My thoughts on Nielsen's "Top 10 Retailer Mistakes on Black Friday"

Nielsen published an article earlier this week on "Top 10 Retailer Mistakes on Black Friday".
According to Nielsen, the mistakes include:

• Sticking to traditional categories
  
• Not having a retailing objective
  
• Not measuring your objectives
  
• Leaving a bad first impression with new shoppers
  
• Missing loyalty opportunities
  
• Sticking to Friday morning
  
• Not having door-buster merchandise in stock
  
• No sense of urgency
  
• Shallow discounts on door-busters
  
• Not scouting the competition

While I agree with most of these points, I do have some disagreements:

1. It may be a bad idea for retailers to try out new categories. I think it is OK for an electronics retailer to offer free soda and chips during Black Friday, but selling these items is a very different proposition.
2. Most retailers do have sales objectives (by category) for Black Friday. I think what they also need to have are gross margin objectives. Given the hectic pace of Black Friday, it is often not possible to have targets for 'new customer footfalls'.
3. Retailers need to be careful about passing discounts to the most loyal customers. Many of them are willing to shop with the retailer without the discount. On the other hand, many Black Friday shoppers are active discount seekers.

Here's wishing all of you a happy Thanksgiving

Black Friday deals: Do they work for the retailer?

The US holiday retail season this year is expected to be the worst in the past few decades. Many retailers have started offering Black Friday discounts in advance.

The website Black Friday Ads tracks some of the hottest discount deals being offered by retailers. They have a page which tracks the scanned advertisements of most big US retailers. Some retailers are offering online deals at prices below Black Friday prices.

I couldn't help wondering how retailers can use analytics to maximize their Black Friday sales and gross margins. Here are some suggestions :

• Designing the black friday deals:
  

1. Analyze market surveys to understand what products people want to buy during Black friday (computers, HD TVs, iPods, hard disk drives, digital cameras, GPS devices, clothes, toys) this year
2. Benchmark prices against competition based on information available daily to ensure that you have enough traffic-pullers...these get the people into the stores.
3. Ensure that your deals are spread across the aisles/ departments. This ensures that customers are exposed to more categories whil picking up the doorbuster items and that all doorbuster products are not picked up just by the first few customers. An analysis of previous years' transaction data will yield numbers on how many customers got a doorbuster product (typically a few hundred per store) and how each of these customers moved through the aisles.
   

• After Black Friday: Analyze the baskets of transactions during Black Friday:

1. Customers who buy doorbuster products often pick up other items that may not have significant discount. Calculate the sales and gross margin on baskets that have a doorbuster product. Retailers often lose money on the first customers in line.
   
2. Customers often come in after the doorbuster products are sold (Each store usually stocks 5-15 units of each doorbuster). They often pick up products with lower discounts. To calculate the halo effect of the discount, calculate the sales and gross margin lift for Black Friday baskets without a doorbuster product
3. So long as the total of the above has positive sales and margin impact, the retailer made money on the Black Friday deals.
4. The learning from Black Friday can be used to better structure deals for the rest of the holiday season.

This season, retailers may have to resort to a long period of discounting with dynamic moves based on competition and sales performance on a daily basis. Getting the process of discount pricing will be very critical.