Tuesday 6th Dec 2016 - Logistics Manager

Black Friday 2015: has the beast been tamed?

Black Friday saw record sales, quiet high streets and almost seamless logistics. But was it all really worth it? Alexandra Leonards explores the ups and downs of Black Friday 2015, and examines the lessons that have been learned.

This article appears in the January 2016 issue of Logistics Manager

This article appears in the January 2016 issue of Logistics Manager

On the high street, Black Friday was a far cry from the mayhem witnessed in 2014. But this time around, it was online that saw a hefty growth in sales volume. Beyond the shopping centres and retail parks of the UK, shoppers were exploiting discounts on their laptops, tablets and mobiles.

There was a clear shift to e-shopping, with UK consumers spending £3.3 billion online over the four-day Black Friday weekend.

“For a business that is now a 100 per cent online digital business, this is clearly good news for Very.co.uk,” says Gareth Jones, chief operating officer of Very’s parent company Shop Direct. Jones thinks that the evident swing to online platforms demonstrates consumer apprehension about potential chaos on the high street.

Year-on-year, Friday 27th (Black Friday), Saturday 28th, and Sunday 29th of November saw high street footfall decline by 4.05 per cent, 6.14 per cent and 5.17 per cent respectively. Scenes of frenzied shoppers tumbling over each other in 2014 seems to have put people off.

“People decided to go for the choice, ease and affordability of online instead,” says Jones. He thinks that Black Friday Weekend will undoubtedly become the domain of online retailers in future.

Many retailers experienced record online sales over the shopping weekend. John Lewis saw its biggest ever single day’s trade on Black Friday, an increase of 11.9 per cent on the year before. The Currys PC World ‘web site had a record start to its Black Friday sales – with a 2900 per cent increase on orders compared to the previous week. And Amazon UK sold 7.4 million items on Black Friday, which was also the retailer’s biggest ever day – up from 5.5 million in 2014.

Online platforms generally fared well this year – though some retailer web sites, including Argos, John Lewis, and JD Sports, experienced mild technical difficulties that were quickly resolved.

The diminished drama appears to be an indicator of all-round better preparation. Retailers tactically spreading out their deals over a weekend, or week long period, was also a significant game changer.

Matthew Robertson, commercial director of parcel data management platform NetDespatch, says that retailers have learned a lesson from the chaos of 2014. “They have been more careful in their planning, and thought about the long-term benefits of spreading out deals.”

Robertson attributes the promotion of click and collect, alongside organising processes to manage peak times, as ways retailers have successfully approached the shopping phenomenon. Many retailers, including Tesco, didn’t offer next day delivery, or offered it at a higher price, to help take pressure off the busy weekend.

DHL Supply Chain managing director of retail, John Boulter, highlights the importance of forecasting during busy seasonal periods like the Black Friday Weekend.

“Forecasting is crucial and both the retailer and supply chain partner needs to understand what products will be required and when they will be required,” he says. “This year, we expect the 18th December to be the busiest day for gift volumes and the 22nd to be the most popular for last minute purchases. Understanding these specific peaks means we’re able to prepare our teams and ensures that we’re ready to meet demand.”

After struggling with huge and unexpected volumes in 2014, Yodel spent ten months planning for the Christmas peak.

Yodel put limits on next day delivery capacity, and spread out deliveries over the course of a week. During this time it handled a record breaking 5,098,559 parcels. The Wednesday after Black Friday, a Yodel spokesperson confirmed the success of its preparation: “Service is going smoothly and indications are that the cyber weekend parcel volume is being spread to ensure that it’s manageable this year, and customers have a better end to end experience.”

Between November 26th and December 2nd 2015, parcel carrier Hermes processed 7.7 million parcels, and its order volumes grew by 50 per cent.

“Last year, the popularity of Black Friday took the whole industry by surprise, but this time around both retailers and carriers knew what to expect,” says Martijn de Lange, COO of Hermes.

“Over the course of 2015, we have invested in a secondary sortation tier at our fully automated hub in Warrington, opened another 125 sub depots across the UK and added another 3,000 couriers to our network for the peak season. This investment has boosted our overall capacity, increased the efficiency of our operations, and helped us to deliver a fantastic service over the course of the Black Friday weekend.”

DPD was also confident during the aftermath of Black Friday. Despite handling over 30 per cent more parcels than the previous year, the delivery company said that everything had “worked like clockwork”. In preparation, it had 1,000 full-time, permanent drivers that were recruited during 2015, a number of new purpose built depots and a £100 million super hub in Hinckley, which opened in September 2015.

On Black Friday, chief of courier service CitySprint, Patrick Gallagher, warned that high levels of online buying could mean delivery problems for the following week.

“This inevitably puts greater strain on distribution and delivery networks, who must make sure shoppers receive their online purchases in good time,” he said. “Sensible retailers will have capped the number of same day and next day deliveries they promise in this period to avoid damaging their reputation.”

