By James Smith, managing director of AutoStore UK
As we enter what is the busiest period of the year for many retailers and businesses, there is plenty to ponder.
2020 has already significantly challenged the retail sector, with a significant rise in e-commerce orders taking its toll on supply chains and logistical support as a result of global COVID-19 lockdowns. But even with the UK preparing to exit it’s second lockdown of the pandemic, the challenges are not going to ease just yet.
This year’s edition of Black Friday brings a wealth of savings and an opportunity for shoppers to get in on the biggest sales, and let off some steam in the form of retail therapy. But this annual period of mass sales will present an entirely different proposition altogether.
It will be the first year where businesses have been forced to operate on a predominantly online-only basis, with only a select few retailers able to open their brick-and-mortar stores for the entirety of the sale period.
With spending in store restricted for the best part of six months, prior to the second lockdown PwC had estimated a vast re-increase in spending of up to £8.4bn this Black Friday – up by 8% on last year. Now though, the same firm are anticipating that we may in fact see a decline in sales – estimating £6.2bn in sales to be secured, down 20% on the previous year.
Despite these changes in expectation, an IMRG report launched in November predicted that e-commerce will still be an area which sees a significant uptake in its presence across Black Friday. A year-on-year increase of up to 45% is predicted, which would pose challenges to small and large businesses alike. Customers who have seen disposable income freed up due to new remote working procedures put in place will now have additional income to spend on the sale. While others who have seen incomes slashed as a result of job losses and working hours being cut will now be on the lookout for the cheapest offers as we look ahead to Christmas.
With this in mind retailers should be preparing themselves for a new challenge which may not have been considered previously.
The majority of stores will be beginning the annual sale online, with the view of opening stores once the lockdown has concluded, there will be an expected increase in e-commerce sales made. This increase in e-commerce demand will bring with it a surge in online orders far beyond what we have seen to date, and therefore cause great strain for fulfilment and distribution centres for the smaller retailers and even the big brands expecting to cash in.
What may not be considered the greatest challenge though, is the increase in anticipated returns of products purchased online. With an increase in e-commerce, what is also anticipated is that many products ordered online will not be kept for a number of reasons, which will likely see an increase in the number of items being returned.
The process of managing online returns is no small task. Returned items are often processed in entirely different facilities to the main order fulfilment centres. Once sorted, they are then required to be returned to the shop floor or sales warehouse as soon as possible, in order to get the stock back into the system. This can come at a great cost to businesses, and will likely cause great pressure for supply chains this Black Friday.
A recent Barclaycard report showed that 57% of retailers from its survey claimed returns have a negative impact on day-to-day operations. Meanwhile 20% had claimed they increase the prices of products to supplement that cost of managing returns. As a result, many businesses often do not accept returns altogether to save on the cost of processing at such a cost to the business.
However with sales down across the board this year for so many, and demand set to sky-rocket, there may be little choice when it comes to accepting returns. The need for more stock to be available may require the need to process returns and get these back into the system and in store as soon as possible.
To do this, only the most prepared and secure businesses with robust supply chain operations will be able to do this effectively enough. Predominantly e-commerce first businesses will likely have the right systems and operations in place to succeed during the course of Black Friday and as we move closer to Christmas. Any businesses still acclimatising to the world of e-commerce though, may find this year’s sales a real test of their business structures.
In light of all of the challenges and profit losses suffered this year, there is a lot of ground to make up. And the retail sector will need to be prepared if they are to manage what could be the most challenging Black Friday to date.