Black Friday shopping spree boosts retailers’ profits in Romania

Newsroom 20/11/2015 | 11:09

Black Friday, already a tradition over the past years in Romania, is something that Romanian IT&C retailers have started to prepare for long in advance, given that sales can even be ten times higher than on a regular day, according to some pundits. This poses substantial logistic challenges, but the retailers interviewed by BR say they are able to rise up to meet these challenges.

 

Otilia Haraga

On peak sales days like Black Friday, the number of orders received by online retailers can increase tenfold compared to sales during a regular month, which is reflected in the loading degree at operational level. These can spike even by 1,000 percent for stores without automatic software, according to pundits from e-commerce platform, Teamshare.

Retailers that have not automated and synchronized their “kitchen” to the high order rate, preferring to process and bill everything manually, face the highest issues, according to Teamshare experts. They say that, while these stores feel an operational surcharge up to 1,000 times higher, process automation can decrease the load charge to just 100-200 percent compared to a normal situation.

In fact, taking into account the low margin of the sales, taken down due to promotional prices, the Black Friday discount campaigns that run without automated processes, in reality, generate financial losses at a time when the entire online retail sector should make a profit, they say.

“In the case of the stores that work without operational automations, they have many orders and returns that need to be processed within only several days with the same human resources. To this time crunch, when we also add the low margin of sales because of the promotional prices, the Black Friday discount campaigns that take place without automation cannot produce any profit so the outcome is quite the contrary,” according to Marius Panait, managing partner Entelion Software.

The ideal situation would be that the only thing left to a human operator at peak sale times is to transfer the order on the bill, while the rest of the processes are automatic, recommend the Teamshare experts.

”Buyers do not have time to call the call-center in order to check the accuracy of the information, because they are watching the best offers. The negative effects appear over the next few days when deliveries do not take place during the promised timeframe. Process automation can actually prevent these situations,” according to Panait.

The retailers’ operating systems are not the only ones that can suffer glitches along the way. When the client places an online order via card, it is up to companies like PayU to process them.

PayU Romania expects November 20th, which was declared Black Friday by most of its partner retailers, will see a double number of orders compared to 2014. “We estimate that the stores in the PayU portfolio that are organizing Black Friday will exceed RON 450 million in sales. Out of the total orders, we estimate that 25 percent will be paid using a bank card,” according to Marius Costin, CEO PayU Romania.

Costin says that, from a technical viewpoint, the PayU platform is prepared to support seven times more transactions than those during Black Friday 2014. “We don’t expect to come across problems on Friday. Every year we invest hundreds of thousands of EUR in the expansion of the tech infrastructure, both hardware and software, in order to prepare not only for Black Friday, but also to support our customers’ expansion,” said Costin. Last year on Black Friday, there were over 10,000 transactions per hour at peak hours, according to PayU data.

Delivery companies are also facing very urgent challenges on Black Friday, given the high number of orders that need to reach the customers’ homes.

“Black Friday volumes increase every year by up to 60 percent, compared to a regular timeframe, but we are 100 percent ready to deliver all the orders in time and safely. DPD has been preparing for Black Friday ever since September, talking to customers, estimating the volumes and increasing the work capacity accordingly. For this timeframe, we have increased and diversified the car fleet and the number of couriers by more than 30 percent. We have doubled the surface of warehouses in the country, and we have also supplemented the capacity of the warehouses in Bucharest,” representatives of DPD Romania tell BR.

 

Romanians are buying more than in previous years

This year on Black Friday, most shopping lists will include on average 2 or 3 products, which is more than in 2014. On this list, the most frequently sought-after items are TV sets, desired by 40 percent of respondents, small home appliances such as vacuum cleaners, kitchen robots or mixers that are a priority for 39 percent of respondents and mobile phones, which are on the list for 22 percent of respondents in a survey carried out by MillwardBrown Romania on 2,000 respondents from urban and rural areas, aged between 18 and 65 years old. Washing machines and fridges are the next two categories of products ruling in the preferences of 18 percent and 17 percent, respectively, of those who were interviewed.

Top 10 most popular purchased products  2014 2015 2014 vs. 2015
TV sets 30 percent 40 percent + 10 percent
Small home appliances 36 percent 39 percent + 3 percent
Mobile phones 20 percent 22 percent + 1 percent
Washing machines 9 percent 18 percent + 8 percent
Refrigerators 11 percent 17 percent + 6 percent
Laptops 15 percent 15 percent 0 percent
Clothes 17 percent 15 percent -2 percent
Cooking machines 6 percent 11 percent + 6 percent
Tablets 12 percent 8 percent -4 percent
Footwear 8 percent 6 percent -2 percent

 

In fact, according to the survey, 44 percent of Romanians between 18-65 answered “I will probably buy something” or “I will definitely buy something” on Black Friday, when questioned as part of this survey. The category that displays the highest purchase intention is that of young men, aged between 24 and 24 years old, according to the survey.

Compared to 2012, when the Black Friday phenomenon was still green, nearly three times more people said they would buy something this year. Also, the number of Romanians who have heard about the Black Friday discounts has reached 71 percent.

