Black Friday no "be all and end all" for sales as marketing costs bite

November is often dubbed the new December of retail sales with Black Friday as the jewel in the online crown, but the market has become more saturated in the past year with an increased cost of consumer acquisition.

Speaking with entrepreneurs who have founded successful consumer-facing brands, Business News Australia found that the Black Friday weekend - estimated by the Australian Retail Association (ARA) to be bringing in $6.36 billion this year - has been a boon for some, but with some important caveats as companies fight to cut through the noise.

With just four staff and an engaged TikTok following of almost 300,000, Allen Fu and Xixi Lu's skin care product brand CheekyGlo is on track to notching 40-50 per cent sales growth in 2023, but the year-on-year difference is much greater when you look at the Black Friday sales period.

Fu says sales surged by 187 per cent year-on-year in the recent event, as a "testament to us growing the product range, creating different types of combos for our customers, and aligning all of our emails, ads, content, social and social media".

"When building our business, we thought about how we can increase the returnability of the customers, and so we plan our products and do our R&D with that in mind," says Fu, whose company's best sellers include an exfoliating glove, dermablades, scalp scrubbers and body oil.

"We’ve quadrupled our following on TikTok this year - we’ve had videos go absolutely viral, leading to $200,000 in sales in two weeks."

He says the cost of consumer acquisition through paid ads with Meta and Google increases every single year.

"It just gets more and more competitive over time, especially during Black Friday. Everyone's smashing the ads, which is why for us in our business our strategy is definitely to dominate the organic game."

Another Sydney-based brand in the beauty and health space - Georgiemane, which sells hair repair and growth products - has seen such exponential growth that its Black Friday weekly sales were more than its entire revenue in 2020.

"And then November sales were more than January to October in 2021," says Georgiemane's founder George Papura, noting a product was sold every 6 seconds during the Black Friday event, equating to 14,400 products in 24 hours.

Papura emphasises a partnership with Priceline has led to "multiple millions" worth of sales in its first 12 months, and after the exclusivity period with the chain ends the company is lined up for another major retail opening in February 2024, but Georgiemane's direct-to-consumer retail business remains its "bread and butter".

"What's driving this increase is the growth of the brand - it's the momentum," he says, noting the number of customers on Georgiemane's books has gone up by 60 per cent year-on-year, allowing the company to leverage that higher customer base.

"We just have more customers to do the promo in front of now, so we’re going to have more revenue."

That doesn't mean the success of a Black Friday promotional campaign is a given however, with Papura highlighting the importance of fresh product releases, creative ideas and attractive deals.

"If you just sit back and relax, and don’t introduce new products, deals, bundles, gift with purchases (GWPs), or minimum spends to get a free hairbrush for example, you're going to find that your average order value (AOV) will stay complacent," he says.

"For us, we're always introducing new products – we’ve introduced build your own bundle, and that average order value has been increasing ever since we’ve been doing it, and it’s similar with other brands.

"I speak to a lot of brands – decent brands from $50-100 million, and it’s the same trend. You’re just adding products, and it’s going to help your AOV."

Jeremy Carp, who co-founded Fairley with his wife Susannah Carp a decade ago, says the Melbourne-based jewellery brand has had a successful Black Friday period despite tougher economic conditions, and headwinds including more brands getting involved this year and also starting earlier, as well as digital ad costs that "skyrocketed".

"A lot more brands are now doing Black Friday sales, and what that means is that the digital marketing costs have gone up, so all the Meta ads, all the Google ads, all the costs associated have gone up," he says.

"Whereas in the past if you had a budget of X amount of dollars, you were getting a certain amount of traction onto your particular website. That’s fallen, because the cost of the ads have gone up, so you’re not getting as much bang for your buck.

"It’s the first-time customers that are harder to get over the line when your ads are much more expensive. For us it was good; we had less traction on the website, but we found customers were spending as much in previous years if not a little bit more."

He notes the company is lucky to have a very loyal customer base, and believes that Fairley is somewhat resilient to economic cycles as jewellery is not seasonal, great for gifting and well priced - an "inexpensive pleasure".

"I think a lot of people are now using Black Friday as the opportunity to buy Christmas presents, so November was always going to be a big month for retailers anyway," he says.

"It's a great period for most online brands, including ours, but it's not the be all and end all or the answer for your all-year sales. I wouldn’t want to be reliant on it.”

