Black Friday – do retailers benefit?

Is the craze of online shopping around Black Friday a good thing for retailers, or is it worsening an already tough situation?

Source: Bloomberg

Black Friday is a relatively recent arrival in the UK. The post-Thanksgiving shopping day in the US has no real equivalent in the UK, and its import to a nation that views the third Thursday in November as just another day, is slightly odd. But, it is here to stay, helped by the all-conquering presence of Amazon.

However, this year sees an already tough environment for retailers becoming much tougher. Inflation is running well ahead of wage growth, even after moderating slightly in October, according to the latest data.

Although, retail sales were still poor in October, seeing a year-on-year contraction for the first time since early 2015. So perhaps some were holding back for the frenzy of discounting that occurs in November. However, the volume of retail sales was also poor, falling to the weakest level in four years. If shoppers are holding back then the flood of deals around Black Friday may remain with us into Christmas and even beyond.

The problem for retailers is that, not only do they have to eat into already-thin margins with discounting, in order to keep hold of precious market share, they also have to work hard to make sure their backroom and warehouse operations run smoothly. Marks & Spencer suffered a terrible Christmas three years ago when its flashy new warehouse did not work as planned. In this era of nearly-instant delivery from Amazon, other retailers have a much higher bar to hit than in the easier pre-2010 years.

The rise of Amazon, and internet shopping more broadly, continues to have remarkable ramifications for the retail sector in the UK. Amazon carries all before it, and in reality the others are merely left scrabbling for what is left. Could they ever have avoided it entirely? This seems unlikely, but its permanent presence in the UK calendar has certainly accelerated the decline of bricks and mortar stores.

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