With the holidays shopping season approaching, Black Friday is becoming a pivotal event for retailers worldwide. This shopping phenomenon originated in the United States, traditionally takes place after Thanksgiving, and serves as a key indictor of consumer confidence and economic trends. Over the years, the event has increasingly moved online. In 2022, a 69% of sales were made through ecommerce, resulting in a $9.12 billion in sales.
However, the excitement surrounding Black Friday often comes with significant challenges for retailers and supply chain managers. Crowded stores, staff shortages, and complex logistics create a high-pressure environment that requires strategic planning and execution.
Figure 1: Key Black Friday Statistics (source: Finances Online)
Identifying key challenges
Retail and warehouse strain
With Black Friday approaching, retailers face significant operational strains. Physical stores are often crowded, leading to logistical challenges and increased theft. Retailers must not only manage the influx of customers, but also maintain a positive shopping experience, which can be particularly difficult in an environment where staffing levels may be low.
In warehouse environments, the need to manage increased inventory and expedite deliveries becomes paramount. The influx of orders requires not only careful warehouse management, but also additional temporary staff to meet the increased demand. Companies should prioritize effective warehouse planning, employee training, and process optimization to successfully navigate this complex landscape.
Logistics Complexity
The logistics framework surrounding Black Friday is full of challenges. Major carriers such as UPS and FedEx must plan for a surge in demand and a rise in package volumes. The final delivery- known as “last-mile-delivery”- often becomes particularly challenging due to traffic congestion and logistical bottlenecks. These factors contribute to increased pressure on supply chain teams to deliver products in a timely and efficient manner, with on-time deliveries becoming a critical factor in customer satisfaction.
In addition, the event results in significant volumes of returns, requiring robust reverse logistics processes. Retailers must implement efficient systems to manage returns, as a well-organized return policy can significantly increase customer satisfaction. The rise in online shopping led to higher return rates, highlighting the importance of optimized processes to effectively manage these challenges.
Figure 2: % of Black Friday Shoppers (In Person vs. Online) (source: nine tailed)
Inventory management and global supply chains
Many products purchased on Black Friday come from various international sources, making supply chain management more complex. Goods are typically transported by air or sea before being distributed via domestic road or rail networks. Effective coordination between various stakeholders is essential to managing these complicated logistics.
Proper inventory management is crucial in this context. Retailers have proactively increased their inventory levels in the lead-up to Black Friday and the subsequent holiday season to ensure that sufficient stock is available to meet customer demand. This allows them to minimize the risk of stock shortages and increase customer satisfaction. Industry reports indicate that 65% of consumer brands aim to have their inventory ready two to four weeks before these sales events.
Addressing Black Friday Challenges
With each approaching Black Friday, new challenges arise that retailers must face. Climate change impacts operating costs, especially when refrigerating perishable goods, and potential labor strikes pose additional risks to supply chain stability. Historical disruptions, such as strikes in the logistic sector, underscore the need for retailers to take proactive measures and contingency plans to mitigate potential disruptions.
In addition, fluctuating exchange rates and rising trade tensions can further complicate the supply chain landscape. As retailers increasingly source products from different regions, they must be prepared to manage these complexities while ensuring product availability and maintaining cost efficiency.
Leveraging technology for operational efficiency
Leveraging advanced technologies
Given these challenges, adopting advanced technologies to improve supply chain efficiency is critical. As shown in recent Black Friday sales data, revenue has grown significantly over the past six years, from $5 billion in 2017 to $9.12 billion in 2022 (Figure X). This rising trend in sales highlights the increasing pressure on supply chains to handle larger volumes and meet higher customer expectations.
Companies leveraging artificial intelligence (AI), automated sortation systems, and transportation management solutions can streamline operations and improve logistic performance. For example, AI-driven forecasting tools enable retailers to analyze consumer behavior and accurately predict inventory needs. This capability allows companies to adjust inventory levels to meet expected demand, reducing the risk of stockouts and overstocks. Additionally, automated sortation systems can speed up warehouse operations, improve order fulfillment speed, and minimize human errors.
Incorporating Internet of Things (IoT) technologies can also improve real-time visibility across the supply chain. By using IoT devices, retailers can track inventory levels and monitor the condition of goods in transit to ensure products are delivered in optimal condition and on time.
Figure 3: Black Friday sales in number (source: Demandsage)
Preparing for Peak Season
Preparation is essential as Black Friday approaches. Retailers should conduct comprehensive reviews of warehouse layouts to optimize efficiency. Adapting warehouse configurations to accommodate increased inventory levels and fast order fulfilment processes is critical to avoid unexpected downtime during peak periods. Additionally, investing in wearable technology can increase employee productivity so they can handle their tasks effectively.
Expanding Black Friday into a multi-week sales campaign requires flexible inventory management practices. Retailers need to be prepared not only for a single day of increased activity, but also for sustained demand over a longer period. This adaptability is essential to meet customer expectations and ensure smooth operations.
Building strong relationship with carrier partners is also important. Retailers should select delivery partners based on their service levels and cost-effectiveness to ensure reliable delivery during peak periods.
Improving real-time tracking capabilities is another key factor. Providing customers with up-to-date information about their orders helps to build trust and enhance the overall delivery experience.
Conclusion
Black Friday 2024 is approaching, and retailers are facing increasing logistical challenges due to the trend of a multi-week, online-driven sales event. Despite the rise in online shopping, about 30% of consumers still shop in-store on Black Friday, highlighting the need for a balanced approach. By adopting flexible inventory management, improving technology, and building strong partnerships with their suppliers, retailers can effectively meet customer expectations and ensure a smooth, successful holiday year.
