View Point - John Baulch

Black Friday – the retail conundrum

Starting in the USA, the infamous Black Friday retail sales event has spread across the globe, although it has evolved considerably in doing so. What began as an opportunity for retailers to hold a sale to clear overstocks on the day after Thanksgiving has turned into a month-long retail extravaganza, which many retailers have embraced – some perhaps more enthusiastically than others. So how did Black Friday pan out in the UK last year, and what lessons can be learnt from what happened.

In all honesty, I suspect many toy companies and retailers have mixed feelings about Black Friday – it’s a bit ‘can’t live with it, can’t live without it,’ especially for many specialist and independent retailers and smaller suppliers.

The original American concept has mutated into a November-long campaign here in the UK – and we don’t even have Thanksgiving as a focal point for the event. Instead, we have over a month of deals, stretching from the start of November and even spilling over into December. “Is this Black Friday…I thought that was last week?” seems to be a common misconception amongst many shoppers. The problem now, of course, is that the genie is out of the bottle – and it is very unlikely that we can put it back in. It would take several years of pain to re-educate consumers – and in the current climate, I just don’t see any retailers being brave enough to accept lower sales for a few years in order to wean shoppers off their discounting obsession. However, I do wonder if some retailers will think about taking a step back and assessing whether Black Friday could be done smarter next year, rather than just unleashing a never-ending barrage of deals across the whole month.

According to Circana numbers, Black Friday week was +17% versus last year, and +8% on the same week in 2023. Given the prevalence of retail deals across the whole of November, it is notable that the barrage of special offers only really had a significant impact on sales numbers in the final week of the month. Now, of course, you can post-rationalize that outcome in several ways. Perhaps the relentless onslaught of ever-increasing reductions finally wore consumers down. Maybe the deals were better that particular week, or consumers were finally in a buying mood driven by incessant Black Friday messaging. Or – and this is my suspicion – people had just been paid, so had money in their pocket / bank account to allow them to splurge. If you go along with this explanation, does that make all the previous offers across the month leading up to Black Friday a bit… well, pointless? I’ll leave you to decide whether that’s the case or not. I will only say that I can’t be the only person who feels the whole ‘Black Friday creep’ – going from a day to a week to a month – has perhaps gone a touch too far.

In addition, I had a very interesting conversation with Circana’s Melissa Symonds at a meeting back in November. Looking at their data, Melissa was struggling to see a correlation between the depth of discounting and the rate of increases in sales. According to the numbers, a 50% reduction generally drove no greater sales uplift than a 10% reduction – the fact that some sort of deal was being offered did move the dial, but apparently much larger reductions didn’t necessarily move it that much further. Food for thought as the toy community reflects on a fairly brutal November from a discounting perspective.

That +17% increase in Black Friday week presumably saw a lot of sales gravitate towards online retailers. I just hope a good percentage of those sales came from genuine toy brands, rather than some of the other – shall we say less reputable – toy ranges that can be found online. And furthermore, I hope that sales weren’t driven by the kind of pricing that can wreck lines for physical toy stores – I felt for our US contributor, Rick Derr from Learning Express, when he posted on LinkedIn that two of the lines he had backed from the start to be amongst his top sellers of the year had both been savagely price cut by Amazon. There’s nothing anyone can do in these circumstances – not even suppliers most of the time. If it was a physical retailer slashing the prices, you at least have a chance of reaching someone in a senior capacity to ask them to reconsider the pricing activity – that’s never going to happen with Amazon, where there simply is no form of redress or opportunity to appeal for some common sense.

To be fair, although the discounting started early in the month, we actually managed to get to the middle of November before the dreaded ‘b word’ started getting thrown around (b is for bloodbath in the toy community, especially in Q4).

It can sometimes be tricky for consumers to decipher which price reductions are genuine, and which are manufactured. Which stock is current, and which comprises slightly older lines on clearance? Which lines were originally priced to be promoted soon after landing on shelves? Which products are slow moving, which have retailers simply ordered too much stock of and when are suppliers and retailers prioritizing volume / market share over profit?

Of course, whatever the motivation, the problem is that there is nothing illegal about any of this activity. It’s a free market, and retailers are completely at liberty to do whatever they want on pricing – whether that’s for the right reasons or not. That said, I can understand the disappointment when new brands are being slashed in price. This has recently happened on several new movie ranges before the film even launches, although that just seems to be standard practice at the moment. It has also happened on ranges that have just hit shelves, where companies have been previewing extended ranges for next year. Does heavy discounting undermine the excitement generated at previews for these ranges?

And whatever else it does, it educates the consumer to wait until the heavy discounting starts. Every year, retailers and consumers play a game of Russian Roulette – and every year, retailers blink first. While they do that, of course consumers will delay purchasing until the prices start to tumble.  Although I have been kicking around the toy industry for a few years, two things never fail to surprise me when the bloodbath starts. The first is the toy industry’s insistence on cutting prices at peak-selling season – something that doesn’t happen with flowers on Valentine’s Day or Mother’s Day, holidays in August or hotels at Christmas.

The second is when one of the retailers identified as driving the price reductions is a specialist toy retailer. There was always a belief that grocers and multi-channel retailers were deliberately taking a hit on toys to generate footfall, believing they could make up the loss by selling other items to shoppers. That clearly isn’t the case when a specialist toy retailer is leading the charge. Nevertheless, this tends to happen every year, and unfortunately there doesn’t seem to be any way of stopping it. Although it does seem mildly ironic that retailers are choosing to give away profit when they are complaining en masse about certain measures in the budget that will affect them.