Top 10 online and offline stores considered by consumers

  • eMAG – 30 percent
  • Altex – 21 percent
  • Flanco – 9 percent
  • Carrefour – 8 percent
  • Kaufland – 4 percent
  • Media Galaxy – 3 percent
  • Auchan – 3 percent
  • Domo – 3 percent
  • Lidl – 2 percent
  • Cora – 1 percent

 

Recently, some Romanian retailers have been under fire from the media, under suspicion of raising prices in the weeks before the Black Friday campaign.

Dragos Sirbu, CEO Flanco Retail, told BR that this is due to the report between the benchmark price and the discounts applied for that product at various times. “Always before Black Friday, there are controversies and discussions, especially because of some technical specifics of the retail industry. In retail, there is something called benchmark price, in other countries it is called ‘manufacturer recommended sales price.’ This is the “whole price.” Each promotion campaign that posts percentage discounts is reported to that price. In case of temporary campaigns, after they are over, the price goes back to the initial level. The discounts announced on Black Friday are also reported to the benchmark price, the difference being that, in the case of many products, they are considered higher than during some discount campaigns. (..) I think there should be a clearer and more frequent communication of these benchmark prices, so that this confusion goes away, the discount is clearer for consumers and the honesty of retailers is not questioned,” he told BR.

Retailers adopt different business models

Total Black Friday sales across the entire Romanian retail market will reach RON 1 billion, Iulian Stanciu, CEO of online retailer eMAG, told the media in a dedicated Black Friday conference.

eMAG, which spearheaded the Black Friday phenomenon several years ago, chose November 20th as Black Friday, so that customers have the time to receive their products before December 1st. The company expects to sell around 650,000 products worth RON 200 million, and promises that the products will be delivered between November 21 and 29.

According to Hotnews.ro, the company admitted to some difficulties during last year’s Black Friday when delivery of 10 percent of the ordered products took more than six days, and some customers even received the products after a month.

Another well-known online retailer, PC Garage, estimates orders of RON 12 million, which would be a 30 percent growth compared to last year’s edition. “The same as last year, we will roll out the Black Friday campaign throughout the entire November 20-22 weekend. Right after Black Friday, on Monday, November 23rd, PC Garage is organizing Cyber Monday, being the only store which brought this concept to Romania,” according to Razvan Pop, marketing director PC Garage.

This year, PC Garage aims to deliver 80 percent of the orders in at most 4 days since they are placed, added Pop. Thus, PC Garage will be working with the same two delivery companies it usually works with. The customers in Bucharest will receive their products starting November 20th and the customers in the rest of the country, starting the next day.

MarketOnline.ro started preparations for Black Friday this summer. “Given that many other stores started the Black Friday campaigns on November 1st, this year we wish to grow by 20 percent the level of sales of RON 8 million that we reached last year,” said  Andrei Cracea, manager MarketOnline.ro. The products should be delivered within 3 days by the three delivery companies that MarketOnline.ro is working with.

CIT Group, a company that sells refurbished IT&C products, is in full swing of the discount season. “This year we decided to adopt a progressive system in which we kicked off the discount season on the first Friday of the month and increased the discounts progressively for the products in stock. We have a limited range of products to which we apply minimum discounts of 17 percent. The climax for the price of the products that are still in stock will be the last Friday of the month, November 27th. (…) We are mainly relying on refurbished computers and laptops, for which we offer 5 years of warranty and a Windows license,” said CIT group representatives.

Retailers with a strong offline sales component are also preparing for Black Friday. Flanco Retail will organize Black Friday between November 20-22. “We don’t think it is sustainable or possible to offer significant and authentic discounts for longer periods, and we do not want this concept to lose its value,” said Sirbu.

The retailer posted last year total sales of RON 98 million on Black Friday, with customers buying over 200,000 products. “This year, we wish to exceed the 2014 performance. (…) To be conservative, we aim to deliver all the orders within a week,” said Sirbu.

Its competitor retailer, Media Galaxy, that runs the Media Galaxy and Altex stores, said it will organize “the biggest Black Friday ever” between October 30th and November 30th, estimating EUR 75 million sales for Altex and Media Galaxy stores.

“Customers will benefit from substantial discounts for 32 days, which is translated through discounts for various products and larger stocks than what they are used to. (…) The discounts are split per week rounds so that buyers can enjoy new discounts every week,” says Carmen Capitanescu, marketing manager at Media Galaxy.

“We are working with a delivery company and with our own fleet. We will be trying to deliver all orders within 24 hours,” said Mihnea Nicolescu, e-commerce manager at Media Galaxy.

F64, a retailer that focuses on the photo and video product niche, has seen improvement in the Black Friday sales yearly.  “From one year to the next, our Black Friday campaign went better and better. In 2014, we reached sales of RON 13 million, and for 2015 we forecast a 20 percent hike for the three discount days,” Marian Alecsiu, founder of F64 photo store told BR.

The appetite for Black Friday is not expected to shrink, neither for retailers who see it as a perfect opportunity to boost sales, nor for consumers who are hunting the best quality-price ratio.

“This is the fourth Black Friday edition and, with each new edition, more and more stores are announcing their participation. I don’t think we have reached a saturation point, which is why this year there are more stores who have prepared such campaigns,” says Alecsiu.

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