Retailers face ‘Bleak Friday’ as cost of living crisis hits spending – business live – The Guardian

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

The stakes are high for retailers today, as they try to tempt shoppers to spend with a flurry of Black Friday offers.

But they could face a “Bleak Friday” this year, economists say, as the cost of living crisis means consumers will resist discounts on new electronics kit, homeware, clothing and the like.

Plus, ongoing strikes at Royal Mail could deter people from shopping online.

Bleak Friday

How will Black Friday be impacted by postal worker strikes? @DaveWardGS says they have no choice.#KayBurley FC pic.twitter.com/vJmDdR7oFd

— Kay Burley (@KayBurley) November 24, 2022

Black Friday, originally an American post-Thanksgiving wheeze, is now more of an global event – thanks to international retailers looking to kick-start the festive rush.

These days, ‘Black Friday’ deals often last at least a week – running into the pre-Christmas offers, and then the January sales. But some of the offers may not be as generous as they look (and may get more generous once retailers get desperate to shift stock).

The CEBR thinktank reckons we could see a “Bleak Friday”, with discounts unlikely to save struggling retailers as UK consumers cut back spending by an estimated £1.5bn in the last quarter of this year.

The CEBR say:

The cost-of-living crisis, combined with warnings that discounts are often more generous at other times of year and the threat of a Royal Mail strike, will mean that it is a weak year for Black Friday sales and we may see January sales start early in an attempt to shift stock.

Black Friday can also suck in spending that would have happened anyway, either before or after the big day/week. This year, people simply have less disposable income to spend at all, with surveys showing many households are cutting back on spending.

The CEBR says:

While 42% of Brits have reported shopping around more due to the rising cost of living, suggesting they are looking for discounts, a higher share, 65%, reported they are spending less on non-essentials due to these cost pressures.

It’s the first Black Friday without Covid restrictions since 2019, which ought to help retailers get customers into shops. But sales and profits could still be lower than 2021.

As Danni Hewson, AJ Bell financial analyst, put it:

“Friday should be one of the busiest days for UK retailers but concerns about constrained budgets and the added issue of a strike by Royal Mail workers are both expected to make the affair a rather damp squib.

Retail expert Richard Lim told the BBC he was expecting Black Friday to be a more “muted affair” with sales down on last year.

Lim said:

“Inevitably, I think what we’re going to see is consumers being much more careful with their spending.”

Black Friday: Cost of living crisis may hit sales rush https://t.co/8jqJ8xUkUF

— BBC News (UK) (@BBCNews) November 25, 2022

Also coming up today

Retail giant Amazon faces a wave of Black Friday protests and strikes, as workers stage walkouts over pay and conditions (more on that shortly).

AMAZON FACES BLACK FRIDAY PROTESTS, STRIKES IN 40 COUNTRIES; WORKERS PLAN TO STAGE WALKOUTS OVER PAY AND CONDITIONS: BBG

— FXHedge (@Fxhedgers) November 25, 2022

Royal Mail staff will be picketing outside the postal groups offices again today, in an ongoing dispute over pay. Eight more days of action are planned in the run-up to Christmas.

The UK’s wave of industrial action has deepened, with nurses announcing they will strike for two days next month.

Royal College of Nursing members will stage national strikes – the first in its 106-year history – on 15 and 20 December, with action expected to last for 12 hours on both days.

The unprecedented industrial action will seriously disrupt care and is likely to be the first in a series of strikes over the winter and into the spring by NHS staff, including junior doctors and ambulance workers.

European financial markets could be subdued, with Wall Street reopening for a half-day after Thursday’s holiday.

European Opening Calls:#FTSE 7469 +0.04%#DAX 14555 +0.10%#CAC 6705 -0.04%#AEX 723 -0.01%#MIB 24726 -0.02%#IBEX 8390 +0.02%#OMX 2108 +0.05%#SMI 11158 +0.00%#STOXX 3963 +0.03%#IGOpeningCall

— IGSquawk (@IGSquawk) November 25, 2022

The agenda

The Jaguar Land Rover logo at a dealership.

Newsflash: Jaguar Land Rover is cutting production at its UK factories until the spring, my colleague Jasper Jolly reports.

It’s a sign of JLR’s continued struggle to source semiconductors amid the global shortage.

The carmaker, whose chief executive, Thierry Bolloré, last week announced his resignation, has decided to cut production at factories in Solihull and Halewood between January and the end of March as it tries to prioritise its most profitable models, said industry sources.

JLR and other carmakers have been plagued by shortages of semiconductors since early 2021.

