Beyond the numbers with Grant Thornton: Listen now
Yet with people looking forward to a sense of normality this festive season – looking beyond lockdowns, closed borders and QR codes – retailers have been bracing for Black Friday weekend like never before.
Based on forecasts, the outlook seems positive. Consumer spending is predicted to reach $6.2b over the four-day Black Friday/Cyber Monday weekend alone (Friday 25 November to Monday 28 November 2022) according to the Australian Retailers Association (ARA). However, many of the Banks are being more cautious, predicting lower than expected spending.
Either way, businesses must be ready and on top of their game when it comes to price competitiveness, customer service and ease of shopping this silly season.
Although the rising cost of living, interest rates and inflation appear daily in the media, these pressures on buyers’ bottom lines haven’t filtered through to average household spending yet, with pre-Christmas sales expected to reach nearly $64b this year according to the ARA.
Consumers are becoming savvier in their spending, by considering purchase time and actively seeking out those elusive bargains. Not only are consumers increasingly tapping into promotional events, but also making purchases earlier in the year, with the ARA predicting around 25% of shoppers will have completed Christmas shopping by Black Friday weekend. While December still generates most profits for retailers, November spending has rapidly increased, having accounted for circa 47 per cent of combined November/December sales in 2021.
While these planned promotions encourage spending, it’s no surprise profits remain higher in December where promotional activity is less frequent.
Which leads us to ask – could Black Friday become more popular than December for Christmas shoppers? For some of Grant Thornton’s retail clients, the Black Friday event has now surpassed Boxing Day in terms of sales volume. And with retailers now planning specifically for this event (i.e. ordering product), customers can access better quality products. It’s become a true win/win.
Whilst we eagerly await the outcomes of Black Friday weekend, it’s encouraging to see strong business confidence going into the festive trading period, which is undisputedly a retailers’ most important time of year.
The shift to online sales has been a steady yet noticeable change in consumer habits in the last decade – born out of convenience and variety at the fingertips of consumers, high consumer reach, cost-effective expansion and the ability for businesses to operate around the clock.
Online sales boomed in 2020 and 2021 as a result of the COVID-19 pandemic. In 2021, online sales during the Black Friday period increased by an impressive 76% compared to 2019 levels according to Australia Post, as consumers favored this channel to receive goods in a simple, contact-less way, directly to their doors.
However, since we’ve begun operating under pre-COVID-19 conditions again, shoppers have returned to high streets. Bricks-and-mortar retail is back in full swing, as shoppers benefit from in-store client experiences, the ability to test or try on products and benefit from the instant gratification of purchasing products face to face. As a result, online sales may decline while in-store will out-perform recent years.
Black Friday has traditionally been driven by online promotions on Australian shores, however many offers are available both in-store and online. This ensures retailers broaden consumer reach and leverage multiple touchpoints to encourage consumer spending.
Shopping today, as opposed to a year ago – let alone two – looks very different. Gone are the days of favouring pet care, garden and fashion, aligned with a time of lockdowns and at-home entertainment.
Today, consumers are living a less regimented lifestyle; dining out and travelling – and their purchases are aligned to this more outgoing, social lifestyle. That’s why research by MST Marquee has shown consumers will likely spend big on liquor, recreational goods, fashion and electronics this festive season.
To avoid returns and to manage fit-related unwanted goods, retailers are expected to focus promotions on jewellery and smaller, stocking stuffer goods. Retailers will also take the opportunity to minimise overstock by promoting inventory that are unlikely to be sold after the festive season, like boots and winter goods, as we ease into the summer period.
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