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Black Friday is still a couple of months away, falling on 29 November this year, but brands and retailers are deep into planning their promotional strategies.
We spoke to analysts and experts about what to expect when it comes to delivery times, consumer confidence and inventory levels this year, as well as how retailers are shaping their winning strategies.
Consumer confidence is up — but it’s not that simple
The macroeconomic environment is in a better place than it was this time last year, with inflation easing in the UK and the US. Deloitte UK research shows that spending on discretionary goods and services — such as holidays, restaurants and clothing — has risen and reached positive territory for the first time since Q3 2021, and PWC UK’s consumer sentiment survey shows that shoppers are feeling more cheerful thanks to lower inflation and interest rates.
Despite this, experts agree consumers generally remain cautious. Luxury more broadly is facing a slowdown, with heavy hitters such as LVMH and Kering experiencing weaker demand in some markets. “Many are still choosing to take advantage of higher interest rates by putting away their wage gains into savings, rather than spending,” says Kelly Miely, retail partner at Deloitte, adding that prices are much higher than they were two years ago. “Interest in Black Friday is likely to be higher than last year, [but] retailers will still need to work hard to demonstrate value and incentivise cautious shoppers to spend their hard-earned cash,” adds Lisa Hooker, leader of industry for consumer markets at PWC UK.
Consumers are just as cautious in the US. “There are some chinks of light such as moderating inflation, lower gas prices and reduced interest rates — but these don’t inject huge firepower into the consumer economy,” says Neil Saunders, managing director of Globaldata’s US retail and consumer division. He expects growth to be modest. “The Black Friday event will be solid, but it will fall short of being spectacular.”
The luxury multi-brand retail sector has seen significant disruptions this year: Matches went into administration, Farfetch was rescued by Coupang and Yoox Net-a-Porter’s future is up in the air. Part of the challenge is that consumers are increasingly shopping directly from brands. “Multi-brand retailers will really need to pull out all the stops this year to generate good sales growth,” says Saunders. “While things may pick up a bit over Black Friday, trading will still be soft.”
In-store shopping is more important than ever given the landscape, says Ryan Llewellyn-Pace, founder and CEO of consultancy Pace Partnership London. “People are going back to stores, so an omnichannel strategy is becoming increasingly important. Equally, Black Friday is a key period for full-price sales and retailers will use it to sell gifts at full price, especially in-store,” he says.
Shipping and logistics challenges will impact discounts
Retailers are having to choose between more expensive air freight and less expensive (but currently disrupted) shipping. In the US, the biggest concern is a potential workers’ strike at ports on the East Coast, says Saunders. “This has the potential to disrupt apparel imports in a big way, just as we come into peak selling season,” he says. “That said, most retailers are aware of the potential issues and have been finding workarounds such as routing more product through West Coast ports or ensuring they have capacity to air freight things in. However, this usually comes with a higher cost and is something retailers will need to account for in either higher prices or a hit to their margins.”
Some shipping routes between Asia and Europe have been disrupted because of geopolitical conflicts in the Middle East. Attacks on commercial ships passing through the Red Sea — a key water body for global trade — are also having a knock-on effect on the Suez Canal shipping route, explains Manraj Ahdan, global freight director at Advanced Supply Chain (ASC) Group. “Shipping companies [are] looking for safer passage via other maritime routes. These alternatives are often longer in distance, leading to supply chain delays. The delays are also compounded by increased demand for alternative shipping routes, which have become busier with more and more vessels.”
Disruption has eased along some routes: shipping costs from Shanghai to Rotterdam are overall still high, yet have dropped significantly since July, data from maritime research firm Drewry shows.
Retailers are planning ahead by experimenting with new routes and with switching from sea transport to air freight (or using a combination of both methods), which cuts down on delays, too, says Ahdan. But, again, all of this is placing retail margins under pressure. As such, ASC expects that discounts may not be as steep as they usually are in the run-up to and through Black Friday.
For those experiencing rising costs, it may be a decision between “absorbing these costs or passing them onto consumers”, says Laura Morroll, supply chain partner at PWC UK, which could impact pricing strategies this Black Friday. There’s also the aftermath of Black Friday to consider, since one in every four items will be returned, she adds. “The aftermath will pose the same issues it does every year for all parties in the supply chain. It will be interesting to see the impact that charging for returns has on consumer buying as many retailers have introduced it more recently.”
Excess stock: What will sell?
Stock levels in the US and the UK differ, primarily because retailers in the UK are struggling with an excess of warmer weather clothing after a particularly rainy summer. “Summer overstock from a disappointing season, coupled with cautious consumer spending has led to excess inventory for some. So while we have plenty of new season coats, boots and glittery eyeshadows available for the festive season, retailers might still be dealing with swimsuits and sunscreen that haven’t sold,” says Morroll. With wallets pinched, savvy shoppers could be keen to buy next year’s summer products this November.
In the US, meanwhile, inventory levels are “in a reasonable place”, Saunders says. “Most apparel retailers have bought more cautiously and have tried to avoid too much inventory going into discount. There is slightly more of an issue in luxury than in general where there has been a slowdown, but it is not a huge problem,” he says. “What that means is that there may be fewer bargains over Black Friday from retailers trying to sell down excess stock.”
Which categories will fare well? Harvir Dhillon, economist at the British Retail Consortium, says beauty will continue to be a “standout performer” this Black Friday, as it has been the past few years. “This is due to the ‘lipstick effect’, where the high cost of living has meant people spend more on smaller indulgences, along with generally high consumer demand for these products. We expect sales in this category will continue to fare exceptionally well,” he says.
In the luxury fashion segment, price-sensitive customers may be keen to “invest in small accessories” — good news for brands, as those products tend to drive profitability through volume growth, says Deloitte’s Miely. She also suggests there will be “a focus on core products and ranges over trend-driven items”, which may help retailers “mitigate risk and ensure longer-term sales potential if sell-through is not achieved during the promotional period”.
The winning promotional strategies
Like in recent years, the 2024 Black Friday sales period will likely stretch across November, potentially throughout December, too. “Over the last number of years, we’ve witnessed businesses extend Black Friday to the whole month of November, but be more smart on how they promote; more selective than blanket discounting,” says Morroll. “This can help when there’s excess stock, for instance, but savvy shoppers will be using the deep discounts to buy items on their wish lists, either for themselves or for festive gifting,” she explains. “It also helps manage logistics and customer flow, in turn attracting more cautious consumers who look to spread out purchases over longer periods during the peak shopping season,” adds Miely.
Beyond a conventional discount, brands will experiment further with “value-driven promotions”, Miely predicts. “This could include bundled offers, loyalty programme benefits and exclusive experiences. There may also be an emphasis on cross-selling, driving additional sales through products that complement the original item of purchase,” she says. The benefit of loyalty programmes is capturing customer data to offer personalised promotions.
These models are particularly relevant for luxury brands who are trying to navigate the promotional environment without downgrading their positioning. “Winning Black Friday is about precision over mass promotions to optimise sales and protect margin. Play smarter to get ahead this season,” says Jacqueline Windsor, head of retail at PWC UK.
Performance over Black Friday will set the tone for the rest of the holiday sales period. “This Black Friday will be a marathon not a sprint,” says Saunders. “A lot of retailers will be looking for sustainable growth over the whole holiday period and so they will plan promotional calendars accordingly. Black Friday is still a banner event, but it will be one of many ways in which retailers try and get consumers to open their wallets.”
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