Business development · 23 November 2015

Small retailers opt out of blanket discounts on Black Friday

A number of smaller retailers are responding differently in order to protect their margins and business models
A number of smaller retailers are responding differently in order to protect their margins and business models

Despite the considerable build-up to Black Friday and its anticipated shopping chaos, many smaller retailers are looking to eschew the day’s traditional promotional activity.

Over £1bn is expected to be spent by shoppers on 27 November, and more than three-quarters of UK retailers are expected to hold a Black Friday promotion according to Barclays Christmas survey.

Mike Stewart, analyst at Panmure Gordon, said: “Retailers now face a prisoner’s dilemma – if you know that there is a peak in trading and you don’t participate then you’re leaving your rivals to mop up.”

Some retail experts have warned that Black Friday is encouraging retailers to sell at low-margins, or at a loss, during a period when they would usually be selling goods at full-price.

As a result, a number of smaller retailers are also responding differently in order to protect their margins and business models.

David McCorquoudale, head of retail at KPMG, warned that smaller names which haven’t invested as much in their online systems, will miss out on important pre-Christmas sales or potentially buckle under the added pressure. Online sales are expected to reach near £1bn as shops brace themselves for a record-breaking day.

While the likes of Amazon, Asos and John Lewis are expected to cope well and reap the benefits Stewart predicts Game Digital and AO.com could lose out.

Many sites got overloaded last year and 78 per cent of retailers surveyed by RetailMeNot said they were planning to build in extra capacity into websites and rent additional bandwith for the period.

Some big retailers like Asda have abandoned Black Friday promotion altogether, reporting that sales in its core food businesses usually fell during the promotion.

FatFace’s chief executive, Anthony Thompson, said that rather than discounting, it will donate ten per cent of net profits to local charities. “Content discounting is sucking the life out of the high street and Black Friday has simply added insult to injury,” he said. “We have therefore decided to give money to local charities across the country over Black Friday weekend, rather than offering blanket discounts.”

Another clothing company, White Stuff, is opting out of discounting products, instead offering shoppers a gift card for future purchases.

The rise of Black Friday has also caused concern about a knock-on hit to Boxing Day sales, with analysts warning the level of spending could drop.

McCorquodale said: “Black Friday last year completely disrupted the traditional pattern of festive spending in the UK and this year the effects are likely to be even more pronounced.”

He aded that with so much volume “changing hands at discounted prices on a single day at the end of November, this undoubtedly has an impact on the more traditional sales periods and inevitably takes volume away from these”.

The UK has taken to Black Friday with gusto, and recent research commissioned by RetailMeNot predicted that UK retailers will rack up around two-thirds of all European sales on the day. British shoppers are expected to spend £966m, compared to £1.53bn across the continent.

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ABOUT THE EXPERT

Rebecca is a reporter for Business Advice. Prior to this, she worked with a range of tech, advertising, media and digital clients at Propeller PR and did freelance work for The Telegraph.

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