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Black Friday Ecommerce: The Hype and the Reality

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Black Friday ecommerce can really stress you out.

I remember my first Black Friday as a retailer.

It was 2003. The holidays kinda snuck up on us.

We had no idea that we had to strategize this entire month. We came up with a few last-minute deals. We sent out a few last-minute emails. WE WERE COMPLETELY BLOWN AWAY WHEN THAT DAY’S REVENUE TOPPED All OCTOBER’S COMBINED.

Since that first Black Friday in retail, my holidays have never been the same.

Gone were the Christmas cheer and caroling and chestnuts by the fire. Now all I see are competitors’ promotions, vendors that won’t ship on time, and skyrocketing acquisition costs.

The holiday hype: maximum sales with maximum deals

“It’s the most wonderful stressful time of the year!”

Everything about this season is designed to stress out you, the marketer.

Journalists crank out articles about “maximum deals.”

These work your customers into an absolute deal frenzy. Those customers start to pig-pile on you.

crazy eddie holiday pricing

Then your vendors jump on the pile. They jam more blog posts down your throat about how you have to “maximize sales” across every conceivable marketing channel.

Maximize email and Facebook and Adwords … you do have your Google Shopping feed optimized by now, right? What?! You haven’t???

You can hardly breath under that pig-pile at this point. So let me try to dig you out from under there …

Maximizing deals and sales are cool … but what about maximizing profits?

(silence)

Yeah profits. As in what you are going to use to buy your kid the best holiday gift ever.

At Karmaloop, the company increased sales yearly on Black Friday from 2010-2014!

Each year it had bigger deals too!

You know what happened in 2015? The company went bankrupt!

Karmaloop holiday discounts

Increasing revenue is BS if every year you increase discounts more. (My boy Hillstrom hammers the point home here — worth a skim.)

So before you get buried under the pig-pile this week, let’s take a step back and think this one through …

The holiday reality: minimum profits

About 15 years of ecommerce Black Friday / Cyber Mondays have taught us some things:

  1. The more we hype up Black Friday / Cyber Monday, the more we train customers to shop during those four days. Big surprise, each season is bigger than the previous one!
  2. For most retailers the holiday sales frenzy doesn’t increase Q4 revenue. It just cannibalizes the rest of Q4. Customers sit on their wallets until this week. (BTW this is oh crap moment #1.)
  3. This week is all about discounts. So now we are cannibalizing full-margin purchases with discounted ones. (oh crap moment #2.)
  4. Customer acquisition costs go through the roof as the big brands plow budget into paid. (oh crap moment #3.)

You never want three “oh crap” moments. Put it this way … Eisenberg’s deli in the Flatiron has a salad on the menu called the Triple Threat: scoop of egg salad, scoop of chicken salad, and a scoop of tuna salad.

Well Black Friday / Cyber Monday presents a Holiday Triple Threat to your profits.

You were hoping to add new demand over this week? Sorry, it’s just reallocated demand from October and November. That’s your egg salad.

Oh and in reallocating that demand you are moving it from high-margin to low-margin purchases. There’s the chicken salad.

And finally, if you depend at all on paid acquisition, your customer acquisition costs are going to skyrocket. Tuna salad.

Hope you are hungry because the Holiday Triple Threat just triple-screwed you.

It’s why many (most?) retailers are unprofitable this week. Will you be one of them?

Relaxed holiday times

How to stay profitable out there …

All this stuff about delis has a couple of implications for you, the intelligent marketer:

  1. If you are daring enough to play the paid acquisition game this week, … just have your shit dialed. CACs are going to go through the roof in most categories. Keep in mind your equation for a profitable business: LTV > CAC
  2. This week the best way to ensure LTV > CAC is to market products and offers where you are sure you will make money on the first purchase.
  3. If that first transaction isn’t profitable, you’ve got your work cut out for you. If this is you, at least try pushing products that encourage the customer to come back and buy again, like protein powder. (Mental note: merchandise protein powder for next holiday.)
  4. It goes without saying that you want your lifecycle marketing all dialed in to increase the likelihood of a high LTV customer. Bounce-back campaigns, second-purchase campaigns, things like that.
  5. If you have a better idea who Santa is than your CAC, then lay off the paid channels. ASAP. Focus on reaping what you’ve already sown. Push your offers to your current audience: your email list, web traffic, and remarketing audiences. Any low cost acquisition will help you stay profitable.

Whatever you do, make a note to measure how your Black Friday / Cyber Monday offers perform. Do it twice: once at the end of next week and a second time in February after you’ve processed all your holiday returns.

How? Use my ROI spreadsheet. It will help here because it takes discounts into account (as you should).

Oh, and carve a small control group out of your holiday offer craziness. Who knows, you may be lucky enough to discover your merch is so compelling it doesn’t need a discount. Armed with that knowledge, you’ll make money hand over fist in Holiday 2018.

Above all, don’t buy the hype. Be a skeptical marketer.

Look at your own data. Avoid getting sucked into running unprofitable promotions.

And have a turkey leg. Watch some football. Enjoy a stress-free Thanksgiving!

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