Black Friday is without a doubt one of the biggest dates in the retail calendar, and this year will be no exception. As the industry continues to try and react and adapt to the COVID-19 pandemic, 2020’s Black Friday weekend has the potential to be the most important one yet. Put simply, it could be make or break for many retail businesses.
The events of the past few months have transformed the retail sector as we know it, most likely forever. Some of the stats around e-commerce sum this up; in the UK, it took ten years for e-commerce as a proportion of all retail sales to grow from 10% to 20%. During the course of the pandemic, this figure has grown from 20% to 30% in approximately eight weeks.
During this time, at Peak, we’ve seen an increasing number of retailers begin to better understand the value and importance of their data – and how, when leveraged with artificial intelligence (AI) – that data can provide them with a significant competitive advantage.
At our latest Masters of AI event, we looked ahead to Black Friday 2020. We welcomed some amazing guest speakers to shed some light on how leading retailers prepare for this crucial trading period, how they’re leveraging data and technology to their advantage, and why 2020 may well be the most competitive Black Friday yet…
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Nailing your Black Friday marketing strategy
Following an introduction from Peak’s Retail Director, Tom Summerfield, on Peak’s vision of AI-powered Connected Commerce (there’s more on that later on!), our first guest was Matt Holmes, a senior digital leader heading up the digital marketing team at rapidly-growing fast fashion brand, PrettyLittleThing. During Matt’s career he has specialized in guiding digital teams through times of transformation, using agile principles and technology to get exceptional results at leading global e-commerce businesses.
He explained about the opportunities and challenges posed by Black Friday for brands like PrettyLittleThing, reaffirming the importance of being able to “cut through the noise” with your digital marketing during one of the most competitive periods of the year.
For Matt and his team, this is all achieved through better segmentation, amazing personalization and ensuring they’re reaching customers with the right message, at the right time, via the right platform. By avoiding a ‘spray and pray’ approach – “throwing mud at the wall and seeing what sticks,” to quote Matt – PrettyLittleThing instead focuses on honing its Black Friday strategy over the course of the year.
“It’s about being better at insight, knowing who our customers are, and being prepared with a number of creative variances,” said Matt. “We want to build better connections with customers, understand what they need and be able to show them the right products in the right away – rather than it just being a case of who can shout the loudest on the day.”
For those looking at PrettyLittleThing from the outside, it’s easy to get distracted by the iconic pink branding, unicorns and army of influencers that the company has become so synonymous with. But behind this trend-setting exterior are world class digital teams, BI teams and proven tech partners – Peak included! – that help PrettyLittleThing develop and execute an effective, data-driven Black Friday marketing strategy that powers profitability over this crucial sales weekend.
“We’re very commercially-driven, and have to be on top of our numbers all year round – but even more so on Black Friday,” said to Matt. “We’re a fast-paced business and we react quickly to changes, and this year we’ll be leaning on automation tech a lot more to make those decisions even faster.”
Matt went on to share his thoughts on whether pureplay online retailers like PrettyLittleThing had an advantage over more traditional retailers, explaining why the most successful brands will employ a “so what?” strategy. You might have access to a wealth of data, but what are you actually going to do with that information and insight?
In terms of Black Friday 2020 and how things will be different this year, Matt expects it to be noisier and more crowded than ever before.
“It’s going to be a crowded market – nobody knows what the pandemic will bring in terms of new restrictions but I can’t see a year where bricks and mortar is anything close to how it has been, so the battleground will be online. Budgets are going to need to be bigger, costs are going to be higher but there will be more at stake for those who get it right.”
Protecting your margin on Black Friday
Next up, we welcomed Scott Robertson for his Masters of AI debut. Scott is founder of an exciting new consultancy, Sqwyz, that specializes in helping businesses define and deliver their strategic ambitions. Before that, Scott held the positions of Head of Business Transformation and Head of Merchandising at retail giant Superdry – making him the perfect guest to chat about using data to make smarter buying and planning decisions on Black Friday.
Scott opened by sharing his thoughts on retail becoming increasingly customer-centric, and how a clearer, joined up view of data – taken from across the entire business – allows retailers to be more proactive in their approaches.
“Channels are typically reactive, but data capability is developing so that we can become proactive and anticipate what customers are going to do, and surprise and delight them by serving their needs even better across however or wherever they want to shop,” explained Scott.
“What we’ve seen as a result of the COVID-19 pandemic is a lot of companies being forced to accelerate along this journey as lockdown has impacted physical retail. I think it’s proven that if you focus on achieving a few key digital objectives, it’s very doable to make big changes quickly.”
However, for Scott, there’s also internal benefits for retailers who are looking to gain a more holistic, joined up view of their data – especially when you consider that many retailers have evolved to have a siloed function mentality, with little cross-departmental communication.
