Black Friday And Cyber Monday 'Success' Could Clean Retailers Out

You wouldn't know it if you have been battling with the hordes of shoppers on Oxford Street or any other city centre, but retail has a secret. It's hooked on discounts, and is finding it hard to kick the habit. 

Retail sales volumes for November are just over 1% up year-on-year, according to the Office for National Statistics, but this is highly unlikely to make up for an October that is weaker than usual. In fact, according to The Times, Visa is predicting the first decline in Christmas shopping revenue for retailers in five years. It should know because, apparently, one in three pounds spent in the UK is handled by the company. 

Regular readers will know I have believed for quite some time that Black Friday is a monster of retailers' own making. If you need to discount stock before Christmas, you know you might just be making a problem for yourself. Sure, it must be great for clearing out stock and getting deliveries going out nearly a month before the big day -- but surely there are problems too.

As UK retailers have picked up on this very American tradition, the talk has always been about people stocking up on gifts but then still flocking to the high street in December. In other words, Black Friday doesn't cannibalise sales. I would beg to differ, and I rather suspect the sales figures will prove that people are just shopping earlier and snapping up money-off deals.

Let's not forget that Black Friday and Cyber Monday came after a year of retailers routinely discounting anyway. The sales haven't stopped there either. In some quarters they are still carrying on, and then retailers will expect us to get excited about the traditional Boxing Day sales. A month after we've already received widespread discounts? I'm not so sure the big UK sales day will still be a hit.

What we can almost certainly guarantee is that retailers will be struggling in the New Year. They have not only been holding back on price increases caused by the weaker pound, but they have actually been discounting throughout the year. They have then been frightened into joining the Black Friday and Cyber Monday bundle to buy market share with even further reduced prices. 

I am not one for next year predictions, but I reckon it's fairly safe to say this addiction to discounting will lead several retailers to suffer serious financial strain.  

This whole trying to "out-discount" one another in a bid to buy market share reminds me of one the best sayings ever in business -- revenue is vanity, profit is sanity.

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