Is Black Friday even worth it?
That’s a question that many retailers and brands ask themselves around this time of year.
Is it worth all the trouble? The early starts. The late nights. The number crunching. The price watching. The long days and the short rests in between...Black Friday is stressful and resource-consuming...
So is it even worth it? The answer is a resounding yes — if you’re strategic about it.
People are primed to buy on Black Friday, and as a retailer, it’s a shame to discount the psychological power this holiday has on consumers. Many consumers will surf the internet just to see if there is a deal available, and even if they don’t intend to buy, many will walk away from the day with one or two items.
There are plenty of ways to infuse strategy into your Black Friday game plan. But as pricing experts, we wanted to talk about what we know best: how to price effectively on Black Friday.
We ran an analysis of all of our market data to uncover some trends about Black Friday for you. In this post, we’ll discuss the data, highlight important trends, and give you tips on how you can make Black Friday more profitable with the information you have.
Black Friday pricing pressure: should you change your prices?
When it comes to Black Friday, your price matters. A lot.
In fact, according to Google, pricing and promotions are 13% more influential in the week leading up to the last Friday in November than at any other time of the year.
But just because people expect discounts doesn’t mean that you need to slash prices for every product in your store, nor is it what the market actually does.
We analyzed the top 100 Amazon bestsellers in 300 categories to see how different price points reacted during Black Friday 2017 and 2018 and looked at a few things.
First, we looked at trends over the last two years and determined if there were any categories where pricing pressure was growing.
Second, we compared the number of price changes by category for the week before Black Friday to the number of price changes in the week of Black Friday itself.
The results were interesting, and the analysis proved our hypothesis that the number of price changes is increasing across the board each year. And that number of price changes shows no sign of slowing down.
How to win this Black Friday
How can you make Black Friday a success? The key is to use data strategically to build strategies ahead of time. Here are our top tips for getting the most out of this Black Friday.
Pick your battles
To build a battle plan, you need to consider two questions:
1. Do Black Friday promotions match my commercial strategy?
You won’t be able to respond to every price change that occurs on Black Friday...nor should you, necessarily.
You need to know when to react to the market, but you also need to know when to not react because it will be detrimental to your brand perception. To figure this out, go back to your commercial strategy.
If you want to be seen as a premium brand or retailer, for example, you might not want to cut prices the same way someone who wants to be the kind of shop with the lowest-price-for-everything would.
You could unintentionally drive the overall market price down, and no matter what, you’ll always be undercut by competitors whose goal is to be a cheaper alternative.
2. Where should I apply promotions?
With your commercial strategy at the top of your mind, consider how Black Friday can actually help you achieve your company’s goals.
One of the easiest ways is to narrow down which categories you want to focus your time and energy.
You can’t realistically tackle every category with the type of energy it requires to maximize profits on every product (that is, unless you’re using an advanced dynamic pricing software). Your team isn’t a machine that can work 24/7 without losing their sanity.
To be effective, you should be selective in where you target your team’s energy. You might want to run a promotion on all Consumer Electronics, for example, or on any other subset of your assortment.
You can then focus wholly on running that promotion effectively.
Price increases and decreases
You don’t always need to decrease your prices on Black Friday (or in the week leading up to it).
Our analysis uncovered that many shops actually increase prices during Black Friday week, though price decreases were still 1-2x as common.
There are a couple of explanations for this. One is that retailers and brands might run a margin optimization strategy to capitalize on increased consumer willingness-to-spend around Black Friday.
These price increases could also be a response to supply and demand. If one shop sells out of a popular item, other shops in the market might increase prices as the supply shifts.
Finally though, many of these price increases might just be the result of a lack of data. Shops might not even know their prices are higher during Black Friday than the week before because they can’t keep track of their price changes.
Whatever the reason these price increases occur, you should watch out for them in the week of Black Friday. They are an opportunity for you to react.
You could lift your prices with the overall market to capture more margin, for example, or you could decrease your price to stay underneath the competition.
Use the right data
Every year countless news outlets publish “exposes” that show Black Friday deals aren’t as steep as most consumers believe.
But does that stop consumers from buying?
Definitely not. Black Friday brings in more and more sales each year.
For the most part, retailers and brands aren’t trying to take advantage of consumers during Black Friday.
It’s actually because shops don’t have the proper data to know whether a product’s price was lower in the last month than what they advertise on Black Friday.
Data like historical trends help you know the long-term market price for popular products over the course of several months, so you can make sure your Black Friday price is lower than the historical average.
You need roughly three months worth of historical data to understand what the lowest price of the product has been.
Historical data also shows which products people search for in the weeks leading up to the holidays so you can guess which products will be popular on Black Friday itself.
Another data source that’s interesting to use is price elasticity. If you understand how different products and categories respond to changes in the market, you can prioritize which categories need the most attention.
Finally, competitor pricing data is always useful, but especially so for Black Friday. Without competitor pricing data delivered directly to you, you can’t monitor the market effectively.
You can take that data a step further with automation tools like automated price checks and automated price updates. These tools save valuable time so you can focus more on strategy.
Increase the frequency of your price changes
Black Friday is one of the most competitive days of the year, if not the most competitive day.
To stay in the game, you need to shift your prices as quickly as the rest of the market.
Our analysis of the top 100 Amazon bestsellers across 300 categories shows we’re headed toward a Black Friday standard where of one in every four products experiences a price change.
That’s roughly 7,500 products from that analysis alone.
Some categories have already surpassed that 25% threshold. We discovered the most competitive categories in terms of price are:
- Consumer electronics (36% of products experienced a price change in Black Friday week 2018)
- Toys (28% of products experienced a price change in Black Friday week 2018)
- Baby (27% of products experienced a price change in Black Friday week 2018)
- Health and Beauty (27% of products experienced a price change in Black Friday week 2018)
There are also a few categories that are showing significant upward trends. Shops in the Sports, Travel, and Outdoor categories will quickly pass this threshold as well.
It’s impossible to keep up with these price change frequencies if you don’t use some form of pricing automation tool. More companies realize this and switching over to dynamic pricing as a result.
Black Friday might not seem worth all the trouble.
But when you use data to build strategies that serve your company’s goals, the retail holiday offers the potential for excellent sales growth.