By Sarah Louise Jordan
Retailers might be backing themselves into a hole with events such as Black Friday and Cyber Monday by entering into an unsustainable cycle of discounting, according to new research by eConsultancy.
Although both of these events brought retailers a welcome surge in sales, the rise of strategic discounting means that retailers will need to become more flexible than ever before to survive.
Experts are now predicting that January will be a harsher-than-normal month for retailers as customers have spent the majority of their disposable income at pre-Christmas sales.
The report continues: “If everyone has spent their Christmas and January budgets now, they might be less likely to spend more in the coming weeks. This could force retailers to continue heavy discounting even after the usual New Year sales, leaving them facing a black month of poor returns at the tills.
“Although counterintuitive, the possibility of ongoing discounts and low prices is not entirely positive for shoppers. Forced discounting will ultimately have a stifling effect on retail competition by squeezing independents out of the market and standardising merchandise offers across the larger chains. This will likely mean less choice, albeit it at lower prices, for consumers.”
According to eConsultancy, UK shoppers spent £810 million online alone during Black Friday, a 40% increase on last year’s figure. John Lewis reported record-breaking sales both in store and via its website, while police were called to a number of supermarkets as physical confrontations broke out over discounted goods.
The report continues: “Timely re-structuring or re-organisation could enable retailers to shape their businesses for the new landscape emerging where customers expect a lot more for a lot less, while being able to maximise opportunities such as Black Friday or Cyber Monday.
“Taking a balanced approach to pricing throughout the year could be useful in driving loyalty but businesses still need to weather the storm of discount frenzies with much more flexibility than ever before.”