Many carmakers cut their orders for the computer chips at the start of the coronavirus pandemic, only to find themselves at the back of the queue when demand roared back.

Here’s Jasper’s story:

Cyber-criminals target Black Friday to trick consumers looking for bargains – so here are three threats to watch out for (from website Hey Discount).

1. Suspicious links in websites, emails and text messaging

There are a few ways you can check a link that appears in a text or email. The best way to tell is by examining the sender’s information, you can do this by clicking on the contact information of the sender, examining the email address or phone number, and checking that it matches up with the company it claims to be.

If you notice any strange email addresses or unidentified contact numbers, there is a chance that it is a potential scam.

2. Unfamiliar Websites

Many scammers will set up fake websites with fake products listed to retrieve your bank details and information. While shopping online, opt to use an internet browser that uses advanced technology, and look out for the padlock icon within the site’s URL bar at the checkout, as this helps protect your information.

You can also use other websites to check the legitimacy of the seller, but ultimately it’s best to stick to familiar websites, especially around this time of year.

3. Verification Code and Delivery Service Scams, designed to evade two-step authentication

These messages usually pretend to be your bank or a company you’ve recently made an order with. These messages will typically ask you to finish your transactions by inputting a verification code. Fake delivery messages, sometimes disguised as the Post Office and other well-known delivery companies, are also common during the Black Friday period, detailing information about a product you have recently purchased, asking you to click a link and pay a delivery fee to retrieve items that haven’t yet been delivered.

Our advice would be to be cautious of any text messages you receive beyond the checkout, and to always double-check you’ve received an order confirmation via the email provided at the point of order to ensure your purchase has definitely gone through.

Some economic good news – Germany’s economy grew a little faster than first thought in the last quarter, which may ease fears of a deep recession.

German GDP expanded by 0.4% in July-September, up from an earlier estimate of 0.3%.

It means Europe’s largest economy managed to keep growing through the first three quarters of 2022, despite ongoing Covid-19 disruption, supply bottlenecks, surging energy prices, inflation, and the war in Ukraine.

German GDP growth in Q3 was even better than in flash estimate: 0.4% QoQ, from 0.3%. That’s a surprise. Growth was driven by government and private consumption. Net exports and construction sector were drag on growth. https://t.co/sf41uVUAG4

— Carsten Brzeski (@carstenbrzeski) November 25, 2022

Shares in UK homebuilders have dropped in early trading in London, amid worries that a recession and rising borrowing costs will hit the housing market.

Persimmon (-2.4%) and Taylor Wimpey (-2.4%) are the top FTSE 100 fallers, with Barratt Development down 1.7%.

Analysts at Berenberg have cut their share price targets for the housing sector this morning.

Also, a Rightmove survey has found that demand for rental homes across the UK has jumped. Some potential first-time buyers are putting their home-buying plans on hold in the hope that mortgage rates will drop in the new year.

That’s driving up rental prices – a blow to tenants (which will leave them with less disposable income for Black Friday).

Energy regulator Ofgem has been accused of an “abdication of responsibility” after announcing a package of reforms designed to bolster consumer protection and ensure energy suppliers are more resilient to market shocks.

Oftem says its new rules will shield households, after taxpayers had to pick up a £9.2bn bill after nearly 30 suppliers went bust.

The boss of Centrica, though, has criticised Ofgem for failing to protect consumer deposits, warning:

“If and when a large supplier fails, the recklessness of the decision not to address this issue will be clear for all to see.”

Here’s the full story:

UK businesses may have to offer more aggressive discounts than usual, to encourage shoppers to spend this Black Friday.

But that will eat into profit margins, as Victoria Scholar, head of investment at InteractiveInvestor, explains:

Businesses will be desperately fighting it out for the slimmed down collective pot of potential consumer spending.

However, businesses have also been facing a big increase in costs from energy to wages to materials. This troublesome combination of increased costs and higher discounts will put pressure on margins, making it increasingly tough for retailers to remain profitable.

They may also struggle with a hangover of too much inventory if sales fall short of expectations, potentially resulting in even more discounts after Christmas into the new year and even tighter margins.

In the UK, workers associated with GMB union have planned protests outside Amazon’s warehouse in Coventry.

Protests are also expected outside the company’s Dublin offices to push back against two new planned data centres in the city.

The Irish Times has more details:

“Amazon workers in Coventry are overworked, underpaid and they’ve had enough, said Amanda Gearing, a senior GMB organiser, adding that hundreds will assemble to demand a wage increase from £10.50 an hour to £15.