But MetaPack data found that 92 per cent of deliveries on Cyber Monday were on time, just one per cent off the average for the previous six months, and 19 per cent higher than on Black Friday 2014.

“Thanks to the depth of preparation made by both retailers and carriers, the sharing of forecasts, and the adoption of multi-carrier contracts to cover the period, retailers were able to manage capacity and worked in tandem with carriers to clear orders,” says Patrick Wall, CEO of MetaPack.

“As a result, the quality of service for customers was maintained throughout, with carriers even providing additional services – including Sunday collections – to manage the increase in volumes and enable retailers to keep their delivery promises.”

However, LCP Consulting warned that some 2.2 million of the 22m parcels due to be delivered during the week after Black Friday would not arrive on time. It said that across the Christmas period, 17 million parcels worth £695 million would not arrive when the retailer promised.

The consultancy said that the increase of four million next day deliveries on Black Friday would put “additional strain” on retailers – resulting in late deliveries.

And not all retailers did cope with the high volumes. Boasting 900 Fast Track delivery vans on the road, Argos seemed to be prepared for the demanding weekend ahead.

Offering up next, and even same day delivery for £3.95, and free delivery for those willing to wait four working days – Argos promised its customers a lot. It is unsurprising then, that hundreds of customers voiced their disappointment on social media when their deliveries were delayed, or even cancelled, following the Black Friday weekend.

“Retailers continue to pursue a faster and freer agenda, which is simply placing too much pressure on their back end infrastructure and carrier partners to deliver,” said Stuart Higgins, retail partner at LCP Consulting.

“With one in ten deliveries risking failure this Christmas, retailers need to ensure they don’t promise what they can’t deliver or the customers will simply find a competitor who can.”

Oracle’s Dominic Regan says that historically, the retail supply chain has been optimised by focusing on internal operations.

“In today’s customer-centric retail environment however, retailers are finding that their traditional supply chains are not agile enough to meet the requirements of the different segments of their customer base,” he says.

“For some online shoppers the cost of delivery is a priority, for others it may be convenience or speed of delivery that is paramount.”

 

Is it worth it?

Although Black Friday itself prompted record sales, November 2015 produced an arguably disappointing set of figures. Yes, sales were up, but only by 0.7 per cent. In 2014, there was a more significant increase of 2.2 per cent.

Like-for-like, retail sales had actually decreased by 0.4 per cent in November 2015, when they had increased by 0.9 per cent in 2014, according to the BRC-KPMG retail sales monitor.

KPMG, the global professional services firm, says the ‘slowdown’ in November demonstrates shoppers holding off for Black Friday discounts. So, is it worth it?

“Jury’s out,” says Richard Wilding OBE, professor of supply chain at Cranfield University. “Main reason, cost to serve. Measurements of market share or sales might look good, but are they profitable sales?”

He says that Boxing Day sales have always been worth it for retailers, because of the publicity – pictures in the papers of customers queuing outside stores is great advertising. But Black Friday’s dramatic drop in footfall means retailers don’t benefit from this exposure.

“Are we actually burning value?” says Wilding. “Some organisations not doing Black Friday end up looking far rosier in January when all the figures are revealed.”

Speaking before Black Friday, James Miller, senior retail consultant at Experian Marketing Services, said that a handful of major UK retailers had warned that their profits may again be hit hard due to the Black Friday Weekend.

David McCorquodale, head of retail at KPMG, describes November’s unexciting sales as a ‘reality check’ for retailers. “The result was that, despite the hype around Black Friday, there was minimal loosening of the family purse strings compared to last year,’ says McCorquodale. “And retailers, facing significant cost increases next year, will be striving to wean UK shoppers off the discounting drug.”

When you consider the additional cost of extra drivers, distribution centres and warehouse staff – the profitability of the Black Friday Weekend appears increasingly questionable.

“You could say that retailers and delivery companies are facing the perfect storm,” says Dominic Regan, EMEA senior director of value chain execution at Oracle. “The growth of online shopping has contributed to healthy sales figures for retailers, but the increase in orders has put immense pressure on their supply chains and left some retailers struggling to keep up with demand.”

John Day, senior lecturer in strategy and logistics at the University of Derby, believes there’s a chance that profits given away over Black Friday, will never be recaptured.

“It’s more that retailers have to do it, because everyone else is,” he says. “Unfortunately it appears to now be a part of our Christmas shopping holidays. Retailers don’t want to miss out.”

Day thinks that Asda’s decision to call off its involvement in the Black Friday Weekend in 2015, could potentially be a ‘game changer’ for 2016. But whether retailers will so easily be able distance themselves from the shopping holiday, is another question.

“Many retailers will breathe a sigh of relief once the busy festive sales period is over,” says Regan. “However planning is key and optimising their supply chain should be a constant priority all-year round.”