You know the old saying, you can have it good, fast or cheap, but you can only pick two? It’s known as the Iron Triangle. And, once upon a time, it applied to many things in life including retail purchases. The historic trade-off – the more convenient, the less price competitive – might be still true in categories where shelf life is an issue, like fresh food. But we’ve learned in recent years from the growth of Black Friday sales, that in more and more categories, you don’t have
’t have to give up convenience to get the best price. Especially for consumer durables, the organised shopper can have their preferred (low) price and get it delivered to the door too.
The rise and rise of Black Friday
Black Friday has evolved into a global shopping phenomenon. I don’t have to look much further than my doorstep to know this is the case. The sheer volume of packages that arrived over the last couple of weeks (yes – they’ve even made it a fortnight event now), which are now wrapped and under the newly decorated Christmas tree, struck me with insights I couldn’t ignore.
My wife loves Christmas. The shopping – as in that quaint old activity of visiting shops – has always been a big part of the ritual. She hardly set foot in a shop this year and is boasting about how much she didn’t spend, or in the case of the kids, how much more she got for the amounts she forked out.
According to Forbes, retail Black Friday sales in the US were up 7.8 per cent compared to last year. Closer to home, the retail sales figures for November are yet to be revealed but brands including Harvey Norman have cited a sales bump for the period.
It’d be a worry if Aussie retailers didn’t see an uptick in sales off the back of Black Friday since so many jumped on the bandwagon with plenty of stores going early.
An unsustainable business model
Aussies love a bargain so it’s little wonder Black Friday has been an exponential success over the last five years. And with the cost-of-living crisis bearing down on us, it has created the perfect conditions for the best result ever – globally.
However, it shouldn’t be forgotten that Black Friday is an event characterised by unique market conditions. When the Black Friday sales signs come down, we’ll all be back to expecting the traditional trade-offs between speed, cost, and quality.
Or will we? When will these massive events like Black Friday start to educate the customer and the retailer to expect a new normal?
The problem for retail business owners is that offering it all, all the time, just doesn’t translate into a sustainable business model. For most. Amazon may disagree.
They would argue that the pendulum has been swinging this way for many years, and these current economic conditions have helped find the tipping point – the toothpaste is now mostly out of the tube and it’s not going back in.
It remains to be seen, but it may be that returning to a more ‘normal’ pricing strategy and pursuing a ‘Christmas business as usual’ approach for 26 days isn’t going to work. And in the absence of significant incentives, plenty of savvy shoppers will now be sitting on their wallets waiting it out until the Boxing Day sales kick in.
The tipping point has arrived
Black Friday may have giveth to November, but it will taketh away in December.
While we’ve had a December reprieve on interest rate hikes, another rate rise coming down the pipe in the New Year is on the cards according to many.
So I’m predicting more businesses will need to deal with this new customer expectation well into 2024. And retailers of consumer durables who were thinking of upping their prices, either now or in the New Year to make up for a current margin shortfall, should be giving very deep thought to the pros and cons.
The tipping point may well have arrived. But even if it’s not quite yet, that old ‘good, fast and cheap’ adage is destined to echo in retail’s reality for years to come.