Could COVID signal the demise of Black Friday for the Retailers?

Australians have wholeheartedly embraced online shopping during this pandemic. In truth, we’ve been big on e-commerce for a while now, but over the past nine months, it has moved to the very heart of the Australian mainstream.

The Australian Bureau of Statistics says that during the pandemic our online retail spending has jumped by almost one and a half billion dollars – it’s grown during the past 8 months by more than it grew over the last six years. And as consumers turn their attention to digital transactions, the biggest online retailers are reaping the rewards: Kogan’s (ASX:KOG) share price was at under $4 in March; in mid-October, it had reached an all-time high of more than $25. The share price of Temple and Webster (ASX:TPW) and JB Hi-Fi (JBH) have hit record highs, as well. 

And why wouldn’t Australians look to their computers, tablets and phones to buy? In 2020, during a time when so much of what we take for granted has been restricted or curtailed, technology allows us to find what we need online and have it on our doorstep within a matter of days – sometimes hours. Not just clothes and electronics, but food and drinks. In fact, almost anything.

But this is more than just a change in convenience; it marks a significant shift in power. Before we embraced shopping via the web it was the retailers who held the aces. They dictated when and how products were sold and pushed them out to consumers.

“Push” is the word Zuora CEO Tien Tzuo uses to describe the central activity of an old business model that “tr[ies] to sell as many units as possible through as many channels as possible”. In this model, the “poor lonely customer sits at the end of that supply chain process, anonymous and dispensable”. It runs on a tired formula of advertising and discounts and, as Tien puts it, culminates every year “in the biggest Pavlovian stunt of them all, Black Friday”.

I’ll get to the opposite of push in a moment, but first I want to talk a bit more about Black Friday.

It came to our shores with little explanation, an American curiosity just plonked into an Australian retail context. But unlike other quintessentially American creations like Starbucks drinks and Hershey’s lollies, it’s taken off.

Now, Black Friday is OK for people who want cheap, discounted products before Christmas. But is it good for the retail industry as a whole?

Actually, it could hardly be worse.

Black Friday is a desperate frenzy of price-lowering based on the understanding that if sales don’t happen now, it may be Boxing Day or bust. 

It would be bad practice at the best of times, but it’s disastrous when you consider the state of the Australian – indeed the world - economy.  

It’s easy to criticise, I know, and you might fairly be asking, “What’s the alternative for retailers?”

Well, my biggest criticism is that huge ‘events’ during which retailers sell products at severely discounted prices to non-event periods leads to a total lack of business certainty and revenue stability. So, my advice would be to consider a model that ditches mountainous (but far-from-certain) peaks and inevitable troughs for one that establishes a system of far more evenly distributed and predictable income.

Here’s where we come back to the alternative to pushing – pulling. It’s not undertaken by the retailer, but by the customer. In the new business model, he or she doesn’t sit at the end of the chain, but right in the middle. And, ideally, that positioning is made possible by a tiered subscription or membership program. 

Is it prudent to shift models during a recession and as Australians radically change the way they approach retail? Well, consider that subscriptions have boomed during precisely the same period as online shopping. Our research shows that from March to May 2020, for example, just under half of the 700+ subscription companies we surveyed were still growing (they had observed no major change to their acquisition rates). About 20 percent were in fact accelerating their growth. 

That’s striking when you consider how badly so many traditional retail companies are struggling. And if you think subscriptions are only applicable to a small handful sectors, think again. Yes, video streaming, gaming and finance get the headlines. But there are many subscription companies doing exceptional work covering services as diverse as grocery delivery, alcohol curation and distribution, clothing advice and dispatch, car use and many more. 

Why does it work? Because pull beats push every day of the week - pandemic or no pandemic. People can buy – or use a service – precisely when it suits them. The retailer, for their part, gains recurring, steady revenue, as well as a far better understanding of who their customer is, what they need and like, how they behave, and how that changes over time. 

There’s no dangerous, feast-or-famine cajoling required; only maintenance of good service.

If you’re a retailer or any business for that matter, you should be concerned with what your customers want to invest in, to sign up for, to subscribe to. Without an answer to that question, you’re not building loyalty, you’re begging for sales.