Tuesday 16 October 2018

How retailers are adapting to new landscape with Black Friday and Cyber Monday

Firms battling online rivals, logistics, and heavy discounting in a transformed Christmas period, write Gavin McLoughlin and Samantha McCaughren

Discounting is now an established part of the festive retail campaign with main retailers seeing a lull after this weekend before another surge in consumer spending arrives closer to Christmas. Picture: Steve Humphreys
Discounting is now an established part of the festive retail campaign with main retailers seeing a lull after this weekend before another surge in consumer spending arrives closer to Christmas. Picture: Steve Humphreys

Gavin McLoughlin and Samantha McCaughren

This time 10 years ago, Irish shoppers were in a buoyant form, with fears of an economic crash pushed to the back of the minds of most. Shops all over the country were preparing for another exuberant season of spending, stocked up with their most luxurious and expensive products for the country's peak December shopping spree. Special offers were a rarity, with stores expecting full margins in those affluent times.

A decade on and while the economy has recovered well, Christmas shopping habits have been changed forever.

Black Friday has kick-started the discounting bonanza, with offers this weekend in line with the cut-price deals once only seen in the January sales.

Pre-Christmas discounting has completely altered revenue patterns in the last crucial weeks of the shopping year.

Carraig Donn, the Irish giftware and fashion chain, is one of the groups that has embraced Black Friday and is offering 20pc discounts and special deals this weekend.

Maeve McCormack, head of marketing and ecommerce at the retailer said: "It's a big week in the calendar for us now. It has changed the retail landscape in Ireland. That traditional shopping day of December 8th has been replaced by this frenzy of shopping, which is driven by the big retailers."

In the early days of Black Friday, retailers were sometimes uneasy about the dip in trade which followed. "There is a little bit of a lull in early December as a result, a time which traditionally shoppers were out in force." But overall, the group has adapted to the new patterns.

Another perceived threat to traditional retailers is online shopping. Carraig Donn, which is expansion mode and now owns 38 stores, has made its online central to its growth plans. "We relaunched CarraigDonn.com in the early part of this year and it's becoming more and more at the core of the business. We are a 50-year-old, traditional business still based in the West of Ireland but ecommerce is now at the core of everything that we do."

The company, which has just opened in Rathmines and will shortly open a new shop in City Square and Waterford, is two years into a five-year strategy which aims to see online revenues hit 10pc of group turnover. McCormack said that online is now one of its best performers.

Consumer spending to date gives retailers some reason to be optimistic about the coming weeks. The CSO's retail sales index shows the value of sales (excluding the motor trade) up more than 3pc year-on-year in each of the first three quarters of this year. Volumes were up more than 6pc year-on-year in each quarter.

Blaine Callard, chief executive of Harvey Norman Ireland, is feeling cautiously optimistic about the weeks ahead. "There's no signs it's going to be a bumper Christmas but I think growth is good at the moment," he said.

"Last year was difficult. If you go back two Christmases, most retailers were pretty optimistic that we were seeing a strengthening of retail coming out of the depths of the recession.

"Then last Christmas, that really felt like it stalled for most retailers. I think the general sense around, both from what we're seeing and those in the industry that we're talking to, is that this Christmas looks encouraging, and looks definitely to be up on last year."

Arnotts is also expecting Christmas trading to be better this year. After a year of store refurbishment and the introduction of new brands it is expecting this Christmas to be its best ever.

"We have seen a very positive reaction to our 'Christmas Night In', an annual event which is the first indicator of Christmas trade for Arnotts," said managing director Donald McDonald. Customers are now spending more money per transaction, but similarly are expecting more from the store itself, he added.

"While we see more and more customers shopping online with us on Arnotts.ie, we equally see more and more customers researching online but then buying from us in-store. In particular, large ticket items where people want to have a trusted advice and after-sales service," he said. Harvey Norman is seeing this trend too, Callard said.

However, the continued weakness in sterling is potentially a drag. Alan McQuaid, an economist at Merrion Capital, said the current levels are making it more attractive for people to do their shopping in Northern Ireland. This has been particularly pronounced in the auto sector.

"You'd have to say, given the uncertainty over Brexit and the UK economy, that you can't see sterling making a sustained rally any time soon," McQuaid added.

Stephen Sealey, the managing director of Brown Thomas, believes however that the weak pound will mean UK rivals have to charge more for goods they have bought in Europe.

"What's happened in the UK is that as they have restocked and bought the new season ranges, they have been paying a higher rate because of the exchange rate and their prices have gone up. And some brands have been quite aggressive in putting up their prices in the UK," Sealey said.

He is also looking forward to the opening of the new Luas line in Dublin city centre. "When that starts running it will mean that Dublin is a single destination rather than north side/south side."

More generally, Sealey feels confident. His store - part of the Selfridges group that also owns Arnotts - has also invested significantly in its Dublin store in recent times. But Sealey isn't getting ahead of himself.

"We're in the first mile of a marathon and there is a lot to go and it could change between now and Christmas but I feel confident ... whether it is going to be a better Christmas generally or whether we are eating someone else's lunch, I wouldn't particularly like to comment."

Discounting is now an established feature of the pre-Christmas period - indeed Blaine Callard says Black Friday is now bigger than Christmas for Harvey Norman.

Retail Ireland, the Ibec group focused on the sector, believes this year's Black Friday will turn out to have been a record breaker when it comes to discounts.

The new discounting cycle has "distorted the trading period for many retailers and places already tight margins under further pressure", the group said.

Callard said the rise in activity around Black Friday, the lull that follows in early December, and then another rise around Christmas, makes planning very complex.

"You have these two humps and that's very challenging for retailers in terms of scheduling resources. When do you take on additional staff? How do you allocate your inventory? A lot of retailers really struggle with this two-humped peak, and we've been no exception. It's been adjusting every year.

"Black Friday is great for consumers in that you've now got a period of aggressive sales and discounting by retailers in the lead-up to Christmas. It's tougher for retailers to navigate and we're all trying to find our own path."

Lorraine Higgins, the deputy chief executive of representative group Retail Excellence Ireland, has concerns for independently owned shops, but said more and more of them were getting on board with the Black Friday concept.

"This weekend has helped people's spirits. We've seen more people engaging in it than we would have in previous years and it's not just the high street retailers ... there is a longer lead to the Christmas period, which is probably needed by a lot of retailers," Higgins said.

REI is encouraging people to shop local, supporting jobs in their communities. Higgins said that last year, retailers had been let down by disappointing sales for in a number of areas such as children's clothing. "Retailers are being more strategic about Christmas rather than assuming it is going to be a foregone conclusion."

The second big day of the discounting period, Cyber Monday, occurs tomorrow. Like Black Friday, it is another US creation designed to encourage customers to shop online - an area where many Irish retailers are seen as lagging behind their foreign competitors.

Higgins says there is a threat to Irish-based retailers from international brands "aggressively social media marketing". Despite the challenges, retailers are on track have their best Christmas for several years.

McCormack said that Carraig Donn is optimistic about Christmas. "In terms of footfall we are encouraged by what we have seen to date in quarter four and from what we've seen before, it will definitely be up on last year." But it continues to be a fast-moving market and she like others in the sector know that retail will continue to be extremely challenging. "What worked 10 years ago won't work now," she said.

"And what worked this year may not work next year."

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