Black Friday "unprofitable and unsustainable" for UK retailers

LCP, a logistics consultancy, have published research showing that the number of leading UK retailers that see Black Friday as “unprofitable and unsustainable” has doubled over the last year.

Black Friday, the day after Thanksgiving, marks the official start of the holiday season wherein retailers across the country offer big promotions on products.

The number of retailers in the UK that feel Black Friday is a drain on profits rose from 32% in 2015 to 61% in 2016. Asda dropped out of Black Friday involvement in 2015 and instead engaged in deeper promotions across December.

In the US on the other hand, where the retail frenzy began, retailers are still convinced there is money to be made from Black Friday with only 35% viewing it as unprofitable.

Using retail market data the consultancy estimated that 5m parcels purchased on Black Friday will be returned in the UK, with London returning the most, at 27% of purchases, and Scotland returning the least at 19%. This means that retailers will have to manage approximately an additional 50% of daily returns volume during the week following Black Friday.

Next day deliveries are expected to be up by 20% or 1.0m from last year bringing the total up to 7.5m parcels.
Next day click and collect orders are also expected to rise but the data suggests that customers will only collect half of the anticipated 3.5m orders.

“The true profit impact of Black Friday is not driven by sales increases and gross margin; it is driven by the additional operating cost and the complexity of managing operational peaks,” said the release.

Retailers must manage the processing of returns in a timely manner in order to get the merchandise back on sale to avoid the risk of having to mark down the products.

Research also found that peak events polarises retailers’ behaviour with some having high levels of control and others taking on a more “chaotic approach”.