There are some pretty good reasons to avoid having anything to do with the cut-price spending splurge that takes place in many countries over the weekend following the US's Thanksgiving holiday. The in-store sales are notoriously crowded, sometimes unsafe, and people often get swept up in the hype and buy things they don't need.

Damaging discounts

But Black Friday and Cyber Monday are also highly questionable from the retailer's point of view. Research by KPMG shows that the top 10 retailers in the UK have had declining annual profit margins since around 2013, which is the year when the US sales event took off in the UK. The consultancy's analysis of the UK's top 10 retailers (by revenue) looked at their annual reports, as well as their annual sales revenue and profit margin data. It said: “The aggregate of these data points highlighted a notable stagnation of cumulative sales revenue and an overall trend of declining profit margins since 2013.”

KPMG warns that there is a downside to heavy discounting: if companies chase the top-line sales growth, they are in danger of underestimating the impact prolonged discounting is having on their bottom line. The firm's Paul Martin said: “We’ve already established that Black Friday doesn’t increase sales for retailers over the Christmas trading period, it simply brings retail spending forward. What’s more, it forces retailers to sell their goods at discounted prices earlier and for longer.”

Data key to sale fraud prevention

But damaging the company's long-term profitability isn't the only Black Friday danger for businesses. With most bargain purchases being paid for by credit/debit card or online, retailers also need to sharpen their fraud protection and prevention tools, as outlined in this Paypers article by Adyen's Attila Dogan and Kount's Brad Wiskirchen. Dogan suggests a granular approach to detecting customer fraud in online platforms by linking transactions made using different devices, through networks and using different online personas. He advises businesses to focus on using a similar approach with their different shopping channels so they know which shoppers buy in-store and which are buying online (and which use both channels). He also suggests that businesses should be ready to adjust their risk settings, as customer shopping habits may change during busy sales/holiday periods. Wiskirchen sums up the importance of real-time data analysis for retailers: “Granular data, relating to each aspect of a transaction, reveals a host of information and analytics within milliseconds, providing merchants with everything necessary to accept or decline the purchase.”

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CTMfile take: This suggests that Black Friday/Cyber Monday isn't just a bad deal for consumers but also for the retailers and businesses that take a cut to their profit margins in order to compete and attract market share. This leaves the question, who does benefit from the post-Thanksgiving shopping frenzy?