“Logistics focuses on making the warehouses as efficient as possible, sourcing focuses on getting the best price, merchandising focuses on sales, margin and stock. Many of these are actually at odds with each other – for example, trying to optimize how you pack boxes for retail stores might drive cost down in the warehouse, but it might equally drive cost up in retail stores,” said Scott.
“Most businesses now have the data to start to think about optimizing the end-to-end operation, so it’s about how you pull those functions together, by connecting the right people together and using the data to join the dots.”
The conversation then turned towards Black Friday, and how a brand like Superdry utilizes cross-functional data in this way to put itself in the best possible position. A key thing for Scott is preparation and having a clear strategy. He advises businesses to more or less start planning for the following year’s Black Friday straight away, being sure to capture the lessons you’ve learned and fully understand what’s worked and what hasn’t. The next phase is then placing your buys for that period.
“You need to be clear on what your Black Friday strategy is: are you planning on using it to drive footfall and sales? If so, you might need to buy a bit extra, you might want to concentrate on promoting some high margin stock that you can afford to mark down more,” said Scott. “If it’s more of a stock clearance strategy, it’s working out which products you’re likely to want to clear at that point and adjusting your buys accordingly.”
There’s a stage that follows this, according to Scott, where retailers should take a step back to review. How are sales progressing against your plan? What stock do you have left to liquidate? Test the temperature of the rest of the market to anticipate what they’ll do, and model multiple different scenarios.
“The key is working out how long to run for, and when and how to react when you actually get into the trading period. There’s huge amounts of data involved, as well as a degree of intuition, so it’s very difficult to do it with any degree of certainty in Excel, which is almost always the merchandiser’s tool of choice!”
This brings the conversation back to the transformative role that AI can offer merchandising teams, blending their creativity with science to help spot patterns and trends, hidden in their masses of data, that can help to optimize the markdown strategy.
This is crucial to ensuring margin is being maximized on Black Friday; just because it’s a period of discounting doesn’t mean that it shouldn’t be profitable for retailers, too.
“What’s really tricky is being able to track and analyze every item at an individual level, especially as you’ll have potentially a thousand or more lines in the sale. Therefore getting the right markdown price first time is key,” explains Scott.
“One of the biggest mistakes I’ve seen is just doing flat markdown, so 30% off everything as an example. It might be great for driving customers to your stores and easier to implement, but all that typically happens is your best sellers sell even better and your worst sellers don’t sell. And if your best sellers are selling anyway, you’re basically throwing away margin and leaving yourself with a worse stock mix after the sale.”
“Margin protection on Black Friday is critical. Being intelligent about how you structure your markdown so you can achieve your objectives in terms of sales and stock, and seeking out every last penny of margin has never been more important.”
Connected Commerce: an exceptional customer experience from order through to delivery
Host Tom talked us through the Peak vision of ‘Connected Commerce,’ powered by AI. Building on Scott’s take that businesses need to better connect their systems and gain a joined up, holistic view of data from across the entire operation, Tom outlined the potential of a central system of intelligence, an AI system, to help provide an exceptional customer experience on the busiest weekend of the year.
For Footasylum, a key Black Friday focus was often on the supply chain and logistics side of the business – getting orders out of the door as quickly and efficiently as possible to fulfill customers’ needs. This is, of course, easier said than done. Siloed data sources and business systems scattered across the retail value chain cause miscommunication between departments, which ultimately cause delays which disrupt the customer journey. On the most important weekend of the year, you simply can’t afford this to happen.
Take the recommendation engine on your website, for example. Tom states that this should automatically know if there’s a stock issue in your warehouse before it serves onsite recommendations – but it doesn’t. With AI, though, you can simultaneously leverage WMS data, ERP data, online and in-store transaction data and non-transactional data to better inform those recommendations. Not only does this mean smarter, tailored recommendations for your customers, but also offers a more seamless user journey without any ‘out-of-stock’ disruptions.
“Your markdown strategy should be considering non-transactional demand data from your website. To that point, so should your transport strategy as an extension of your allocations strategy, but I bet it isn’t really,” explains Tom further. “No doubt those teams will be considering everything in your WSSI (weekly sales, stock and intake data), plus the expertise of the person analyzing that, but these extra AI-driven insights mean that, in real time, you can make more intelligent decisions.
“Your warehouse management system should know which items sell best together on your website so it can positively affect your putaway strategy on your pick face,” says Tom. “But, most of the time, that won’t be the case because of legacy system limitations.”
These are all examples of systems and data sources that don’t typically talk to each other. By having them in one central system, ingesting the data and unlocking its true value with AI, retailers can then push these intelligent insights back into their businesses to better inform their decisions and choices.
When all of these parts move and communicate together in unison, driving intelligent recommendations and always-on optimizations, it’s safe to say that the Black Friday battle will have just gotten a whole lot easier.