Everybody loves a bargain and days like Cyber Monday and Black Friday see huge returns for large retailers, but what effect does the day of big deals have on the little guys? As champion of small and medium enterprises, we uncovered what it takes to avoid being crushed in the discount frenzy.
With some retail experts claiming that big discount days actually make small enterprises suffer, small businesses have been warned to avoid mass discounts all together and skip days like Cyber Monday.
Anthony Gale, CEO of Shoprocket, speaking to ParcelHero, agrees that these days are not suitable for smaller companies. He said: “Cyber Monday and big discount days are bad for small businesses as they can’t afford to compete with larger companies who are selling with huge discounts.
“Large companies will often have loss leaders to attract customers which small businesses are unable to do.”
Because it is also very difficult to predict the scale of sales on big bargain days, small businesses can’t accurately predict how much they should invest in marketing Black Friday or Cyber Monday, regardless of record-breaking profits of £1 billion predicted overall for the retail industry.
It’s a stark contrast to the displays of bargain hungry customers stampeding through large retail outlets and fighting for flat-screen televisions. Although UK customers rejected chaos for some traditional queuing and festive mince-pies, inevitable scenes of some US shoppers fighting for vegetable steam pots and televisions are already circulating on the internet.
The good news for those wanting to avoid the rush (and for in-shop staff hoping to avoid an increase in verbal abuse) is that analysts have predicted shoppers are moving online, especially for Cyber Monday. The convenience factor alone is expected to generate larger discounts for retailers today than on Black Friday and its extended week. This is great if you are a company with a strong online presence, but bad news if your online voice is small.
But it’s not all doom and gloom
Last year, it was reported that consumers spent £810 million online, according to IMRG. The Royal Mail’s research has also revealed that 60 percent of consumers are preparing to do the bulk of their Christmas shop online between Black Friday and Cyber Monday.
It’s estimated that the UK has 4.9 million SMEs who could seriously benefit from this surcharge in traffic to their sites. However, many British business are failing to optimise on this shopping event. Some of the challenges faced on this shopping event include:
- Sluggish websites that crash under the burden of increased website traffic.
- Managing extra stock and distributing and dispatch orders quickly enough to meet the demand.
- The biggest strain on SMEs is customer enquiries about orders.
- The solution to this is in the making. In preparation for the big surge in traffic, make sure you bolster online services and keep a watchful eye for peak traffic surges on your servers. Even large retailers struggle to keep-up with demand.
- Make sure you manage your customers expectations. If you get a very large order then remain transparent in delivery deadlines and procedure. It is proven that customers do not mind waiting longer if they feel they are getting a decent deal. Use a reliable courier service to ensure your customers are not disappointed by their delivery experience, this is the final and equally-important stage in the customer dealing with you, don’t let yourself down.
- Take on extra staff over these peak periods to deal with customer inquiries or upgrade your online customer service systems.
Provided you can plan ahead and resolve these issues proactively, you too will benefit from the surge of traffic. It’s worth familiarising yourself with the lead times and delivery deadlines for the holiday period.
Let the big guys sacrifice profit
Reputation, reputation, reputation. Charles Astwood, CEO and Founder of online pet fashion store Pet Runway suggests that SME’s can’t compete with large retailers like Amazon, who are vying for market share as a priority and should instead concentrate their energy on customer service:
“Discounting during Christmas is a dangerous precedent for all retailers, whether online or offline. If we take our lead from Amazon, who can lose a lot of money to gain market share, we will quickly lose all our unique, local shops.
“Most shops rely on the Christmas period, and if we reduce our margins, that are thin enough already, we are just inviting disaster.”
A report by LCP Consulting supports this, suggesting that almost a third of retailers in the UK and US actually think Black Friday is “unprofitable and unsustainable.”
Some large retailers in the UK subsequently chose not to partake in the bargain frenzy, including US owned Asda. Its parent company, Walmart, one of the largest US retailers believe Black Friday does not have a future in the UK, and simply isn’t worth the effort.
A major reason for this is the serious dent it induces on Christmas profit margins, as Astwood states: “There is data from the Office of National Statistics that suggests we just shift buyers into an intense 3 day period of buying in November, and the rest of December suffers because of it.”
Focusing on customer service, suggests Astwood, should remain the priority for small business, ‘something that the Amazons of the world can’t do.’
Stick to your principles
Other companies are refusing to partake in Black Friday not only for its lack of suitability, but also because of ethical reasons. What Daisy Did, an ethical retailer based in Northampton has refused to participate in Black Friday because of the consequences heavily discounted retail items have on those at the beginning of the production line.
On the company’s Facebook wall CEO and co-founder Ozric Vondervelden, said: “We pay our producers and staff living wages for their hard work, we pay ourselves modestly and pay honest taxes. Most companies will calculate their product prices based on consumer psychology, whereas our prices directly reflect the work that has gone into them and the associated costs along the way.
“We don’t have the margin to offer massive discounts on our products, and neither should large chain stores. This mentality of getting something for nothing is what has driven prices down and created such terrible working conditions in the fashion industry.”
What will you be doing for Cyber Monday? Let us know in the comment section below.