Black Friday- is it worth it?

November has become one of the most significant shopping months of the year thanks to Black Friday (or White Friday as it's known in MENA), which is less than two weeks to a little over a month away, depending on how you look at it. It may be great for consumers, but is it good for your business? That's what we'll determine in this edition of The MKTG Detox.

This edition is a bit long, so if you can’t read it all, click here to listen to the audio version.

Quick Background

Initially, it started as a retail sale day on the Friday after Thanksgiving in the US- in the last week of November, with huge markdowns attracting even bigger crowds. It then expanded into Cyber Monday for online, and the concept grew outside the US into other markets globally. It then evolved into a continuous Friday-Monday sale (Cyber Week) in retail and online spaces.

Souq.com (now Amazon) brought the concept to the MENA region as White Friday since Black is culturally associated with a bad day or death in the region and would not bode well among Arab shoppers. 

Coincidentally, Singles' Day in China also falls in November- 11.11, around two weeks before Black Friday. What began as an event celebrating singledom evolved into a 24-hour sale on Alibaba and proved hugely successful. In recent years, online retailers across global markets have also adopted Singles' Day as part of their e-commerce calendars.

More discount days are not a good thing.

Since Singles' Day and Cyber Week are only two weeks apart, November quickly turned into an entire month of sales and discounts (which I'll refer to as Cyber Month from here on out), followed by sales in December for the Holiday season.

The value of Cyber Month has diluted over time- considering the back-to-back sales since the COVID-19 lockdowns in 2020, in addition to other shopping events like the Dubai Shopping Festival (DSF) in UAE and Hala February in Kuwait. The continued discounting impacts consumer expectations moving forward, which is detrimental to brands trying to position themselves beyond pricing.

Return Thursday

A lot of post-Black Friday reporting focuses on YoY growth of the sales season, but one thing often kept out of conversations is return rates. 

While US Black Friday sales increased by 5% in 2022 from the previous year, returns increased by 63% YoY and accounted for 13% of total orders, according to Salesforce. In the UK, +143% more items were returned on the Thursday after Black Friday; around 33% of shoppers returned what they bought. In MENA, returns hover around 15-40%throughout the year, depending on the category. Black Friday would be higher than other shopping periods as many purchases are impulsive.

Now, before you rush off and change your return policy (please don't), 48% of customers consider free returns- after the discount percentage- an essential factor before purchasing. And 45% say they're less likely to buy an item if they can't return it. 

So, is Cyber Month worth it?

It depends. To decide whether Cyber Month is worth the investment, I put together five critical things you need to calculate and consider when making your assessment:

1. Cost of Returns: have you factored return rates into your budget? Account for revenue reversal in December and additional fees and logistics to handle returns. Check 2023 numbers to see what your cost of returns looked like and add 15-20% to the return number, then calculate the additional fees to arrive at your Cost of Returns for Cyber Month 2024.

2. Reason for Returns: the context of the cost of returns is critical to determine if there's a way to reduce that cost of return. For example, if customers buy an item in multiple sizes (i.e. Bracketing), can you introduce a sizing tool or images of the item on differently sized models on the site to reduce this behaviour? If, on the other hand, your product is of poor quality or you get many complaints from existing customers, can you improve the product or reconsider your product assortment for Cyber Month to mitigate returns? If the item arrived damaged or doesn't look like the picture, can you change logistics partners, packaging solutions, and photos on the site? More importantly, can you resolve these issues in time for the season, and will it be worth the investment?

3. Revenue vs Profit: what's your profit margin during Cyber Month vs other sales seasons and peak shopping periods? If, for example, 50% of your sales happen during Cyber Month, and combined with the Cost of Returns, can you afford to keep taking such a big hit on your margins? Involve your finance lead to arrive at the correct conclusions.

4. CLV of Cyber Month Shoppers: if you don't have answers to this one, prioritise fixing your tracking and audience segments!

   1. For retail, how many of your Cyber Month shoppers shopped with you throughout the year? What was their frequency and average basket size?

   2. For SaaS, how many of your new user acquisitions in previous Cyber Months stuck around, were active users, or upgraded vs. users who signed up in other months?

5. Competition and Customer: what did your top 2-3 competitors do during this season last year, and what are they expected to do? Are your current/potential customers price-sensitive?

Other considerations:

• Grocery category: this category generally operates on very slim margins and has deeper discounts this season, so do not expect a positive ROI. Instead, the goal should be growing your brand's digital share of shelf MoM (and YoY during Cyber Month).

• SMEs: if big players are in your category, they most likely have big budgets to match. There's also a lot of noise during November, so if your budget is small, a better strategy might be to focus on your existing customer base- more on that later.

• Direct-to-Consumer (D2C): if your website is slow, there are gaps in your user journey measurement, or your site can't handle an influx in traffic, you must fix these issues before considering partaking in Cyber Month. Otherwise, you'll lose out on potential sales. It's like pouring water into a leaky bucket!

If the answer you arrive at is 'yes', then make sure your Cyber Month strategy covers these five foundational elements to make the most of the season:

1. Goals and KPIs: What's your goal for Black Friday? Sell slow movers or overstock?  Grow digital share of shelf? Make sure your goals makes sense for the season and measure 2-3 KPIs. It’s not the time to do any brand-building.

2. Existing customers: let your customers/followers know beforehand so they can add the products they want to their baskets before the discounts hit. Not only will this provide you with valuable insights into what they want to buy, but it also gives you insight into the delta between potential and actual basket size and buyers post-season. 

3. User journey: test the entire user journey, from browsing to checkout. Ensure all product images and descriptions are up-to-date, fix any bugs on the site, all pixels are firing, and all metrics are captured and tracked properly to avoid discrepancies. 

4. Email marketing: for D2C, you must have a solid email marketing sequence for Cyber Month to drive conversions at every stage of the purchase journey. #3 will heavily impact this part of the strategy.

5. Ad Strategy: this should start around ten days before Singles' Day (i.e. 1 November) to raise awareness. Below is a chart for how to pace your budget. Messaging should be product and discount-focused. If you have any special bundles or gifts with purchase, highlight those. Your ads need to grab attention and convert viewers to buyers. If your discounts extend into December, switch creative and messaging to reflect the holiday season.

In the next edition, I'll cover alternative strategies to Cyber Month that you can consider using for your brand.

Happy Strategising,

Nagham

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