Tuesday 25 June 2019

Samantha McCaughren: 'Struggling stores paying Black Friday price to boost footfall'

Black Friday is more evident in Irish cities, towns and shopping malls than ever before
Black Friday is more evident in Irish cities, towns and shopping malls than ever before
Samantha McCaughren

Samantha McCaughren

The main street is in turmoil, that we know. In Britain, a number of scalps have already being claimed, including House of Fraser which went into administration and was then rescued in part by Sports Direct owner Mike Ashley.

Many large chains are closing dozens of stores, including New Look and Marks and Spencer. Several others have issued profit warnings.

The UK has its own problems with consumer confidence dropping ahead of Brexit, but Ireland has been left relatively unscathed to date.

However, retailers in both countries face a common problem - the rise of online shopping.

Irish shoppers have not shifted online to the extent of their British counterparts, but they are catching up fast.

It is difficult to get a read on how the international chains are doing in Ireland but, anecdotally, the word is that shops are struggling.

Latest Brown Thomas accounts show that turnover was down to €165.7m, a drop of 1.2pc. Earlier this month, Marks & Spencer singled out Ireland for its 'difficult trading'. There may be plenty of signs that the Irish economy is in rude health, but retailers are still feeling the chill.

So is the answer to their woes Black Friday?

This weekend Black Friday is more evident in Irish cities, towns and shopping centres than ever before.

What started off as a US craze, focused on electronic goods, has seeped through to fashion, beauty, jewellery and all the other goods that would be most typically be highly sought after for the so-called Christmas 'gifting' period.

The British chains have led the way with the discounting model, but smaller Irish-owned shops and chains have also jumped on the bandwagon.

Among the Irish stores offering money off across most stock this weekend are Carraig Donn, Pamela Scott and Easons.

There is some debate about how real the discounts are. Electronics in particular are difficult to judge given that the price of older models always falls as newer versions come on board. There is ample evidence of online and bricks and mortar shops flogging bargains that aren't really bargains at all.

Clothing and fashion stores have always used discounts to bring in shoppers. The difference is they used to be available after Christmas, after retailers had enjoyed the shopping rush in the preceding five or so weeks. With Black Friday discounts, many clothing and gift shops are offering 20pc or 30pc off all stock, so margins are taking a hit at the busiest time of the year.

It definitely boosts footfall. According to PwC, footfall on Black Friday 2017 was up 30pc compared to the previous Friday.

There was an even greater Black Friday impact in shopping centres, where footfall was up nearly 40pc compared to the previous Friday.

Analysts, however, are vocal in their criticism of this practice. Richard Hyman, a well-known retail adviser, told a British newspaper: "Black Friday has probably been the most stupid retail import from the USA this country has ever seen. To launch a promotion when you are wanting, and needing, to promote your Christmas ranges is very confusing for customers."

Moody's issued a note last week warning that Black Friday discounts don't make sense. The credit rating and research agency argued that Black Friday largely brings forward purchases from closer to Christmas, often at lower margins.

Overall the event is rarely positive for individual companies. David Beadle, vice-president and senior credit officer at Moody's, said: "Smart retailers that have chosen to participate do so with a carefully thought-out strategy including specific buying to protect margins.

"Others have decided their overall profitability and brand values are better served by avoiding involvement altogether. In time, we believe that the event will be increasingly about electricals and that consumers will come to realise true bargains are rare."

But it's a tough call for retailers. I was buying some clothes in a Dublin city centre shop on Friday which I might not have considered were it not for the chunky 30pc off (all stock).

I felt a little guilty that I was racing in to get bargain at a time when retail is facing into an uncertain future. "I do feel a bit sorry for the shops," I told the manager, thinking about the hefty discount I was getting at a time which was once the retail sector's most lucrative time of the year. "Why," she asked thinking of the long day ahead. "Is it because we're so busy?"

And therein lies the reason why more and more shop owners are jumping on the Black Friday bandwagon, wherever it may take them.

For a retail sector which is seeing fewer customers come through those bricks and mortar doors, the promise of hordes of shoppers one again filling their stores is impossible to resist, regardless of the longer-term consequences.

Sunday Indo Business

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