The problem with Black Friday returns and how AI could help

Love it or hate it, it looks like Black Friday is here to stay, with the UK sales extravaganza now reaching almost every nook and cranny of both the online and physical retail world. But under the weekend’s attractive promise of just-in-time-for-Christmas discount prices, is the shopping bonanza doing more harm than good for UK retail?

Imported to the UK from the US in 2013, Black Friday has become a mostly-digital event, with approximately three quarters of sales purchases being made online. With a decrease in customer footfall year-on-year, the financial impact of dealing with mass returns, and the pressure to sell items substantially cheaper than they otherwise would, many UK retailers are struggling to keep up.

Returns alone this year could cost UK retail massively. Global returns platform Rebound estimates that the logistical nightmare of tens of millions of parcels ending up in “Crimbo Limbo” - a no-man’s land of un-processed returned stock - will cost the UK around 362 million pounds.

According to the company - used by online clothing retailers such as ASOS, Gymshark and Charles Tyrwhitt - if retailers want to avoid hefty costs, they need to better understand when stock is coming back, and have full visibility of their returns data.

Joaquin Villalba, co-founder and CEO of Nextail - an AI-powered retail intelligence platform - understands the challenge retailers face when creating deals to compete in the discount season. “Today the consumer has a more powerful position than ever before - their price savviness means that any promotion which doesn’t deliver good value will damage brand or retailer loyalty,” he told FashionUnited.

The price of Black Friday returns a huge burden for UK retail

One way Villalba thinks retailers can better handle Black Friday - and the returns fiasco which follows - is the implementation of intelligent inventory systems that better re-balance products in stores - something which the company reports can increase sales by between 5-10 percent and reduce stockouts by 60 percent.

While the tech is advanced, the logic behind it is simple: Use machine learning to better predict and track stocks in retail - an innovation that Villalba thinks could help deal with the Black Friday returns influx.

“AI can provide more accurate forecasts of demand by enabling retailers to take data-driven decisions about the allocation of stock to maximise sales, reducing the friction between the online/offline shopping experience and minimising lost revenue.

“This ensures every return is accounted for and correctly distributed to the store where it has the highest probability of selling. This dynamic replenishment system is crucial for better demand predictions and is especially important when dealing with a high amount of returns.”

Last week, Springboard - a retail intelligence company - predicted footfall to drop by -3.7 percent year-on-year in 2018 compared to Black Friday 2017, and by -2.7 percent over the weekend as a whole. In contrast, online transactions were forecast to rise by +4 percent, hinting at a busy year for online returns.

Commenting on the results in an interview with FashionUnited, Diane Wehrle, Insights Director at Springboard, said: “I don’t think Black Friday adds much of an additional benefit to the UK high street. Instead it cements the discount culture that we’re coming to expect now. I think that’s starting to undermine retail.

“It’s a problem for the industry because now all the sector is based on is price. It’s a race to the bottom - it’s just about who can offer an item cheaper than anyone else.

“After Black Friday, retailers have less profit, meaning they have less money to reinvest. If they have less money to invest, then we won’t see as much innovation in the industry.”

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