Comment: Why supply chain visibility is the key to Black Friday

Today is Black Friday – arguably the biggest and most anticipated shopping day of the year – where retailers slash prices to kick start the Christmas shopping period.

Imported from the USA five years ago, last year Black Friday came into its own and hit the headlines and wallets of UK consumers. Despite this peak at the height of the retail shopping season, retailers are inconsistent in their attitude towards this new ‘shopping holiday’.

Last year's event saw unprecedented levels of demand with Black Friday 2014 overtaking Cyber Monday – the Monday after Thanksgiving in the US – as the biggest online shopping day of the year. According to the IMRG, the UK's industry association for e-retail, the participating retailers experienced an average sales uplift of 180% and shopping traffic was 50% higher than anticipated. While a sales uplift is usually considered a positive thing, many retailers were unprepared for the surge in traffic, orders, deliveries and then returns. Websites crashed leaving dissatisfied customers and the volume of orders placed within such a short period putting significant pressure on carrier and retail fulfilment operations for days – and when you take into account returns – weeks.

The scale of discounting on Black Friday can also present a profitability threat for retailers. A simple Google search finds numerous examples of the Black Friday sales increases experienced by many retailers. What is absent from these accounts is any mention of margins.  So why do retailers participate? Well, there are several very good reasons: 

Although Asda has notably dropped out of this year’s Black Friday activities, bargain shopping events appear to be on the rise. In July, Amazon launched its first ever Prime shopping day surpassing its 2014 Black Friday sales record. UK and US retailers have also begun participating in the shopping events of their international markets like China’s Singles Day. Singles Day is now reported as the biggest online shopping day of the year with Alibaba customers spending over £9bn in 24 hours. Gap also reported at Drapers Fashion Forum that it’s online Singles Day sales surpassed the yearly turnover of its top two Chinese stores combined.

So how can retailers participate in shopping events like Black Friday and also protect their margin? The answer lies in their supply chain.

Discounts aside, Black Friday is essentially about peak management – it’s all about handling a large influx of traffic, sales and orders delivered to the consumer at a reduced price. Many spout the virtues of accurate forecasting and increased server capacity as the keys to Black Friday success. And, whilst you can’t ignore these, a retail crystal ball combined with all the servers in the world is futile if you are unable to fulfil that order in a cost effective and efficient way. How you serve that order – or the flexibility and efficiency of your supply chain – plays a much bigger role in whether your activity on Black Friday brings value to your organisation.

There are many factors that contribute to a flexible and efficient supply chain. However, it starts with visibility. Having visibility of your stock – knowing what it is, where it is and how much you have – is critical to managing the products within your supply chain.

When you have real time visibility of your inventory and know exactly where your stock is, you have these advantages too:

GS1 UK provides a regular column for Essential Retail focused on technology, in relation to retail industry standards and the wider supply chain.

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