Black Friday is one of the most important days of the year to the e-commerce industry. We will be discussing how to use the increased activity of the consumers, stand out from the competition and improve your position on the online market with Greg Białokozowicz – pricing strategy expert at Dealavo.
Aleksandra Hołownia: This year’s Black Friday falls on the 27th of November. Can consumers expect large discounts at online stores?
Greg Białokozowicz: There will certainly be many attractive deals on the market. However, these are only one-time offers, and the level of prices on the market will not change significantly. According to research done in previous years by Deloitte together with Dealavo, the prices of products in the analysed categories were only 4 percent lower on average than the prices recorded one week earlier. This is only a symbolic change.
Does it mean that Black Friday is nothing only a marketing trick?
I would not go that far. There will be some attractive offers on the market – but they usually concern very high discounts on individual products. You can notice this, for instance, by comparing the minimum and maximum prices of certain products – in the past, the differences could be almost as high as 200 percent, particularly on the gaming market.
According to our observations and discussions with the clients, stores frequently advertise one or two very attractive deals in every product category. This attracts the attention of the customers, who, apart from buying the discounted products, also purchase other items, which frequently provide higher margins to the sellers.
Are Black Friday discounts profitable to online stores?
I believe that stores should use the opportunity presented by the Black Friday. According to surveys by Deloitte and PwC, more than 70% of people in the Netherlands, Germany, France, Poland or Ireland planned to shop on Black Friday or Cyber Monday. Black Friday is celebrated in an increasing number of countries, including China, where, however, the most important day for the stores is the Singles’ Day.
The stores that do not decide to use the increased traffic on Black Friday may lose a lot.
What, then, is your advice for online stores?
Most importantly, they should prepare well and analyse how they can distinguish themselves on the market. They should remember that only one of them can be the cheapest. Consequently, the stores should check who they are competing with and what products can give them an edge.
It is a good idea to analyse the data from the previous year to check which competitors decided to introduce discounts in the past and which products were offered at exceptionally low prices. The clients of Dealavo can do this using historical reports, which allow them to analyse price changes in the past. This makes it easier to identify market niches where they can make their presence known. This is a particularly good method for small and medium online stores. Due to the low margins in the industry, SMEs cannot offer significant discounts on all of their goods – such a solution can generally be used only by the largest players.
Do you think that the COVID pandemic will have an impact on this year’s Black Friday?
I do not think it will have any significant impact in comparison with the previous years. On Black Friday and Cyber Monday, consumers generally shop online in most of European countries. In the United Kingdom and Germany, almost 80% of people declared that they would be shopping online instead of in physical stores already in 2018.
However, there is a risk that the people who, for instance, lost their jobs during the pandemic might not be shopping. Still, I believe that some of the people whose financial situation was adversely affected may have been waiting with their shopping until Black Friday to use the lower prices they were expecting.
And what about the companies that used to offer discounts in physical stores? Will the switch to the online market be difficult for them?
I believe that many market players mistakenly assume that the switch to online business will not cause them any trouble. With time, however, they learn that, despite having a strong position on the offline market, they have to face new challenges on the online market. Such challenges may include a larger number of competitors or lower prices on the market than previously expected. Frequently, a company that decides to enter the online market comes to the sad conclusion that their previous offering, which worked well in physical stores, is not competitive on the online market. That is why it is important to monitor prices on the market. Frequently, all you need to do is monitor Google Shopping or Allegro to realise which competitors you have to watch out for and what prices you should offer to become competitive. Not just on Black Friday.