Lockdowns hit retailers’ hopes of a Black Friday bonanza
Black Friday has been a significant event in the retail calendar for some years. And because of this, the UK is more sophisticated and invested in the event than many others. It’s now the promotional period of the year for many, with certain retailers - such as fashion - using Black Friday to drive sales and clear excess Autumn/Winter stock.
But this year will be different as COVID-19 continues to have a profound effect on retail, despite the sector recovering to pre-pandemic levels in June.
Less than two weeks ago, the critical Black Friday promotional period and the run-up to Christmas looked promising. Before lockdowns in England and Wales, Black Friday spending was estimated to increase by 8% this year - from £7.8bn to £8.4bn - with interest remaining similar to last year, at 51%.
But that all changed in a matter of days.
After the announcement of a second lockdown in England, and with Wales in its ‘firebreak’, we updated our consumer research. The results showed interest in Black Friday has tumbled (from 51% to 38%).
It has plummeted among 18-25 year olds (82% to 44%), especially when compared to the drop in 35-44 year olds (62% to 52%) and over 65s (26% to 20%). Under 25s had been the keenest to spend on Black Friday before the English lockdown, but our latest data now shows that the key age range for retailers is 25-44 year olds, because the majority are interested as well as the biggest spenders.
In Scotland and Northern Ireland, interest has also declined despite non-essential shops remaining open (from 50% to 40% and 51% to 40%). And in Wales, the drop-off was even sharper (53% to 32%), even though non-essential stores re-opened in early November.
This means that we now expect spending in this year’s Black Friday sales to fall to £6.2bn - a 20% decline vs last year.
These findings are in line with the decline in consumer sentiment we found in our most recent update, based on a survey taken at the same time. Much like our Black Friday findings, the decline was particularly acute among the under 25s.
This is also a 25% decline against what would have been spent without a lockdown. While that seems worse than the 18% decline in retail sales in April, at that time a grocery boom masked an actual 40% decline in non-grocery between January and April. With Black Friday being mostly non-grocery, it’s not easy to make a direct comparison. But, with that in mind, the impact of the second lockdown is unlikely to be as bad as earlier in the year.
However, the retail sector’s resilience is built on being able to find opportunities. With Black Friday spending predominantly online, the closure of non-essential shops isn’t as catastrophic as you might think. Particularly when the UK’s spending is significantly more online than other countries.
With most physical stores closed, consumers expect to do 88% of Black Friday shopping online this year, up from 77% in 2019, with the greatest penetration of online spending somewhat surprisingly coming from 45-64 year olds (93%). Online penetration will be lowest in Scotland (86%) and Northern Ireland (81%), where non-essential shops have remained open.
This channel shift is something we’ve witnessed most of the year, and is at least partly responsible for a record net loss in chain stores. In February, 20% of all retail sales were online. In May, it was 34%. Despite a slight fall to 27.5% in September as non-essential stores reopened, online sales are increasing again following a second lockdown. This will pose logistical challenges for retailers and delivery companies already at capacity.
However, an important difference for this lockdown is Click and Collect. Legally permitted this time, it will be an important offering for logistics, consumers and non-essential retailers. We expect this to account for 12% of spending, with the highest interest amongst 25-44 year olds (15%), and in London and the South East (16%).
Importantly, many of those interested in Black Friday are expecting to spend more as a result of the second lockdown. This could be because with leisure closed and holidays cancelled they’re redirecting ‘forced savings’, or because they’re bringing forward Christmas spending.
In our October survey, we asked detailed questions about consumer’s spending priorities. We later supplemented this in November with a survey of interest levels following England’s lockdown announcement. In the October survey, consumers suggested their Black Friday spending would rise by 8% (from £293 to £316) from last year, with 26% wanting to treat themselves with money saved from COVID-19. This could be why those in the North West, who have had the strictest local restrictions for longest, were expecting to be the biggest spenders (£445 each). To put in context, it’s more than double the spend of Yorkshire and the Humber (£220), the South West (£207) and Wales (£222).
As usual, men have more interest in big-ticket electricals and technology, and intend to spend more than women (£373 vs £244). Those in the 35-44 year bracket are the highest spending age group (£429), expecting to spend more than double over 65s (£201).
This year, more consumers are bringing forward their Christmas shopping, with almost a third looking to buy presents over Black Friday. This intention is even higher in women (36%), and is over 40% in London and Northern Ireland. This year, it seems Black Friday isn’t just about finding a bargain - it’s also about making sure Christmas shopping is done early, avoiding crowds and overcoming possible last-minute delivery problems.
This trend is also reflected in what people are buying, with an increase in Christmas stocking fillers and treats compared with other categories.
We’re also seeing relatively less interest in electricals and technology, even with several high-profile launches, including the iPhone 12, PlayStation 5 and Xbox Series X. Despite this, the category does remain the top interest for every type of shopper.
Elsewhere, interest has increased in practical gifts and pampering, such as children’s clothing and health and beauty. In fact, for women, health and beauty is expected to be a bigger spending category than fashion, where there is little good news for beleaguered retailers.
It’s currently the only category of retail sales yet to have recovered, and is still 14% below pre-pandemic levels. Unfortunately, this trend simply reflects the low demand for occasion wear and workwear, as consumers go out less and work more from home.
Despite a rebound in spending over the summer months, and consumers spending more time indoors, homewares are less important this November. If COVID-19 restrictions affect Christmas gatherings and limit in-home entertaining, consumers will have less need to spend on special home furnishings compared to a typical year.
It will also be interesting to see how the recent intention to now reduce spend will affect these categories, as well as Black Friday sales more generally.
While some retailers have avoided discounting in the past, that would mean missing out on a significant minority of shoppers. Even with fewer people shopping, 38% of all consumers are looking for a deal, rising to over 50% in the key spending demographic of 25-44 year olds.
Retailers have responded in the past: for Black Friday 2019, 88% of online stores (91% in fashion) were offering some kind of promotion.
So how can retailers capitalise on interest while preserving margins?
The report is based on an online survey of a nationally representative sample of 2,230 adults conducted between 13-15 and 28-29 October, and a top-up survey of 2,003 adults between 5-6 November following the closure of non-essential shops in England.