2016.11.24

Black Friday – everything that is wrong with retail

By Sören
Reading time: 5 minutes

Black Friday represents all that is wrong with retail. Price slashing, queuing and aggression aside, it is a day that does more than most to cement the idea that cutting margin is the way to compete. It is a race to the bottom.

Not all it’s cracked up to be…

But rather than cutting prices and relying on flash sales, retail should find a way to more effectively monetise vast ecommerce traffic year round. Shoppers spent £1.1bn on Black Friday in 2015.  But how much of that £1.1bn was profit? 

Spread that headline-grabbing £1.1bn over fifty two weeks and it equates to just £21m a week across the entire retail sector.  To put that figure in context, it amounts to a revenue increase of just 0.3% on the sector’s average weekly revenues (excluding the £1.1bn from Black Friday).

Are we really to believe that retail cannot find a way to drive revenue increases of just 0.3%? 

Conversion failure

Before we answer that, let’s remember that, in 2015, ecommerce revenues of  £114bn represented a conversion rate of around 7%[i]. Only seven out of every 100 visitors to ecommerce sites was motivated to buy.  So despite massive spending on ecommerce solutions, the vast majority of retailers have failed to convert huge traffic numbers into sales.  Online, conversion rates have remained well below the 10% mark since ecommerce’s year dot - and lag miles behind in-store conversion rates. 

That failure is down to merchandising and the user experience – ecommerce sites have failed to inspire people to buy or made it too hard to buy, or both.   

A rethink

It’s time to stop doing the same thing and hoping for different results. At present, retailers still rely on a manual approach to merchandising that is unsustainably labour intensive. Unsustainable in terms of resource demand –just look at the sheer number of online merchandising jobs retailers are currently trying to fill. 

Automation and AI

The truth is that retailers, in their ecommerce operations specifically, are failing to grasp a nettle that other sectors tackled long ago – automation. But not just any automation. The automation of online merchandising’s heavy lifting – the vast number of repetitive but vital tasks that are practically made for machines - and automation guided by artificial intelligence and big data capabilities.

This kind of intelligent automation has two immediate benefits. 

  • First it enables retailers to deliver better, more relevant experiences for each customer, by adapting everything from search and navigation to recommendations and even product display according to individual behaviour and intention in real time.
  • Second, it frees merchandisers from a tyranny of spreadsheets, and enables them to focus on the high level tasks that really require their specialist input. 

That could include the development and execution of the holistic product exposure strategies that would be necessary to guide automated merchandising.  These high level strategies could be shaped by real merchandising priorities - business objectives like revenue, profit margin, stock oversupply and consumer trends (be they micro or macro).

A molehill to climb

When you think of an ecommerce operation that inspires purchase through absolute, individual relevance, but which also makes it easy to shape merchandising strategies according to business metrics, a revenue gain of 0.3% suddenly feels more like a molehill than a mountain.

And, thank goodness, that race to the bottom - for which Black Friday is the poster child - would be a thing of the past.

 

[i] https://www.quora.com/What-is-the-average-conversion-rate-for-online-retailers

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