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Winter is coming: Tackling the holiday retail surge

(Image credit: Image Credit: WNDJ / Pixabay)

It is interesting to note that while Black Friday is historically an American tradition, UK citizens are the third largest consumers of Black Friday sales. ‘Black Friday’ which represents the beginning of the holiday shopping season came into practice in the U.S. in the early 1950s when large scale shopping took place in the days following Thanksgiving. With globalisation, the tradition has moved to almost all parts of the world and data by Black Friday Global (statistical data on Black Friday collected and analysed by Picodi.com) reveals that in 2018, the UK emerged as the country that spends the most on Black Friday sales after the U.S. and Canada. The extended weekend became even longer when Cyber Monday (the Monday after the Thanksgiving holiday) was conceptualised in 2005 by retailers with the aim of encouraging online shopping. Adobe tracked a mind boggling $7.9 billion revenue on Cyber Monday in 2018.

Today, retailers are maximising sales by extending the holiday shopping season beyond the typical 4-day long weekend to nearly a month long phenomena, taking advantage of the gifting traditions that prevail in the following month of Christmas and New Year.

While the lure of the long sales season is huge for both consumers and retailers, lack of readiness for this massive spike can be a nightmare and a missed opportunity for many retailers, especially considering the impact of the holiday sales on annual sales volume.

Product, pricing and ‘promise’ are key to success

While retailers do anticipate a spike in sales during this season, they can be taken by surprise by the sheer enormity of it. For example, in 2018 Black Friday Global reported that UK retailers experienced a whopping 1708 per cent increase in their sales on Black Friday. Retailers need to plan and invest well in advance in order to ensure that they can improve engagement with customers across product, price and ‘promise’.

With the cost of computing reducing, and the availability of tools such as artificial intelligence, machine learning and data analytics increasing, retailers should strategize to determine which products will be in highest demand over the holiday season, what the optimum price will be, and, most importantly, to help them deliver on the implicit promise they make to customers.

The quantum of data makes it much easier today to model expected consumer behaviour and use it to deliver personalised promotions and experience.

Product: Data must be used to define the products that are expected to be in demand, in what assortment, and in what quantity in order to avoid disappointing a customer with an ‘out of stock’ situation. In the age of omnichannel retail this means having the right SKUs available across all channels.

  • Pricing: The size of discount is a critical element of the sales season. Retailers must spend time studying price sensitivity per demography and geography to determine the optimal price. Pattern analysis of the past, along with future projections using machine learning and artificial intelligence, can provide important indicators around the sentiment, intent and spending potential of consumers with demographic detailing. Targeted offers and discounts can optimise pricing across a range of products.
  • Promise: Retailers must ensure that an advertised product is in stock and be able to guarantee that delivery timelines will be honoured. Failure to keep up this promise can cause a severe dent in customer confidence which has the potential to impact how the customers perceives the retailer in the future.
    Promise: Retailers must ensure that an advertised product is in stock and be able to guarantee that delivery timelines will be honoured. Failure to keep up this promise can cause a severe dent in customer confidence which has the potential to impact how the customers perceives the retailer in the future.

In the UK, uncertainties over Brexit negotiations are making the market extremely unpredictable. The Deloitte report on retail trends in the UK for 2019 highlights a strong consumer economy paired with stagnant consumer confidence, high spending power and a growing shift to e-commerce. These factors combined leave UK based retailers in a state of uncertainty as they resort to even greater discounts to cope with an intensely competitive market.

In addition, retail organisations are often ill-equipped to handle the dynamic demand cycles as a result of legacy IT infrastructure. Traditionally, retailers invest only around 1 per cent of their revenue into IT. Stories of Toys R Us and Maplin tanking under pressure from online retailers are classic examples of well-established legacy brands failing to keep pace with the shifts in the shopping patterns of Britons who are increasingly buying goods from digital devices.

Orchestrating a great sale: best practice

Planning in advance: Questions around the product mix, inventory levels, additional staff, logistics and storage have to be answered well before the sale period in order to bring in the necessary infrastructure and process changes. Policies around returns and exchange must be framed carefully. Dynamic forecasting, inventory planning, cognitive supply chain built on emerging technologies can play a key role in predicting, strategizing and adding the capabilities required for gearing up to the sales.

Building the right experience: It’s a crowded market. Every retailer is vying for attention in the same time frame and often with the same target consumers. How do you create an experience that lures the buyer into your store or excites him enough to click that ‘Buy’ button? Micro segmentation, targeted offers and personalisation are the tricks of the trade that are made possible with big data, IoT and artificial intelligence.

Execution that supports your promise: A robust infrastructure (both IT and non-IT), well-defined processes and a flexible supply chain model are the fundamental pillars on which a retailer can put their faith on to deliver on the promises it makes to consumers. To ensure that the IT infrastructure can hold up during high demand it needs to be proactive and prescriptive, rather than reactive. This means predicting any imminent breakdowns before they happen and taking steps to prevent them altogether.

In conclusion

Preparing for the large spike in demand during the week of Black Friday and Cyber Monday may be a one-time exercise for retailers. However, this preparation will help to build an agile, intelligent and data centric organisation can help to enhance and strengthen the ability of an enterprise to keep pace with every demand fluctuation throughout the year. Implementing a solid technology framework can address challenges and maximise profits throughout the year.

Ambeshwar Nath, SVP and Regional head - Europe, Retail, CPG & Logistics, Infosys