Any workers who walk out during a shift could lose out on the second half of a £500 bonus that Amazon announced for UK warehouse workers last month. The final payment is contingent on staff taking no unauthorised absence between November 22nd and December 24th.

The GMB has said linking payments to attendance could be interpreted as unlawful inducement not to strike.

Amazon faces Black Friday protests and strikes in 40 countries https://t.co/BfnKcpSJb6

— The Irish Times (@IrishTimes) November 24, 2022

Thousands of Amazon warehouse workers across about 40 countries plan to take part in protests and walkouts to coincide with Black Friday sales today, campaigners say.

Employees in the US, UK, India, Japan, Australia, South Africa and across Europe are demanding better wages and working conditions as the cost-of-living crisis deepens, in a campaign dubbed “Make Amazon Pay.”

The campaign is being coordinated by an international coalition of trade unions, with the support of environmental and civil society groups.

Christy Hoffman, general secretary for UNI Global Union, says:

“It’s time for the tech giant to cease their awful, unsafe practices immediately, respect the law and negotiate with the workers who want to make their jobs better.”

More here: Amazon Faces Black Friday Protests, Strikes in 40 Countries

🛍Behind every discount, we should not forget that workers are being paid poverty wages for the clothes they make and that we wear.

On #BlackFriday, @industriAll_EU joins the call for living wages #GoodClothesFairPay 
  
Sign the petition: https://t.co/0vZPT3yERo

— Jude Kirton-Darling (@Jude_KD) November 25, 2022

Black Friday is “the last day of Rome stuff” for major shopping chains, argues City strategist Bill Blain of Shard Capital.

He says big retailers are:

…desperately marketing otherwise unsalable goods at suspicious mark-downs, and arranging consumer loans so they buy it.

Black Friday is an enormous marketing scam! Avoid it and shop local!

https://t.co/cXIhdyUxTm

We’ve all been scammed into believing Black Friday is a boon for consumers – it’s a marketing scam. What else might lurk around the corner in terms of free stuff? How about abundant and free energy. Careful what you wish for.#markets #investing #economy

— Bill Blain (@Bill_Blain) November 25, 2022

Black Friday bargains may not be as good as they seem, consumer group Which? warned this week.

The Evening Standard has the details:

Just one in seven Black Friday deals offer a genuine discount and the vast majority of promotions are cheaper or the same price in the six months before the sales event, a study has found.

Which? analysed 214 Black Friday deals last year across seven major retailers – Amazon, AO, Argos, Currys, John Lewis, Richer Sounds and Very – looking at their prices every day in the six months before and after last year’s event on November 26.

The watchdog found 183 (86%) were cheaper or the same as their Black Friday price in the six months before the event and 209 (98%) were cheaper or the same price at other times in the year.

None was cheaper on Black Friday alone.

Which? concluded that although there were some deals to be had on Black Friday, genuine discounts were “often few and far between”.

More here: Black Friday warning as most deals are not cheaper – Which?

A poor Black Friday would be a bruising blow to retailers, as the UK slides into recession.

Richard Flax, chief investment officer at digital wealth manager Moneyfarm, says:

‘In the minds of many, the words ‘Black Friday’ induce thoughts of excess, with shoppers frantically running through aisles or slamming keyboards to secure as many bargains as possible.

However, with inflation running at record levels and the UK already in a technical recession, this year’s shopping love affair may look a little different. According to research from GlobalData, it’s predicted that with inflation taken into account Britons will spend less in the two-week Black Friday period than in previous years.

If such forecasts prove to be correct, it will add further pressure on retailers, many of whom are already feeling the burden of an extended period of market volatility, supply chain disruptions and a hangover from the pandemic.

People are prioritising buying essential domestic products this year, and trying to cut their energy bills, reports Ed Connolly, chief commercial officer at Currys.

He told Radio 4’s Today Programme that there is higher demand for items such as microwave ovens, and also energy-efficient products such as heat pump tumble dryers.

Connolly added:

This is definitely the year of the air fryers.

We’re selling two and a half thousand a day, as soon as we can get the stock in people are buying it, because it’s a very energy-efficient way of cooking.

It’s here!

Expecting Black Friday sales to be ⬆️ but shifting trends such as recommerce & focus on products like air fryers & electric blankets to help with rising fuel costs

Have you already bought? Playing “the long game”? Or not shopping@CustWhisperer

📸@BBCWorld pic.twitter.com/dzz1Rjq8zu

— Kate Hardcastle MBE (@katehardcastle) November 25, 2022

Over half of Britons expect to cut back on spending this Black Friday compared to last year, research company Attest reports.

