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Britain's Biggest-Ever Black Friday May Come at a Cost

  • Reuters

FILE - Shoppers pass a sale sign on Oxford Street in London, Dec. 22, 2014.

FILE - Shoppers pass a sale sign on Oxford Street in London, Dec. 22, 2014.

Spending in Britain on next week's "Black Friday" discount shopping day looks set to break last year's record despite warnings that retailers would be wise to shun an event imported from the United States.

Misgivings about the broader impact on crucial pre-Christmas trading are illustrated by the decision of supermarket group Asda, itself owned by America's Wal-Mart, not to join the frenzy this year. Asda argues that shoppers don't want big fluctuations in prices.

Other retailers are prepared to take the risk and sign up for an event that sparked brawls in stores last year as shoppers wrestled over bargains.

Retail researcher Conlumino is forecasting Black Friday will generate UK sales, both in stores and online, of 1.6 billion pounds, up 20 percent on 2014, as more retailers join the fray and existing players whip up more business.
Online spending is forecast to soar 32 percent year-on-year to 1.1 billion pounds, according to Experian-IMRG.

Black Friday, the day after the U.S. Thanksgiving holiday, was so named because spending would surge and retailers would traditionally begin to turn a profit for the year, moving from the red into the black.

The day has developed into an important part of the British shopping calendar over the past five years as retailers competed with online bargains offered by Amazon.

It really took off last year when more familiar names such as Sainsbury's and Marks & Spencer embraced it in a big way, while rivals Tesco and Asda also gave it an even larger push.

"The issue for retailers is in how they can benefit from this demand, while not losing margin, or damaging their reputations," said Conlumino's Maureen Hinton.

Though it delivered a sales boost in 2014, the cost was lower demand in the weeks before and after and an expectation of continued pre-Christmas discounts, which damaged profitability.

Some retailers failed to cope with demand, which saw websites crashing and delivery operations overloaded, as well as those unseemly scuffles in shops.
This year police chiefs have warned retailers to have sufficient security staff on duty.

Soul searching

British retailers have traditionally tried to hold off on sales until Boxing Day, December 26, when products not wanted for Christmas were offered at reduced prices.

After last Christmas the bosses of retailers, including John Lewis, Britain's biggest department store, and Argos owner Home Retail [HOME.L] questioned the wisdom of concentrating so much business on Black Friday and suggested diluting the event.

However, John Lewis boss Andy Street conceded last week that this call had fallen on deaf ears. "It will be bigger again this year," he said.

Retailers such as electricals group Dixons Carphone, maintain that Black Friday must remain a fixture as long as shoppers want it.

Dixons Carphone has shown it has a winning formula. By planning meticulously and buying products specifically manufactured for Black Friday deals it can deliver a sales boost and protect profit margins.

But the concern is that the distortion to trade seen last year is being repeated.
Last month Home Retail warned on profit, blaming uncertainty ahead of Black Friday and the British Retail Consortium blamed weak October numbers on shoppers holding out for bargains.

This year Home Retail's Argos is offering discounted "red", "white" and "blue" deals on the Fridays preceding Black Friday in an attempt to smooth out demand.

M&S, Britain's biggest clothing retailer, was the highest profile casualty last year, with its huge distribution centre in central England thrown into chaos.

Unable to cope with demand, automated picking and packing failures delayed the delivery of goods ordered online. Disappointed customers lambasted the firm on social media and a subsequent loss of sales was a major factor in the firm missing forecasts. M&S says it has tested its systems and won't get caught out again.

Asda, which is currently the weakest performer among Britain's largest supermarket groups, believes it will have the last laugh.

"It might drive some of the ones in [the] red into even deeper red," quipped Asda finance chief Alex Russo.