Sustainable fashion company, Melbourne-based Paire is one example of companies that are starting their promotions earlier, and the move has paid off for the group.

"If we only look at the Black Friday-Cyber Monday weekend over four days, we've seen a 30 per cent increase compared to last year," says Nathan Yun, who co-founded Paire with Rex Zhang.

"However, we started our Black Friday sale early this year and this November we're seeing an 85 per cent increase in revenue year-on-year.

"I think the trend is that most online businesses are starting Black Friday earlier this year to capture the demand while avoiding the intense competition over the actual weekend. So did we. And the strategy played out well as we expected."

In contrast, Sam Wood, founder of Sydney-based Azura Fashion Group, saw sales go backwards year-on-year in November but he isn't complaining - profit hit a new record.

"From what we’ve found across the board, everything is almost 75 per cent down from last year in terms of sales, however we have just reconfigured our business around our pricing matrix and the data," he says.

"That's the reason we took up the $2 million investment on in November last year, and we launched that in late October and it’s had a positive effect. Our gross profit for this year is 40 per cent, whereas last year it was 10 per cent.

"Whilst the sales volume is down, we have made more money in profit by keeping prices the same rather than discounting during Black Friday."

Whilst Azura branched out into a direct-to-consumer business, trends around higher ad pricing with Meta and Google have reinforced his belief in developing the business through partnerships with established retail marketplaces.

"We’ve found that our whole direct-to-consumer model we have almost abandoned because the cost per acquisition is so high that we’re now leveraging marketplaces like The Iconic and Catch to drive that, because the cost of acquisition is almost 40 per cent, compared to paying 15 to 20 per cent on a marketplace," he says.

"It'd be nice for people to come to us and buy the products from us, but the business model was originally set up to sell through retailers. With the increase [in costs] from Meta and Google, it’s just reconfirmed that."

Following the latest successful month from a profitability standpoint, Wood adds the company has just closed a $1 million investment to propel growth in new markets.

"We’ve launched through some bigger retailers in the UK, one of them being Next, and we’ve brought on $1 million to help fund that for both working capital and growth," he adds.

While some are benefiting from Black Friday, others are avoiding it altogether for different reasons.

One such founder is Melanie Nolan, whose company The Natal Naturopath launched its first products in October last year: EverNatal, a prenatal and postnatal supplement which has the highest amount of choline of any such supplement in Australia; and IronBiotic, the first iron supplement in Australia to combine iron and a probiotic to prevent constipation.

"I didn't do Black Friday. The reason why is because vitamins would come under that essential category where if you need them, you're going to get them," she says.

"I did not want to add to the noise, because I think that Black Friday period is about gift buying, and I just didn’t personally feel like people are going to be looking for their healthcare products on sale."

This may be true, although that hasn't stopped pharmacies and other major supplement companies from running Black Friday campaigns. Nolan says she also avoided it as on a psychological level, it's difficult to present your product as a premium line if you suddenly discount its price aggressively in short spikes.

"We are more of a premium vitamin, and I think huge sales, to me, slightly devalue the premium selling point," she says.

"I think if I was doing these huge, like 40 per cent off sales, it does put a seed in the consumer’s mind of 'how premium is it? I’ll just wait until the next big sale'.

"I'm not going get sucked in. I don’t think everyone has to do it, and it comes down to the individual business. Is it just for the sake of it? Or would this actually suit my business, my profitability and my customers? And I just didn’t think so in the vitamin space; if I was in clothing or gifts, I think it would be a no-brainer."

Instead, Nolan has opted for a 12 Days of Christmas campaign.

"I thought I'd wait until that [Black Friday] finished, and then I’ll do something that's not so cutting into the profits as big as Black Friday would be, but it’s still a cool way to get brand awareness more sales, more new customers as well.

"My returning customers, they stay with the vitamin once they feel the benefit – they don’t need a sale to drive them to purchase again."

Maria Braun, co-founder of nail products company Mirabele Beauty, has also switched tactics to a more pre-Christmas focused sales campaign even though her company experience 329 per cent year-on-year growth for the Black Friday period.

"The Black Friday ads only ran for a week however we have since switched tactics noticing that the Black Friday ads market was very saturated," she says.

"Over the next two weeks I will be rolling out a 'Black Friday/Cyber Monday is cancelled' campaign and trying a new approach of leaving sale prices until Christmas.

"We are shifting more towards adding extra value through digital products like our eight-week nail growth challenge that is producing very promising results from its first round."