(Bloomberg) -- Black Friday could be more important for UK retailers this year as they try to encourage shoppers to spend cash now before the cost-of-living crisis erodes their Christmas budgets.
Almost 70% of British shoppers plan to participate in the discount event imported from the US, up from 57% last year, according to McKinsey & Co. Online searches for Black Friday sales have risen by a quarter since last year as customers look to save money, according to the Audit Lab, a data research firm.
Sales in the week leading up to Black Friday have increased by a third compared to last year, according to Klarna, the buy-now-pay-later firm.
“Black Friday is going to be even more key in the shopping calendar,” said Anita Balchandani, head of the UK consumer practice at McKinsey in London. “All of Christmas has been pulled forward.”
It doesn’t mean consumers are splashing out. The broader picture shows that they are pulling back from spending this Christmas as energy bills rise and higher mortgage costs loom. Nearly half of UK consumers plan to spend less this festive season with a third buying cheaper gifts for friends and family, according to Ernst & Young. Some people are abstaining from Christmas shopping altogether.
In many cases, Black Friday has turned into Black November. Department store John Lewis Partnership Plc and drugstore chain Boots both offered deals from the start of the month. Retailers also began offering Christmas sales in September and October to entice shoppers to spend earlier than normal.
Retailers are having to discount more heavily as a result in a bid to push spending during what is the most critical time of the year for most brands. Maternity fashion brand Seraphine Group Plc is offering 30% discounts compared to 20% last year, fitness wear brand Gymshark has up to 60% off and electronics retailer Currys Plc has up to 40% off.
Amazon.com’s Black Friday sale in the UK has started and runs until tomorrow, offering discounts of 77% on ear buds and 55% on shavers.
Part of the reason is that retailers have too much inventory, having ordered stock at a time when the economy was stronger and consumer confidence was higher. Some purposely boosted their stock-in-trade to make sure their products were available amid supply chain snarls.
“The incidents of retailers taking part in Black Friday are increasing and that’s because they are sitting there with too much stock,” said Richard Lim, chief executive officer at research consultancy Retail Economics. “They paid a lot to get stock into the country.”
Black Friday continues to be much more popular in the US, where it is part of the Thanksgiving weekend celebrations. Since arriving in the UK in 2014, it has lost some of its relevance and is now largely an online event. Incidents of shoppers fighting over consumer electronics products have become rare.
This year the Christmas trading season will be particularly key for retailers with many struggling with falling sales due to the cost of living crisis. The recent collapses of online furniture store Made.com Group Plc and clothing chain Joules Group Plc show how tough the trading environment is for some retailers.
“The retailers that have failed to walk the tightrope between clearing stock effectively and not discounting too much could find themselves in trouble,” said Duncan Brewer, head of the retail and consumer products strategy team at Ernst & Young.
--With assistance from Ady Nugroho.
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