It's beginning to look a lot like Q4. The golden quarter is in full swing, and Black Friday is firmly on the horizon. The annual shopping event is the starting pistol for the final sprint of the Christmas shopping season, when most retailers make a substantial percentage of their annual revenues. This year, with trade flows at country, route, commodity and company levels fluctuating dramatically, there are rising costs to doing business, and anxious consumers are decking the halls earlier than ever. So how can e-commerce companies maximize their earnings during Black Friday and the crucial surrounding period? Here are four ways to approach the big event.
The combination of Black Friday with an ongoing pandemic, persistent supply chain disruptions and rising inflation is a unique set of market conditions. One thing is for certain; the 26th November will be different this year. Being proactive to counteract these challenges is essential; predicting rains doesn't count, building arks does.
On the consumer side, recent research from Bazaarvoice suggests that 31% of shoppers plan to start their holiday shopping earlier this year, while an eBay Ads survey indicates that more than 25% began their Christmas purchasing before the end of August. Last week, UPS CEO Carol Tome estimated that as much as 50% of holiday shopping could be completed by Cyber Monday. Consumer anxiety is natural in the face of concerns over delivery times and stock availability; shoppers are preparing well in advance to ensure there will be no dramatic impact on celebrations.
It makes sense to encourage customers to shop early to shift demand and ease supply chain backups, in the event of expected instability. The real battleground will be availability, so identifying potential vulnerabilities in your value chain and building operational resilience is paramount. From a business perspective, opportunity is seized in the preparation. Sellers can secure some early wins and build the foundations for sustained success by dialling up their investment in marketing, starting to optimise marketplace listings, engaging in active communication with customers to ensure they are front of mind when it's time to purchase, and, significantly, gaining visibility of their logistics operations.
Sophisticated risk management and thorough forward planning will therefore be necessary, with retailers encouraged to forecast their precise fulfilment needs. By developing an understanding of lead times, analysing last year's performance, and calculating likely delays based on your recent experience of shipping lead times, businesses will be well positioned to refine their inventory optimisation. Ultimately, taking into account profitability and the probability of delays, founders need to balance the risk and the cost of over- and under-stocking.
Flexibility is key. Small businesses can make the most of their agility in unpredictable conditions: whereas large retailers are like oil tankers, e-commerce startups are like speedboats. An oil tanker is cumbersome, carries a lot of overhead, and is vulnerable to a single point of failure. Speedboats, on the other hand, can move at pace and rapidly change course in order to navigate their way through choppy waters: iterate quickly, succeed sooner.
Demand should remain strong over the foreseeable future, and spending is likely to be up. Research from Future found that over the pandemic, UK consumers have saved approximately £200bn and are going to be splashing it on Christmas treats, indicating a strong trading period.
The research also suggests that 82% of shoppers will engage actively in Black Friday. With solid demand, the question therefore becomes how can founders spin up strategies to react to high inconsistency of supply?
With conventional trading conditions and channels subject to change from one day to the next, it's critical to be ready to pivot at speed: be prepared to switch both what you're offering and how you trade. There are delays for large ships docking at Felixstowe, which handles about 40% of containers coming in and out of the UK, with up to £1.5bn of goods being imported into the UK potentially affected by delays before Christmas. Consequently, if a particular product line is held up in port, be ready with various replacement options, and dial your digital marketing up and down to reflect stock availability and replenishment.
In terms of customer delivery, your postal service or parcel carrier should also be able to flex to reflect shifting requirements. Whether it's domestic warehouse space, air freight bookings, extra capacity at short notice, or even a human on the other end of the phone able to trouble-shoot problems, ideal fulfilment partners and intermediaries will be able to adapt their services in line with your margins, getting the cost per kilo for shipping just right for you, and the goods delivered just in time.
Significantly, you don't know what tomorrow's problems will be. These macro factors are outside your control, and new headaches and question marks will surface as others recede. Even with lines of sight, predictions, and planning, outlooks are being revised continually, and the only true constant is uncertainty. What you can control is how you can build fluidity into your processes.
When the going gets tough, the tough get creative. This year brings new challenges, and market forces mean forecasting based on year-on-year metrics is difficult since both consumer trends and supply dynamics are shifting faster than ever before. Shortages and volatility are not necessary bad for e-commerce, though. Patrick Brown, vice president of growth marketing and insight at Adobe, suggests that “limited product availability, higher prices, and concerns about shipping delays will drive another surge towards e-commerce, as it provides more flexibility in how and when consumers choose to shop.”
Taking into account ongoing uncertainty, brands should look to tap into the mindsets of their customers to make sure they are interacting with them in meaningful and relevant ways – however they are feeling this Christmas. How can brands differentiate themselves?
A number of Outfund portfolio businesses are thinking laterally. One business is pivoting to hyper-targeted email marketing campaigns in order to avoid expensive traffic in the post iOS14.5 era, bringing their CAC down and their margins up. Another founder is donating a percentage of sales to environmental charities as part of a week-long campaign focusing on sustainability. It's strategic initiatives and realignments like this that will set successful founders apart.
Black Friday can be the engine that drives both Q4 and a strong start to Q1. This year, the peak might not be as dramatic for a number of reasons. While retailers traditionally slash the price of goods to drive sales on the day itself, rising costs will have an undoubted effect on the depth of the discount businesses can offer. Combined with nervous consumers moving earlier to do their shopping, revenue is unlikely to be so concentrated in a singular spending frenzy. On the plus side, online retailers will be able to achieve a much more stable and constant demand for goods over a longer period in the lead up to Christmas, rather than the usual spikes.
In addition, switched on sellers will elongate their peak trading, and take pressure off the final weeks in December when postal services and shipping lanes could be particularly clogged. Maximising the selling window is important: nothing is more expensive than a missed opportunity. This is especially relevant given increasingly stiff global headwinds, with lingering concerns over the Chinese economy and the country's investment and construction driven model of growth potentially coming under strain in the new year. Naturally, these macro factors are outside of businesses' control, so it's important to focus on the size of the current opportunity: Christmas might only come once a year, but it can set you up for the next one.