Opinions expressed by australiabusinessblog.com contributors are their own.
Over the past few years, Christmas in July has taken on a new meaning for retailers – what was once an opportunity to offer a summer sale has now turned into a critical time to prepare for the upcoming holiday shopping season.
But the past few seasons for holiday shopping have proved anything but ordinary. For the past two years, the pandemic has caused supply chain delays, resulting in backlogs and undelivered gifts, a challenge for retailers and a lesson learned for consumers. As a result, consumers started their Christmas shopping earlier this year to avoid bottlenecks in the supply chain and combat high inflation — with 25% of consumers start as early as August or September. In addition, the pandemic accelerated the trend of online shopping, with new data suggesting so 24.5% of this year’s total holiday sales comes from online orders.
With all this in mind, some (myself included) might argue that July might be too late for retailers to start their holiday season planning, especially given that the holiday season can be responsible for up to 30% of retailers’ annual sales.
Related: July is just early enough to plan for holiday sales
So, how can retailers adjust their strategies to focus on holiday season planning throughout the year (rather than just the second half) to cover all their bases, increase sales, and prepare for the unexpected? ?
Prioritize cash flow planning
Consumers are currently facing the highest inflation rates in nearly 40 years and a halt to government stimulus payments, which in turn affects how they approach their Christmas shopping (e.g. how much they plan to spend, through which channels, etc.).
As a result, small business retailers are entering a challenging and unpredictable time. To reduce this uncertainty, they should look internally and assess their cash flow well in advance of the holiday season to best prepare for what is to come.
The most effective way retailers can go about this is to create several cash flow scenarios early in the year that map out the best-case scenario, worst-case scenario, and most likely scenario for the business for how the holiday season will play out. Considering these three scenarios can help retailers create an action plan for how they will address any challenges and how they will activate each scenario. Good planning gives entrepreneurs the confidence they need to move forward by removing ambiguity and unexpected situations (e.g. not enough cash on hand, supply chain delays) at the most critical time of the year.
Whether you’re a chain store or a local mom-and-pop store, it’s important to have a full understanding of your cash flow position throughout the year to make key business decisions and plan for different scenarios. For small businesses that rely on technology such as Xero, a cloud-based accounting software platform, enables small business owners to track their cash flow throughout the customer journey. Tracking this data in real time allows retailers to see their full cash position at any time of the year, which can aid in their holiday planning strategies.
An important question all retailers should ask themselves early in the planning process is: How will my product/service fare if the economy goes into recession and budgets tighten? Where is my product/service in the hierarchy of needs? If you are a retailer selling non-essential items (e.g. jewelry, home decor), your planning strategy may look different than if you sell essential items such as groceries. Understanding your product and consumer buying patterns will help you assess strategies such as how to price your product, how to manage the supply chain, how to effectively market the product/service and much more.
As retailers begin holiday planning earlier in the year, what factors should retailers consider during the planning process?
According to the National Retail Federation, $218 billion worth of online purchases were returned in 2021 – more than double the year before. The increase in returns is likely due to retailers offering more lenient returns policies during the pandemic as they looked for creative solutions to address store closures/restrictions.
Two years later, retailers (particularly small businesses) are now facing higher labor and shipping costs due to continued inflation, forcing them to look inward for alternative ways to reduce costs (which for many retailers is about to change generous returns policy).
My advice: Retailers should continue to offer flexible returns policies around the holiday season, including keeping the returns period of at least 30 days (in person and online) and only allowing online purchases to be returned in stores. Keeping the window shorter (but still factoring in returns) can alleviate the impact returns have on the beginning of the year’s cash flow.
Restrictions in the global supply chain have had a lasting impact on the retail industry. If there’s one thing we’ve learned from these challenges, it’s the importance of planning.
Having an adequate supply chain strategy in place reduces the risk of overspending on unnecessary items and the risk of running out of stock for highly sought after items. By ordering supplies early in the year, you can ensure you have enough stock for the best-selling items when the holiday season arrives. Not having a best-selling product available often means that the product is replaced by the best alternative.
My advice: Consumer data is your best friend. Properly tracking and using this data can help you better understand your consumers and their purchasing patterns, and which products are likely to be in high demand during the holiday season (for inventory planning).
Related: Do you think it’s too early to strategize ecommerce sales for the holiday season? Think again.
A tight labor market and rising labor costs continue to pose challenges during the holiday rental season. Failure to meet recruitment goals can ultimately lead to lost sales due to not having enough staff to ensure shipments, inventory, and personal sales are accounted for.
My advice: Retailers should consider revamping their hiring strategies, increasing wages, offering flexible schedules and expanding benefits to attract new or seasonal employees. For retailers rethinking their reliance on seasonal workers, consider a more attractive offer for permanent staff to work extra hours.
The current economic climate has impacted the way consumers approach brand loyalty, with many looking for the best deal, even if it’s not through their preferred store. As economic uncertainty continues, consumers are experiencing behavioral changes.
My advice: Retailers should focus on loyalty strategies to reward customers for shopping in their stores (e.g., offer exclusive deals to loyalty members or offer a points system for every dollar spent to reward customers later with a credit or gift). Retailers can also attract new customers by offering bonus rewards for signing up for the loyalty program that encourages them to return to the store. Creating a connected omnichannel experience where the brick-and-mortar and online stores sync is also a big draw for consumers.
Adequate planning and forecasting throughout the year is the surefire way to ensure that your business is best positioned for the best time of the year. By preparing for the upcoming holiday season throughout the year, rather than just in the second half of the year, retailers can immediately apply the lessons they learned from the previous year, effectively planning for different scenarios based on different external factors (e.g. inflation) and gain an edge over competitors.