Dmytro Kudinov about Black Friday

Black Friday is a global phenomenon with deep roots dating back to the 19th century. Originating in the USA, it has evolved several times according to historical context and has taken on new meanings. We now refer to Black Friday, the day after Thanksgiving, during which brands massively launch discounts. Over time, this period has expanded from one day to sometimes weeks before and after Friday itself.

Interestingly, preparations for Black Friday have started several months in advance in recent years, affecting both consumers and brands. For consumers, it means delayed purchases, and for sellers, it results in reduced demand before the discount kick-off and additional marketing investments.

Why has this event become so popular globally and continues to expand? 

  1. Firstly, it’s a straightforward way to increase sales volumes for businesses. Substantial discounts can attract many customers who are reluctant to purchase at full market prices. 
  2. For some businesses, like retail, it’s a way to clear out old inventory, especially clothing, electronics, and home goods. 
  3. Some businesses use this period to gather more data on potential customers for future upselling and cross-selling. 
  4. Many brands consider it a necessary step to maintain market share amidst competition in terms of sales and visibility. The advertising clutter during this period is saturated with discount communications, becoming a market standard.
  5. Another less apparent reason is the opportunity for marketing and sales managers to improve their end-of-year performance metrics.

Some aspects, like clearing warehouses and data collection, are beneficial for businesses. However, others often amount to a short-term chase at the expense of long-term business growth.

What are the downsides for businesses during Black Friday? 

  1. Firstly, profit reduction. By offering 50 to 70 percent discounts, brands effectively “purchase” customers at the cost of their own profit, sometimes even operating at a loss. 
  2. Consumers become accustomed to discounts and plan their purchases to avoid paying full price. 
  3. Discounts can also negatively impact brand perception and value, undermining previous and future brand-building investments. 
  4. Black Friday is an operational nightmare for businesses. Processes designed to handle regular demand throughout the year frequently cannot cope with the peak demand in such a short period, causing both team stress and customer dissatisfaction with service quality and delivery times.

All these negative factors lead to one common outcome – under-earning for businesses. In the long term, this means reduced investments in marketing, thus slowing brand growth, lower team salaries, decreased investments in production quality and product improvements, and reduced contributions to social projects and donations.

Many businesses understand this and look for ways to minimize the negative impact. The simplest method is fake discounts, where the price is stated as discounted, but it’s the standard price. According to a 2022 U.S. study, only 2% of Black Friday offers were genuinely the year’s lowest prices. Similar instances of discount deception have been reported in our market.

Not all businesses are happy to remain trapped by Black Friday. So, what can businesses do to avoid losing profits while staying competitive? 

  1. Firstly, focus on the key value the brand offers to its users. If the proposition is truly valuable, consumers are willing to pay a higher price, making your brand less sensitive to price drops or competitor undercutting. 
  2. Instead of discounts, offer new or loyal customers unique opportunities, providing more value than just price reduction. 
  3. During Black Friday, present unique, limited-time offers for the event to maintain profitability while attracting customers. 
  4. Utilize social themes, such as charity or reducing overconsumption and environmental protection. Consumers are becoming more conscious and are often willing to pay more for responsible brands that invest in solving social issues.

In conclusion, Black Friday is primarily a tool. It can benefit a business if used correctly. Understanding its mechanism and impact on each business is crucial to avoid harming long-term brand development.