The number of UK retailers that see Black Friday as an unprofitable and unsustainable promotion has doubled over the past 12 months, according to LCP Consulting’s latest report “The Future of Retail”.
There is now just over a week to go to Black Friday 2016 (25th November), but some 61 per cent of retailers now say it is unprofitable. That compares to 32 per cent last year.
This contrasts with the perception in the US where the majority of retailers remain convinced that there is still money to be made from Black Friday – with only 35 per cent viewing it as unprofitable.
The research also found that a third of UK retailers have seen returns increase over the past 12 months, with the majority saying that they see an increased proportion of returns following peak trading periods like Black Friday.
Black Friday 2015 saw a significant increase in online sales compared to store sales and this trend is expected to continue for Black Friday 2016 – with an associated impact on returns volume. LCP estimates:
– Five million parcels purchased on Black Friday will be returned, and this will result in retailers having to manage approximately an additional 50 per cent of daily returns volume during the week immediately following Black Friday.
– With next day deliveries expected to be up 20 per cent from last year, an additional one million parcels will also be expected to arrive with the customer the next day (up to 7.5 million parcels).
– Next Day Click and Collect volumes are also expected to rise for Black Friday. However, LCP data suggests that customers will only collect half of the anticipated 3.5 million Click and Collect orders on the next day.
Stuart Higgins, retail partner at LCP Consulting said: “The majority of UK retailers claim that Black Friday is margin erosive and unprofitable. The key question for 2016 is how many more retailers will follow Asda’s lead from 2015 and shun Black Friday involvement in favour of deeper promotions across December, or will perceived competitive pressure lead many to continue to drive Black Friday sales despite the prospect of short term losses and the potential for service disruption?”
DPD plans for 20pc rise in peak parcels
DPD expects to handle a record number of parcels over the Christmas Peak – 20 per cent more than last year.
CEO Dwain McDonald said: “It’s clear that it is going to be another record breaking Christmas for online shopping in the UK, but we are more than ready. Last year we saw Black Friday becoming more of an online sales event, and that trend is likely to continue again this year. We’ve agreed our parcel volumes and we have the people and the infrastructure to deliver.”
The company said it would be relying largely on the efficiency of its existing network infrastructure, technology and its permanent staff, rather than pop-up depots and seasonal labour.
Over the past two years DPD has opened six 60,000 sq ft distribution centres, each capable of sorting 30,000 parcels a day – double the volume of the depots they replaced. And last year it opened its £100m hub at Hinckley, which can handle 600,000 parcels a night.