Retailer, Next, has revealed a 1.3 per cent sales increase to counter its previous weak quarter. There is now much less pressure on the retailer to join the Black Friday sales next month, which it has avoided in previous years with Next’s CEO Lord Wolfson referring to the day as ‘pointless’.
Black Friday is seen by many retailers as a way to shift stock, get out of the red and acquire new customers. But if discounting strategies over the holiday season aren’t approached correctly, they can simply create more trouble for retailers later on in the year.
According to relationship marketing platform, Optimove, customers who first purchase during the holiday season are 19 per cent less likely to return to buy from the brand than any other time of year, making the period a bad time for customer acquisition. But existing clients make 30 per cent more transactions than new customers over this period, and are worth engaging with more.
Pini Yakuel, CEO of Optimove said, “Black Friday is increasingly seen as a burden for retailers, a way to keep up with the competition rather than an actual retail opportunity – especially by more traditional companies like Next.
“Certainly, heavy discounting on Black Friday is not that effective for customer acquisition. But, if approached correctly, Black Friday can be a great opportunity for retailers to work on increasing revenue from their existing customers. In fact, about 71 per cent of customers on Black Friday will be existing customers, and these clients make 30 per cent higher transactions over the Christmas period than new shoppers.
“From this perspective, the holiday season needs a different strategy. Retailers need to think about how discounting impacts acquisition.
"Whilst minor discounts of 5-30 per cent do encourage shoppers to return for a second purchase, anything over 30 per cent is more likely to encourage ‘cherry pickers’ – customers who will buy products at a highly discounted price, but are unlikely to return to buy anything at full price, and therefore don’t hold a lifetime value to the brand.
“The large amounts of data that retailers hold on their existing customers is key to marketing in a way that increases value from existing customers. By using this data to target existing shoppers, personalising and targeting discounts, offers and promotions, retailers can make the holiday work for them by upselling to their existing customers rather than selling at a loss to others who won’t return.
“It is better to use Black Friday and promotions around the holiday season as a way to keep your existing customers coming back, and making sure they aren’t drawn away by other competitors.”