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Black Friday deals: bad for business?

Shopping events including Black Friday and the January sales prompt huge spikes for the retail industry, but will consumers get too used to discount prices?

The pictures on Black Friday were worth a thousand words – a mauling mass of bargain-crazed humanity bursting into stores on the stroke of midnight to claim the knockdown spoils of Britain’s biggest shopping day of the year.

There were brawls and arrests in Manchester, while online retailer Amazon said more than 5.5m items were ordered through its site on Friday in a shopping binge that “surpassed all of our expectations”.

Black Friday, the day after Thanksgiving, has been big in the US for around a decade now and reached the UK four years ago, thanks to Amazon. It kicks off the first big shopping weekend of the Christmas season, helpfully coinciding with the end-of-November pay cheque, and has prompted some big spikes in retail sales in previous years.

If this year is anything to go by, it seems to have reached critical mass in the UK as well, but if the US experience acts as guidance, any boost to retailers’ fortunes may prove short-lived.

Selling items at full price becomes the exception rather than the rule Thanksgiving weekend retail sales in the US fell 11pc compared to last year, according to the National Retail Federation. This may be partly down to fed-up shoppers giving up battling through the crowds, but it is also because cutthroat competition between retailers has meant that Black Friday often starts even before Thanksgiving, just as the January sales in Britain now routinely begin on Boxing Day.

In effect, the battle to steal a march on rivals has led retailers into a bargain-fuelled race to the bottom, with sales starting earlier and lasting longer. This is teaching consumers to expect heavy discounts and not to get out the plastic for anything less.

Retailers’ mass adoption of Black Friday in the UK this year shows just how tough life is for them nowadays: the risk of missing out on sales – even at heavily discounted prices – is just too great to be considered. Selling items at full price in a market like this becomes the exception rather than the rule.

So the numbers might look impressive, but earlier this year shoppers in Japan gave a salutary reminder not to put too much emphasis on short-term binges. Retail sales there shot up just before a rise in VAT was due, prompting people to wonder whether the country was finally bouncing back. No such luck. Sales tax went up and the sales evaporated – artificial highs frequently end in a headache.

Source : The Telegraph
www.telegraph.co.uk/sponsored/finance/macroeconomics-investment/11279924/black-friday-review.html?WT.mc_id=605804&source=EditorialChannel

09 December 2014

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