The Unsustainability of Black Friday and Cyber Monday for E-Commerce

Black Friday made its debut sometime in the 1960s as the day to drive fourth quarter shopping and help retailers move from the red to the black in profits. The day-after-Thanksgiving shopping extravaganza has grown well beyond its roots since then. Last year, at the peak of Black Friday, shoppers were spending nearly US$1 million per minute.

However, the origins of Black Friday were pre-Internet, and a prime purpose for the single-day sales was to drive consumers to brick-and-mortar stores. Recently, with online shopping reaching record highs, and the number of e-commerce-only retailers continuing to grow, Cyber Monday was born. Its premise was the same: to prompt customers to make purchases on a single day to boost revenue in Q4.

There are several key reasons why these shopping days are not sustainable for e-commerce businesses. A correction will occur over the next five to 10 years, as digital-native brands grow and online shopping begins to dominate.

Following are three key reasons the Black Friday and Cyber Monday shopping holidays are not sustainable in the long term.

1. Logistics Are Unmanageable

Customer expectations about shipping and delivery, combined with an increased volume of purchases made at one time, are the ingredients for a logistics nightmare in retail warehouses. Maintaining accuracy and speed of delivery around the holidays requires increased labor. Additionally, meeting customer demands for next-day or two-day shipping is costly and can hit a retailer’s bottom line hard.

Automation has been helping to address this problem, increasing throughput and offsetting labor costs in warehouses. Robots have been helping to solve the logistics issues inside warehouses, but shipping is often the big cost for retailers. So even if a retailer has invested in robots, which can help get goods out the door, shipping is still a concern.

This holiday season, retail behemoths like Amazon, Walmart and Target began offering free shipping. Walmart and Target have specified two-day delivery, while Amazon has promised delivery before Christmas. The trend, however, is clear: Free shipping is the gold standard.

With this play, etailers are making sacrifices in the short term in the hope of winning loyal customers in the long term. However, many of the customers drawn to make a one-time purchase to take advantage of the shipping promotion might move on in the future.

Online retailers arguably don’t need one single day to drive revenue or consumer shopping, unlike brick-and-mortar retailers, which depend on in-store purchases. There’s been a growing trend of sales being offered earlier online. For example, Walmart offered deals starting on Thursday this year. Setting deals to run for several days can ease the logistics burden without requiring any sacrifice of holiday revenue.

2. Website Glitches Are Bound to Happen

Black Friday originated to get shoppers off their couches and into retail stores. With the advent of online shopping, this purpose lost its relevancy, leading to the creation of Cyber Monday to propel online purchases.

E-commerce has undergone a transformation in the last five years. With the growth of social media and mobile shopping, the customer journey has changed dramatically. However, many retailer websites are not built to handle the volume and trajectories of Black Friday and Cyber Monday shoppers. Thus, website outages on these critical shopping days have become inevitable.

Looking back over the past few years, we’ve seen Macy’s, Target and Paypal experience outages. E-commerce platforms weren’t built for, or properly prepared for, the degrees of volume experienced during those peak shopping times.

This year, Cyber Monday shopping was forecast to outpace in-store shopping by 10 percent.

Consumers looking for deals no longer needed to leave their homes and fight in-store crowds, and indications are strong that a preference for online shopping will continue to solidify. If this trend continues, e-commerce platforms will need to evolve in order to better manage the increased load, while simultaneously offering a seamless customer journey.

3. Customers Will Be Let Down

Customers shopped and spent more this year, but it’s likely they also had higher expectations for service and the experience they would have.

In a recent poll, 86 percent of shoppers said they had higher expectations for correct and on-time delivery than in years prior. Those higher expectations, often enforced by online retail domineer Amazon, have made it challenging for other retailers to compete and keep customers happy.

All retailers are competing with Amazon. It was projected to garner 48 percent of all online sales this year, and the company has said that it broke its sales records on Black Friday and Cyber Monday.

Other retailers have felt compelled to try to exceed — or at least meet — the service level that Amazon provides when it comes to shipping and customer care. However, there has to be a breaking point, at which the number of shoppers making purchases and expecting goods delivered is unmanageable. That means that some customers simply won’t get their holiday gifts on time.

When customer expectations are not met, there is a lasting impact. Customers are quick to find alternatives, especially with the growth of marketplace sellers and the downturn in brand loyalty. In a recent survey 90 percent of customers said they already had or in the future would hurt a retailer’s brand in response to a bad purchase experience. Retailers need to keep promises to keep customers in the long term.

Expect Change

Change is inevitable. Online shopping will continue to grow in market share in the coming years, which will drive continued innovation across e-commerce logistics and website platforms. The implementation of more robots for warehouse automation, drones for shipping and handling, and even automated semi-trucks will support logistics management to suit growing customer expectations.

Meanwhile, the e-commerce website platforms will advance to better accommodate the growing crowds, with more load management and increased personalization tools. The Black Friday and Cyber Monday shopping days, as they currently play out, are unsustainable for e-commerce businesses. However, with strong doses of innovation, they could morph into slick shopping events of the future.

Lior Elazary is the founder and CEO of inVia Robotics. He holds a Masters in Robotics from the University of Southern California and has more than 20 years of leadership experience, bringing to market many of the systems that power the Internet. An expert in retail warehouse automation, he is passionate about helping businesses use robotics to improve workers' efficiency.

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