Asda pulls out of Black Friday and others may follow

With the retail sector already being affected by the looming discount phenomenon of Black Friday, Asda has confirmed it will “step away” from taking part, despite having UK introduced the event two years ago.

Asda, whose parent Walmart is a big Black Friday player in the US, said rather than splurging on the flash sales event it will instead invest £26m in savings across the festive shopping period.

The supermarket claimed "shopper fatigue" was causing a drag around one-off sales on big-ticket, non-essential items at Christmas.

"The decision to step away from Black Friday is not about the event itself," said Asda chief executive Andy Clarke.

"Over the last two years we've developed an organised, well-executed plan, but this year customers have told us loud and clear that they don't want to be held hostage to a day or two of sales."

Asda said its investment in other offers would encompass half-price toys, cheap skincare products and perfume, computer games consoles, televisions and reductions on beef, salmon, wine and spirits.

Last week, industry reports suggested Asda was having a "radical rethink" and was felt likely to dial down its involvement this year, according to sources, partially due to the embarrassment of the chaos in the stores last year, where police had to be called on some instances.

Data released on Tuesday suggested wider UK retail sales had been hit in October, partly as consumers and retailers held out for the Black Friday blowout.

After £810m was spent on 2014, it had been forecast that Black Friday 2015 will become the UK’s single shopping day in the UK to hit £1bn in sales.

But with AO World and John Lewis having also expressed objection to the event, Asda’s withdrawal could see others follow.

Last month, Argos owner Home Retail Group warned its full-year profits will fall short of expectations due to trading uncertainty caused by Black Friday.

Several retailers felt last year’s very strong Black Friday sales saw shoppers merely bringing forward end-of-year purchases rather than increasing overall spending in the last few months of the year.

High street sales in fact fell last Christmas, according to BDO, with retailers margins also under pressure as they felt forced to continue discounting.

But independent retail analyst Nick Bubb said others following suit was unlikely. “I think it's full steam ahead for the likes of Amazon and Dixons and it's a brave man who pulls back completely from getting involved, but it's likely to be more of an Online thing this year and more about electricals than clothing etc.”

Economist Howard Archer of IHS Global Insight noted an apparent lull in retail sales in 2014, as data from the Office for National Statistics showed that retail sales volumes rose 1.5% month-on-month and 6.7% year-on-year in November 2014, but were up a lesser 0.6% month-on-month and 4.2% year-on-year in December.

Archer wondered whether UK retailers will match or even surpass the substantial discounting that took place last year.

“Or will retailers decide that less aggressive is needed this year due to consumers’ improved purchasing power and relatively high confidence? Obviously the more discounting that retailers do, the more it eats into their profit margins.”

Analyst Clive Black at broker Shore Capital said he will observe Black Friday 2015 with interest: “We sense that common-sense is going to be more prevalent in 2015, with a more British approach applied to this retail-Americana.

“Several major retailers have outlined their dissatisfaction with this near commercial suicide adopted last year ahead of the the key trading period of the year for many in terms of sales and margins.”

Retail analysis firm Springboard has suggested this year's event would give retailers an early boost, especially retail parks, where footfall is expected to rise by 17%, while shopping centres and high streets will see visitor increases of 12% and 9% respectively.

Nevertheless, Black expects Christmas 2015 will be an enjoyable one for retailers and punters alike.

“The retail segment should also enjoy a British consumer who is benefiting from rising living standards with robust confidence measured by GfK NOP. More particularly though we sense that the leisure segment may be particularly well positioned to capture rising discretionary expenditure in the UK.”

ShoreCap expect bigger ticket gifting to be strong this coming Christmas whilst ongoing expenditure on homewares should also be robust, while the grocery sector should also enjoy strong ‘trading up’.

Forecasts from Experian-IMRG point to internet sales on Cyber Monday, the online cousin that rounds off Black Friday weekend, will grow 31% to £943m, while online shopping on Boxing Day will rise 22% to £856m.