Black Friday 2020: What can we expect and what role does AI have to play?

By Tom Summerfield, Retail Director at Peak

Black Friday is without a doubt one of the biggest events in the retail calendar and one that many retailers are heavily-reliant on. And while that remains the case this year, it is impossible to ignore the fact that this has not been a typical year and retailers are feeling the effects of that.

With the lockdown restrictions imposed due to COVID-19, this year the usual scenes of long queues of customers waiting outside stores, desperate to take advantage of sales, is unlikely to materialise. This shifts the focus to eCommerce, which represents a great opportunity for digitally-savvy brands to take advantage of the circumstances and edge out competitors. While some retailers may want to write this year off, now is the time to get Black Friday right.

Forward-thinking retailers are already looking to adapt to customer needs by offering click-and-collect and same-day delivery on online orders to make the most of in-store stock. It’s these types of initiatives that could be the difference between Black Friday success and failure.

With that in mind, let’s examine the likely scenarios we’ll see across Black Friday this year and what best practice looks like for brands who are looking to optimise their customer experience and maximise revenue.

Two camps: slashing prices & protecting stock 

This year, we can expect a divide into two clear camps: retailers protecting margins and not marking down their stock, and those implementing heavy markdowns out of necessity to clear out their stock.

Many retailers have found themselves in a position where they’ve been unable to predict which products will be in demand or not, and moving stock around has proved troublesome as a result. The volatility of the market has meant that less items have been sold in physical stores and certain types of products (e.g. loungewear) have seen sales spikes in an unexpected manner. The amount of stock retailers have on their books and the profit margins they have on those products will dictate their tactics for the Black Friday weekend – some will be desperate to move on stock, others can ill-afford to part with it at a reduced rate.

At times like these, business units need to be working closely together to deliver a strong customer experience. Using AI to unlock value from data sources such as transactions through to the warehouse will help retailers to allocate stock appropriately and make a more intelligent, optimised decision on which items to discount, so they can communicate this clearly to consumers. As a result, businesses will be able to act holistically, to drive average order value and purchase frequency.

Will discounting make a difference? 

In recent years, savvy retail brands have been looking to discount products more heavily throughout the year, hoping to create less reliance on key holidays such as Black Friday for income. So, is discounting still going to be effective this time round?

Discounting before and after Black Friday absolutely can make a positive difference for retailers but only if it’s informed by transactional data. In the last year or so, we’ve seen retailers take a considered, sensible approach to discounting based on the correct rate of sale and profit margins. However, this year, with many brands trying to get rid of stock, it’s possible we’ll see some retailers looking to heavily markdown products just to free up working capital in the supply chain.

What some forward-thinking retailers have been doing to counteract this issue, is making use of transactional and warehouse data, super-powered by AI, to inform ongoing sales periods over the course of the year. These types of techniques will gradually help to offload stock with targeted marketing and segmented offers to incentivise purchases. This year has been particularly difficult to forecast for, so human expertise alone is unlikely to deliver the optimum pricing strategy brands are looking for. The level of insight these retail brands have over their stock will decide how and what they discount.

COVID-19 and its impact on sales

In many ways, Black Friday 2020 will be a good time to be a consumer, with some businesses needing to clear stock at heavily discounted prices. Retailers will be looking to control their trading ability by incentivising the purchase of margin-rich items they’re looking to clear while being more disciplined on high value stock that they’ll want to sell as close to recommended retail price (RRP) as possible, particularly in the current climate.

As a result, we may see fewer blanket discounts across all stock, and instead see heavy markdowns on specific items. While some consumers may have more disposable income this year due to COVID-19, there’ll be others in the opposite situation – so it’s important brands are utilising AI and data to ascertain what to discount and when, to make sure the customer experience is strong and consistent while maintaining a joined-up and profitable approach across the business.

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