Retailers hooked on 'Black Friday drug', says AO boss

Black Friday discounting has been described as a drug for retailers and shoppers alike, with CEO of electricals e-tailer saying "everyone knows" it is bad for the industry.

John Roberts said on Tuesday that the traditional US Black Friday discounting day at the end of November, when retailers roll out aggressive price discounts following Thanksgiving, is "here to stay" in the UK – after 2014 saw it have its biggest impact yet on this side of the Atlantic.

"It's like a drug [and] the drug of low prices for the rest of the year is a difficult one for people to wean themselves off," he explained during a presentation at the MetaPack Delivery Conference in London.

The AO boss acknowledged that this new addition to the festive period trading caught a number of industry players by surprise, suggesting any retailer or supplier that said they had sufficiently planned for the unprecedented sales peak it caused was probably bending the truth.

"The whole profile was impossible to predict but we have to learn from it," Roberts, whose electricals business saw sales in the last three months of 2014 rise by 38% year on year, told delegates at the Park Plaza Hotel in Westminster.

"The reality is that it's here to stay – consumers will expect it and the press will fuel it."

According to the IMRG-Capgemini e-Retail Sales Index, online retail sales were up 37% month-on-month in November, which represented the largest October-November increase in the 14-year history of the survey. It also highlights the impact that the more-widely-participated-in Black Friday had on UK eCommerce.

Leaders from some of the UK's largest carriers, including Royal Mail, DPD, Yodel and Hermes, agreed yesterday that the change in peak demand at the end of last year caused network issues and acknowledged it is something the whole industry – retailers and delivery partners – must be prepared for in future years, starting in 2015.

So how did retailers do this Christmas, and what have they learnt from Black Friday's impact? From the raft of trading reports published over the last six weeks it is clear the whole industry is facing a new challenges due to changing consumer trends and the new US influence. We've picked out the Black Friday observations from some of the key players.

Sebastian James, group CEO of Dixons Carphone, which installed online queuing systems on its website in preparation for the expected rise in demand from consumers around Black Friday. Some consumers found themselves waiting for hours until they were able to make a purchase, but overall festive trading at the business was said to be encouraging with group like-for-like sales up 7% in the nine weeks to 3 January.

"The strange shape of this year's Christmas trading was something of a roller-coaster but I am very pleased with the end result," said James.

"In all of our largest trading markets we have excellent like-for-like performance against fairly tough comparables. At the same time, we have also experienced stable gross margin. There is no doubt that the huge scale and success of our Black Friday promotion impacted the three weeks that followed, but it was good to see customers respond positively to the deals that we had on Boxing Day where we saw growth from our record-breaking numbers last year in both the UK and Nordics."

Andy Street, managing director of John Lewis, which reported a 4.8% like-for-like sales jump for the five weeks to 27 December but actually saw annual comparative sales drop in the two weeks building up to 25 December due to the impact of a record sales week early in December fuelled by Black Friday.

"This year confirmed the new shape of trade for Christmas, with an early peak at the end of November driven by Black Friday and last minute gift buying," Street noted.

"With Black Friday driving a higher proportion of online sales and customers increasingly wanting more convenience, this has meant a real concentration on fulfilment, making this a truly 'Logistics Christmas'. The investments we have made and the new capabilities we have built in recent years in Distribution and IT have been fundamental in ensuring we successfully navigate this changing shape of trade."

Alex Baldock, group CEO of Shop Direct, which saw total sales rise 5% in the six weeks to 27 December. The company also said the seven days beginning 30 November represented the best trading period of the year.

"It was another record Christmas at Shop Direct and once again led the charge," Baldock explained.

"We like Black Friday. It was huge for us and acted as a starting gun for Christmas shopping – peak came earlier than in recent years. Traders like ourselves will thrive in the environment that Black Friday creates and we're happy that it's here to stay.

"The highly promotional market looks set to continue into 2015. We'll continue to make sure we're offering customers great deals while maintaining sales and profit growth."

John King, CEO of House of Fraser, which saw like-for-like sales increase by 8% year on year in the six weeks to 3 January, as well as online growth of more than 30%.

"We are delighted with our Christmas trading performance. This year we saw a very strong start to the key Christmas season with Black Friday being particularly successful," King remarked.

"This positive momentum continued over the entire critical selling period with a record sales level during the final week before Christmas. Our performance demonstrates the success of our strategy to continuously improve our online proposition, develop both our house brands and premium branded proposition and invest in our stores to give our customers the best possible shopping experience."

Jeremy Seigal, CEO of White Stuff, which has made such an impression on market towns across the UK through rapid growth over the last few years and saw like-for-like sales rise 6.5% in the five weeks to 3 January. Multichannel sales were up by nearly 40% on the same period one year before.

"We're very pleased with our performance over Christmas, especially given the competitive marketplace and the continuing influence of Black Friday on customer behaviour," said Seigal.

"Our customers responded very positively to our strong multichannel proposition, improved gifting product offer and new shops. We sold full price product well through December, and then saw an excellent reaction to our first week of sale, which resulted in a strong gross margin performance."

Anthony Thompson, CEO of Fat Face, where trading in the five weeks to 3 January were up by 5% and eCommerce sales grew by 25%. The business also reportedly catered for later Christmas online ordering and a strong increases in delivery to store.

"We have seen a strong multichannel performance over the Christmas trading period where we maintained our stance of not discounting prior to our Boxing Day sale," Thompson commented.

"This Christmas was a watershed moment for online, with a number of new trends reflecting the demand for convenience from time-poor customers. Our focus remains firmly on our customers who continue to trust in the price integrity associated with Fat Face, whilst benefiting from a genuine Boxing Day sale. When we did go on sale, our sale saw a number of records broken including the highest ever sales on Boxing Day itself and a strong online performance, where an order was being made every second at the peak."

John Cleland, chief executive officer at Maplin, where the four weeks to 26 December saw like-for-like sales growth of 3%, with online sales up 24%.

"The eight weeks sales to Christmas were boosted by five days of the Black Friday campaign, which delivered a 72% increase in online sales and a 15% rise in shop sales," Cleland reported.

Other Black Friday updates

So while some retailers, such as Shop Direct, actively embraced Black Friday and see it as beneficial to their businesses, others are cautious about how it will affect future sales patterns and what impact it will have on consumer expectations. There is a growing feeling of 'if everyone else is doing it, we should too'.

Some businesses such as high street mainstay Next – and, judging by the above comments, clothing retailers White Stuff and Fat Face – are not to be drawn into the discounting battle, or "the race to the bottom" as's Roberts has described Black Friday and similar markdown-driven strategies. It is beginning to look increasingly important for retailers to choose their stance and to stick to it, for fear of not meeting consumers' expectations.

The preparation for 2015 Black Friday has already begun, with Essential Retail hearing that retailers are putting plans in place to ensure online and in-store traffic peaks in the early build-up to next Christmas do not take them by surprise this year.

Perhaps a key message from The Delivery Conference came from Argos home delivery director Brian McCarthy, who called on retailers and carriers to work more closely together in serving the consumer. It's not necessarily a new way of thinking, but remains pertinent all the same.

"Collaboration is absolutely key in this space – carrier relationships are not just for Christmas," he said.

"It's got to be more about long-term relationships and not battering them when things go wrong."