It found that most people expect to buy something, but are unsure how much they’ll spend.

Nearly two-thirds plan to only shop online – a potential blow to high street retailers who have put effort into store displays:

In a new blow to retailers on Black Friday, research published this morning suggests a third of families are planning to cut back on Christmas presents this year, because of the cost of living crisis.@julietdunlop reports pic.twitter.com/YmZCp0Eu79

— Good Morning Britain (@GMB) November 25, 2022

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

The stakes are high for retailers today, as they try to tempt shoppers to spend with a flurry of Black Friday offers.

But they could face a “Bleak Friday” this year, economists say, as the cost of living crisis means consumers will resist discounts on new electronics kit, homeware, clothing and the like.

Plus, ongoing strikes at Royal Mail could deter people from shopping online.

Bleak Friday

How will Black Friday be impacted by postal worker strikes? @DaveWardGS says they have no choice.#KayBurley FC pic.twitter.com/vJmDdR7oFd

— Kay Burley (@KayBurley) November 24, 2022

Black Friday, originally an American post-Thanksgiving wheeze, is now more of an global event – thanks to international retailers looking to kick-start the festive rush.

These days, ‘Black Friday’ deals often last at least a week – running into the pre-Christmas offers, and then the January sales. But some of the offers may not be as generous as they look (and may get more generous once retailers get desperate to shift stock).

The CEBR thinktank reckons we could see a “Bleak Friday”, with discounts unlikely to save struggling retailers as UK consumers cut back spending by an estimated £1.5bn in the last quarter of this year.

The CEBR say:

The cost-of-living crisis, combined with warnings that discounts are often more generous at other times of year and the threat of a Royal Mail strike, will mean that it is a weak year for Black Friday sales and we may see January sales start early in an attempt to shift stock.

Black Friday can also suck in spending that would have happened anyway, either before or after the big day/week. This year, people simply have less disposable income to spend at all, with surveys showing many households are cutting back on spending.

The CEBR says:

While 42% of Brits have reported shopping around more due to the rising cost of living, suggesting they are looking for discounts, a higher share, 65%, reported they are spending less on non-essentials due to these cost pressures.

It’s the first Black Friday without Covid restrictions since 2019, which ought to help retailers get customers into shops. But sales and profits could still be lower than 2021.

As Danni Hewson, AJ Bell financial analyst, put it:

“Friday should be one of the busiest days for UK retailers but concerns about constrained budgets and the added issue of a strike by Royal Mail workers are both expected to make the affair a rather damp squib.

Retail expert Richard Lim told the BBC he was expecting Black Friday to be a more “muted affair” with sales down on last year.

Lim said:

“Inevitably, I think what we’re going to see is consumers being much more careful with their spending.”

Black Friday: Cost of living crisis may hit sales rush https://t.co/8jqJ8xUkUF

— BBC News (UK) (@BBCNews) November 25, 2022

Also coming up today

Retail giant Amazon faces a wave of Black Friday protests and strikes, as workers stage walkouts over pay and conditions (more on that shortly).

AMAZON FACES BLACK FRIDAY PROTESTS, STRIKES IN 40 COUNTRIES; WORKERS PLAN TO STAGE WALKOUTS OVER PAY AND CONDITIONS: BBG

— FXHedge (@Fxhedgers) November 25, 2022

Royal Mail staff will be picketing outside the postal groups offices again today, in an ongoing dispute over pay. Eight more days of action are planned in the run-up to Christmas.

The UK’s wave of industrial action has deepened, with nurses announcing they will strike for two days next month.

Royal College of Nursing members will stage national strikes – the first in its 106-year history – on 15 and 20 December, with action expected to last for 12 hours on both days.

The unprecedented industrial action will seriously disrupt care and is likely to be the first in a series of strikes over the winter and into the spring by NHS staff, including junior doctors and ambulance workers.

European financial markets could be subdued, with Wall Street reopening for a half-day after Thursday’s holiday.

European Opening Calls:#FTSE 7469 +0.04%#DAX 14555 +0.10%#CAC 6705 -0.04%#AEX 723 -0.01%#MIB 24726 -0.02%#IBEX 8390 +0.02%#OMX 2108 +0.05%#SMI 11158 +0.00%#STOXX 3963 +0.03%#IGOpeningCall

— IGSquawk (@IGSquawk) November 25, 2022

The agenda

About The Author

James Kugmo