Supply chain issues to hit Boxing Day sales

Annual research from PwC anticipates “lacklustre” Boxing Day sales, as retailers look to preserve margins already hit by supply chain uncertainty and labour shortages. The prediction comes on the heels of fewer retail outlets also participating in 2021’s Black Friday deals.

Boxing Day sales have been a consumerist institution for decades across the UK, Canada, Australia, Trinidad and Tobago, and New Zealand – where the 26th of December has primarily become known as a shopping holiday. Boxing Day sales often see shops allow dramatic price reductions, as they attempt to offload unsold stock aimed at being sold in the lead up to Christmas Day.

Conversely, however, this has also meant Boxing Day draws bigger crowds for many merchants, resulting in it being the day of the year with the greatest revenue. For example in the UK, it was estimated in 2009 that up to 12 million shoppers appeared at the sales.

With that being said, times have obviously changed drastically. The importance of Boxing Day sales have been declining for some years, particularly as Black Friday has grown. But, as with many other trends, the diminished status of Boxing Day sales has been catalysed by the pandemic. Last Christmas, the ongoing pandemic led to restrictions in non-essential business hours, while uncertainty meant many retailers held off from bigger price cuts to preserve their bottom lines.

Even if the stores do remain open this year – amid a surge in Omicron cases – though, research from PwC suggests it is unlikely that Boxing Day sales will rebound in 2021. In fact, there are fewer sales slated for this year than for last year, according to the Big Four firm. When looking at the figures from December 2020 against 2021, roughly 10% fewer retailers have been promoting deals this month – suggesting that while the importance of Boxing Day sales had already declined, “they will be particularly lacklustre in 2021.”

But is it really the case that Black Friday has “killed off Boxing Day sales for ever”,  as the Daily Mail suggested when reacting to PwC’s report? According to PwC’s Head of Consumer Markers, Lisa Hooker, the two traditions have actually worked alongside each other previously. Other years saw retailers take stock after Black Friday weekend and rein in promotional activity – at a time when over 40% of people do most of their Christmas shopping – before building promotions up again as they go into Boxing Day. So what is different now?

“Retailers have less stock available this year so do not need to use promotional activity to clear seasonal stock before Christmas,” explained Hooker. “Ongoing Covid uncertainty, challenges around Brexit and global border constraints suggest that current stock shortages will last long into next year. Added to workforce shortages and a supply chain still recovering from the pandemic, we’re unlikely to see a return to frequent and heavy discounts any time soon. Promotional activity is likely to follow the trends we’re used to seeing across the year but with fewer participants and fewer bargains.”

At present, the categories that usually drive the sales post-Christmas are those which are struggling hardest with stock shortages. Furniture, electricals and home ware are traditionally promoted across the Boxing Day sales – but amid supply chain disruption, and staff shortages, they are struggling to fulfil current orders, or meet the capacity of increased volumes that Boxing Day discounting brings. Black Friday is not to blame for this particular decline of Boxing Day then, especially as it is also a victim of it. PwC found that the overall number of promotions on Black Friday weekend were lower, as well as the depth of promotions. Only 35% of retailers ran promotions of 50% or more compared to 43% in 2020.

Looking ahead, the challenge for retailers in 2022 will be how they balance stock, manage margin and keep consumer interest. To do that, they will need to be able to find ways to revert to their old discounting tactics. As a result, Hooker suggested, the winners “will be those retailers with strong supplier relationships and therefore more certain levels of stock and supply.”