As more commerce moves online, retailers need to be aware of cyberattacks — only 46% are prepared, despite the $86 billion cost in attacks annually.
Black Friday typically involves brick and mortar retailers offering huge discounts to lure brave customers into their stores to wrestle cut-price microwaves and TV sets from their fellow shoppers’ hands. According to the National Retail Federation, this year consumers have already started ticking off items on their holiday shopping lists. Thanksgiving is no longer the start of the shopping season. In fact, holiday shopping is beginning earlier than ever, with early deals and promotions driving online traffic increases over last year. The rise of our digital economy, plus scenes of mayhem and sometimes violence at stores, has driven many people online. Retail e-commerce was estimated at $1.4 trillion in 2014, or 5.9% of the total sales — a figure expected to rise to 8.8% by 2018. Sales on Cyber Monday (the first workday following Thanksgiving) are expected to surpass Dec. 26 sales this year, which will put a significant dent in traditional retailers’ sales. “In the U.S. especially, Cyber Monday has taken sales from Black Friday and continues to grow,” says Jennifer Neill, senior manager in Grant Thornton LLP’s Retail practice. “It has hastened the need for strategic omnichannel focus.”
For online retailers, the rewards are huge: Amazon sold 64 items per second on Black Friday in 2014. This year, the strategic focus will be on “driving traffic with promotional items on Black Friday while still offering the promise of inventory breadth on Cyber Monday,” notes Neill. In other words, Black Friday will feed Cyber Monday.
The term Black Friday was coined in the 1950s: Philadelphia police officers used it to describe the chaotic scenes in the city the day after Thanksgiving. But given its rising importance to the consumer products industry — and to retailers in particular — Golden Friday might be a more appropriate description.
Cyber Monday has traditionally been a U.S. concept, but the rest of the world is starting to pay attention. Last year, around 5.1 million Canadians took advantage of discount deals, while their counterparts in the UK spent an estimated $1.3 billion in 24 hours.
Some UK retailers, such as ASDA and Argos, are taking a different approach to seasonal discounts. Both have decided to move away from a single day of sales and instead spread their reductions over the winter season, with Argos offering sales every Friday leading up to Christmas. While it remains unclear which strategy will bring in the most revenue, retailers around the world are using all the tricks in the book to increase sales during the holiday season.
With fierce competition and online customers less loyal to any particular store than those who visit in person, retailers need to make sure their digital presence is up to the challenge. A slick interface and ease of payment are important, but so is security. Cybercrime is on the rise: Grant Thornton research suggests its direct impact costs companies more than $300 billion a year globally. Sony and TalkTalk are just two of several companies that have recently lost customer data to hackers.
Cyberattacks cost money
One in eight retail businesses has faced a cyberattack over the past 12 months, according to data from Grant Thornton’s International Business Report. These attacks resulted in an estimated revenue loss of 0.39%, which may sound small but translates into $86.8 billion.1 Despite this, fewer than half (46%) of retail businesses have a cyberstrategy in place, which is below the global average (52%) for all businesses.
These estimates of direct financial impact do not include the long-term reputational damage and loss of trust that companies suffer when their systems are breached. If online customers are worried that their credit card details will not be securely stored by a particular company, they will almost certainly choose to shop somewhere else. Very few retailers are lucky enough to offer a product so unique that customers cannot find a substitute.
There is plenty of advice out there for businesses that realize they cannot afford a major hack — financially or in terms of brand capital. Those that don’t might find the golden lining to Black Friday suddenly darken.