rural locations. As a result, a greater focus needs to be placed on logistical planning and delivery services. “However, bargain-hunters on Boxing Day and New Year’s Day are likely to require more support and service in-store, and in-person,” the association added.
With the logistics industry having done a lot of work to better manage the Black Friday period this year, IMRG published three main key considerations to support this after reviewing logistics industry readiness for the Christmas 2015 peak period.
The first consideration is that demand can vary with various factors to potentially impact the size and scale of Black Friday this year such as the final November payday falling on Cyber Monday, the length of retailer campaigns, the depth of media focus and the British weather. But the most determining factor is likely to be the rate of discounts on offers and how widely available these discounts are, which will relate to whether promotions are department- or product-led.
Another challenge is maintaining the next-day delivery service during peak periods of high demand as volumes become unmanageable. However, it may not be an option for some retailers to switch next-day delivery off completely or temporarily as it is part of their strategic operation. A solution would be to avoid offering next-day as standard, but instead to reserve it for premier customers or those with specific requirements and a genuine need for fast delivery, the association said.
“It should be noted that in many cases shoppers will likely be happy to opt for longer delivery lead-times in order to get the discounts they want,” IMRG pointed out.
As a third consideration, IMRG suggested that retailers could extend their delivery promise this year during the peak period to provide contingency for their in-house fulfilment operations. “The most important point here is to set realistic expectations for the customer and realise what has been promised. If this needs to be adjusted in real time in accordance with demand and performance it will not necessarily be a problem, as long as the customer is aware of what to expect at the time of ordering.”
Andrew Starkey, head of e-logistics, IMRG, said: “In online retail terms Christmas is actually comprised of a series of peaks, with Black Friday likely to be the first and largest of them. Yet it is crucial that logistics operations run efficiently during this initial phase or it can be difficult to recover in time for subsequent peaks. Generally speaking performance has been good so far in 2015, with on-time first-time delivery success at record-high levels for most of the year, but there are many variables that may influence the size and scale of the Black Friday peak and disrupt forecasts. In order to counter the potential impact of these variations, having clear and open communication channels between carriers and retailers will be crucial this year.”
Miller concluded: “The 2015 Christmas period is on track to be another record year for online retail in the UK. With consumers now expecting great bargains and trouble free service, retailers must ensure that they have planned their marketing strategies and logistics around these key dates, with carefully prepared cross-channel campaigns, engaging the right customers, via the right media.”
