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The holiday season.
It's a time for rest. A time for family and friends. And a chance to enjoy some darn good food—and not feel guilty about it.
And for retailers, the holiday season can also be a great time for business. Despite inflation and rising interest rates persisting throughout 2023 and putting pressure on discretionary spending, people are still eager to take advantage of holiday discounts.
In fact, online sales from this past Black Friday went up 7.5% from 2022, reaching a record $9.8 billion according to Adobe Analytics.
But to take advantage of the spending spree that accompanies the holiday season, your business needs to be prepared. From forecasting demand to stocking up inventory and ensuring a great shopping experience for your customers, it's important for retailers to start planning early.
So how do you prepare your store for the holiday season? Check out our top seven tips below.
Preparing for this year starts with analyzing last year. Looking at previous year trends helps you refine your strategy for this year—and set a benchmark of what to expect for this year in terms of revenue and expenses. So when analyzing results from previous years, ask yourself questions such as:
David Ian Grey, founder of the retail advisory firm DIG360, suggests formalizing your holiday season plans as early as May, in a Retail Insider article.
Once you've analyzed previous year trends—and taken into consideration current market conditions—it's time to start planning your inventory.
The first piece of advice is an obvious, but overlooked one: stock up! And do it early. You don't want to miss out on revenue because you understocked popular items.
And with consumers expecting holiday discounts to start earlier and earlier (data from Salesforce showed that discount rates began to rise earlier in 2023 compared to 2022, starting in early November), you may want to prepare for an influx of sales earlier than previous years.
But how do you know how much to stock a given product? And, just as important, how much you can afford to stock?
Answering the first question is a bit more straightforward than the second. To accurately predict how much you expect to sell of a given product, you can look at historical sales figures. Have a product or services that tend to sell like hotcakes during the holiday season? Better stock up. This is where scenario planning can also help here—as you'll be able to model out different business outcomes so you can be prepared no matter what the result is.
To understand how much your business can afford to stock, you'll need to spend some time analyzing your cash flow. Overspending on stock can lead to issues such as a lack of cash flow, which may affect other areas of the business.
At the same time, you don't want to underspend on stocking inventory because you may end up running out of certain products and missing out on revenue. Cash flow planning tools can help ensure that however much you spend on stocking up your inventory, it won't be detrimental to the business as a whole.
Now that you've stocked up your inventory to prepare for the increased demand during the holiday season, it's time to start thinking about your pricing strategy. This is when it's important to ask and answer questions such as:
Remember, your bestselling products may not necessarily generate the most profit or give you the best return on investment. This is why it's important to run a profitability analysis. Performing a profitability analysis will not only help you predict how your holiday sales will affect your business, but also assist in determining which products to discount and by how much.
It's also a good idea (at any time of year, but especially prior to periods of heavy demand like the holiday season) to engage in revenue planning. Both profitability analysis and revenue planning will help you understand how your sales during the holiday season will affect your bottom line—and help you when answering the questions above.
When it comes to promoting products during the holiday season, many retailers focus on their most popular items. And while your most popular products may indeed bring in the bulk of your revenue, both throughout the year and during periods of increased spending such as Black Friday and Cyber Monday, there is also another category of your products you should give extra attention to when consumers are ready to spend.
Can you guess?
Excess inventory. With consumers apt to spend, the holiday season is a perfect time to move your excess inventory through promotions and heavy discounts.
This is why it's critical to audit your inventory. Take a look at what products have not moved over the past few months and make sure to offer incentives for consumers to purchase them during the holiday season.
Moving your excess inventory will help your business by providing it with additional cash flow. Managing your cash flow is critical, especially during uncertain economic times like today when concerns around inflation and recession are causing issues for businesses around the world.
And if you're a brick-and-mortar store, or an online store with limited warehouse space, you'll also get the added benefit of freeing up physical storage (allowing you to stock up even more on products you think are apt to sell).
Calculate ending inventory and gain insights based on product demands, minimum order quantities per pallet and number of pallet purchases for the year.
Analyzing previous year's trends, stocking up early, projecting your profit margins and performing an audit of your inventory are all going to help in ensuring that your business gets the most out of the holiday season.
But all of these activities can be time consuming, especially if you've never done them before and don't really know how to perform them.
Fortunately, we've created a free Excel template to assist you with all the above. Our inventory forecasting template is designed using best practices and can help you with:
Friction.
It's the one thing buyers hate.
Think about it from a consumer's standpoint. You're all set to purchase a product or service and then something gets in the way. That little bit of friction leads to frustration. And frustration usually translates to a lot of lost sales for businesses.
To help your store create a seamless, friction-free experience, here are a few best practices to incorporate:
Customer service should be the backbone of your business. Quite simply, it is too difficult to compete as a retailer in 2023 unless you're providing your customer with excellent service during every interaction.
Customer service is the easiest way to gain loyal, life-long consumers—and also the fastest way to ruin your brand's image and ensure that your customers feel under-appreciated. It all depends on the quality of experience you provide.
Businesses shouldn't need convincing that providing great customer service is good for their bottom line. But if your business does, consider just a few of these facts and learnings:
Despite inflation and recession concerns, the record-breaking sales of Black Friday 2023 has shown us that shoppers still love to spend during this time of year. And you don't want to miss out on this once-a-year opportunity to bolster your bottom line and clear out old inventory.
Whether you're analyzing previous years trends and auditing your inventory or planning revenue and forecasting cash flow, the most important thing to remember is to start your planning process early.
The early bird catches the worm after all (or in this case, the dollar bill). So incorporate the tips we've outlined in this article, download your free inventory forecasting Excel template and set up your business up for success during the holiday season.
