Leading global financial platform, Airwallex, has hosted a summit of leading retail experts to arm business leaders for a difficult peak sales season. The ‘Your Passport to Beyond Black Friday’ summit looked at the impact of recent consumer spending trends and discussed ideas and solutions to the challenges retailers expect during the upcoming sales season. 

Former Ryderwear chief marketing officer, Mal Chia (feature image) and Threebyone Denim director of customer experience and omnichannel, Rachel Tigel, were among the speakers at the event. Retailbiz had the opportunity to interview both Chia and Tigel about preparing for key sales events, responding to economic challenges and the importance of brand values.

Retailbiz: What are your observations as we enter the most important sales period of the year?

Mal Chia (MC): “Entering the last quarter of the calendar year, I believe there’s a degree of nervousness. Normally there’s a bit of hype and excitement leading into Christmas, but I don’t think it’s there to the same degree this year. Businesses are looking at their targets more closely.

“Brands in a good position in terms of inventory holding and margins aren’t too stressed but those that are holding too much inventory, don’t have their margins under control and have trained customers to buy on discount year-round, aren’t going to meet their targets. They’ve pushed too hard with increased media spend and ad spend through this period.

“People are nervous, but as a sector as a whole, we’ve made a rod for our own back. Although a lot of businesses are going to report record revenue, it will be at a net loss.”

Rachel Tigel (RT): “I’m seeing a shift in consumer sentiment. People who aren’t avid shoppers are simply pulling back. When cost-of-living goes up, the retail sector is the first to see increased pressure. Something we see during Black Friday and Cyber Monday (BFCM) is an even gender split among shoppers, compared to other periods during the year when it’s more skewed to female shoppers. I think the nervousness comes from the way discretionary spending is being filtered through the market. People who otherwise wouldn’t have thought about buying something are now hesitating.

“At Threebyone Denim, 50% of our business is international, which means we have other markets that can help us along, particularly the US where BFCM is so big. Businesses are going to use BFCM as an opportunity to reduce stock levels and get units out the door at any cost to re-set their business strategy. They will take advantage of consumers having a lot of choice and navigating a lot of noise. Threebyone Denim will be using the channels we believe we can get the best return on investment (ROI) from, rather than trying to fight the fight.”

Rachel Tigel of Threebyone Denim (second from right) on a discussion panel at the recent Airwallex event.

How should brands respond to current market conditions?

MC: “We’re working with our partners to understand their business fundamentals more than anything else – understanding their margins and helping them understand their margins. Margins are sexy because at the end of the day, you want to have money in your pocket. We design a strategy which not only allows for good revenue, but sets them up for good net position.

“One of my big bugbears about this period is when brands do sitewide sales – for example, 40% off sitewide – rather than tiered discounts because it means customers are only going to buy your best products. We are helping retailers understand their A, B and C grade products and which products are overstocked so we can move them. We’re changing the mindset from chasing revenue to strategically clearing excess inventory. You may not hit your sales target, but the balance sheet is going to look healthier, and the stock position is going to be much better.

Mal Chia of Ryderwear says it’s important to build your brand well ahead of sales events.

“A brand like lululemon doesn’t do much discounting – when they do, customers go crazy for it. People don’t buy a brand just because it’s on sale during Black Friday; they’ve already made that decision much earlier.

“The focus should be on creating a brand that people want to buy from during the peak period – rather than a race to the bottom through increased discounting. If you discount more, you’ll sell more, but work should have already started to build a desire for your brand and your products. It means during sales events, customers won’t be choosing between different brands, they’ll choose your brand because they’ve already made that decision.”

RT: “As we transitioned from a wholesaler to a direct to consumer business, we built a marketing package to become a destination with exclusivity and different colour variants because people want to fill their wardrobe with our brand.

“Influencer marketing has been a big part of our lead up into promotion to generate demand. Having authority in the market means we don’t need to discount as hard because we have advocates and testimonials throughout the year, which makes people want to buy your product regardless of where it is in the discount lifecycle.

“During BFCM, you need to understand consumer psychology. Yes it’s a time of promotion and people are waiting for that discount, particularly with increases in cost-of-living, but if the product they want isn’t on discount, or at a lesser discount than they expect, they are still going to buy it.

“Retailers need to hold their nerve and believe that someone who wants their product will still want it regardless of the promotion. Even if you’re not willing to offer a discount, holding nerve can pay incredible dividends during this period.”

Why is it important for brands to build a strategy around Black Friday?

MC: “BFCM is certainly bringing revenue forward from December. It was as recent as 2018 when Boxing Day eclipsed Black Friday but it’s no longer the case. A lot of shoppers will do their Christmas shopping during Black Friday and during November, resulting in a soft December, which means forecasting is critical.

“Having newness and a strategy to follow up on Black Friday will help acquire new customers.  Regardless of the time of year, if you look at your customer lifetime value, the vast majority is going to be spent in the first 90 days post-purchase. Make sure you’ve got a plan for what you’re going to do to re-engage those customers. When you acquire new customers, you acquire a byproduct to get them to come back to buy from you again, and newness is the best way to do it.”

Rachel Tigel of Threebyone Denim says brands should look beyond promotions to engage customers.

RT: “I also think Black Friday is bringing sales forward because consumers know it’s a great time to buy Christmas gifts. What’s important though is the branding exercise both pre- and post-purchase. For example, whenever we come out of a promotion, we always drop ‘newness’ so the customer has something to look forward to.

“We build out a collection mentality after we’ve launched a promotion. We say something like, ‘we know you bought what you needed during that period, you waited and now look at our new range’ and push people into our multi-channel network. We make sure we’re still offering something after Black Friday; it’s not just a back-to-back sale because that’s when brands lose out and consumers lose interest.”

What are your expectations for the retail sector in 2024?

MC: “Retail forecasts predict 2025 as the year for recovery to pre-COVID levels. If that holds true, we’re expecting recovery to start sometime in 2024 but it’s dependent on the RBA. If they choose to increase interest rates again, then consumer confidence will continue to soften as well. We need to prepare for that by forecasting accordingly and building more of a buffer.

“Brands are pushing so close to the edge in terms of how much they’re spending on marketing, but Google and Facebook are the only winners. With so many headwinds, brands need to go back and double down on two things – better understanding their margins to be operationally fit and building a brand.

“My advice is to stop trading as a commodity and start trading as a brand. The landscape will continue to change and there will be more challenges to come. We can choose to go one of two ways – down the route of playing to the lowest common denominator or growing up and becoming proper businesses with great brands.”

RT: “I think we’re in for a rough ride. Interest rates have been put on hold for now, but they are likely to go up again to bring inflation down. For us, it’s about the buying of our portfolio and having multiple channels that we can sell through so if we have a drop in one, we can prop ourselves up through another.

“We also do this through regional diversification with 50% of revenue from international markets. This means we can play the seasonality card, which has been important. We want to continue adding value to the customer and the channel where they shop to mitigate risk throughout this period because it’s not going to come from a single channel. To keep profitability high, diversification is the option businesses will look to. From a business lens, although times are tough at the moment, it’s important to keep thinking about long-term goals. Don’t slow down your business just because times are challenging.”