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How to Maximize Holiday Sales and Profits

  
  
  

Introduction

Many independent retailers will do as much as a third of their business in the final two months of the calendar year. It’s an absolutely critical period for maximizing sales and profits, and squirreling away the necessary cash to carry the business until the spring selling season blooms anew.

September, October and November are critical months for small retailers so that they are well positioned to have the kind of December which will set them up to go into the New Year in the strongest position. The objective is to maximize both sales and gross profits while minimizing potential markdown exposure.

 

Getting Started

The strategy is to narrow and focus merchandise assortments, so that by the end of the selling season the weight of the remaining inventory is on the proven best sellers. Even retailers whose focus the rest of the year is on offering their customers a complete shopping experience must recognize that at this time of the year the business must become item driven.

Think of it from a customer’s perspective. As customers shop throughout the holiday selling season, their objective evolves from seeking a full range of potential gift items to seeking that item they know is a “can’t miss”. When they are shopping those last few days they are looking for those one or two items that they just know will be right! Merchandise assortments that meet those customers expectations will assure that sales and profits are maximized and markdowns are minimized.

 

Step 1: Narrow your assortments to focus on your best items

Your best sellers in September, October and November are most likely to be the key items that will drive your business in December. These are items that customers have demonstrated they want to buy from you and that you simply can’t afford to run out of before the season ends. Shift your focus from being fully assorted to being narrow and deep by identifying those key items.

 

Step 2: Finalize your November and December sales plans

How has the season trended so far? What kind of sales increases do you anticipate in November and December? How much do you plan to sell of your best items, and how much do you anticipate those items contributing to total sales? This is a critical step. It’s not enough to identify your best selling items; you must also quantify how many units of these items you expect to sell, and how that fits back into your overall  sales plan.

 

Step 3: Plan your ending inventory levels

Determine how much inventory of your best selling items you want to end the season with. These are your best items, they are going to generate the sales you need to make your sales plan, and because these are your best items they have the least amount of markdown risk. Planning an ending inventory assures that your key displays won’t break too early and that you won’t run out.

Inventory planning is critical to profitability at this time of year. Every merchant is tempted to think that they’ll be able to sell whatever they bring in, but it rarely happens that way. If you plan inventories too heavily, you’ll likely wind up with heavy markdowns which decimate profits. If you plan inventories more prudently, you’ll likely still be able to generate sales increases by driving your sell through, while protecting your margins and profits.

 

Step 4: Develop detailed purchasing plans for the remainder of the season

These plans should be a direct function of your sales and inventory plans and should detail items, delivery dates, quantities by delivery date, and vendors. Focus your purchases on your best selling items. Clearly communicate your needs to your vendors, and seek out alternative sources if your primary vendors aren’t positioned to meet your needs. Don’t assume that if you can’t get it from your primary vendor that you can’t get it. If it’s hot, somebody will have it, or an acceptable substitute. Find it; it’s critical to the success of your season!

 

Step 5: Stay on top of your vendors

Timely delivery is more critical right now than at any other time of the year. It can be the difference between selling through your inventory and maximizing gross profit, or having to take post-season markdowns and watching your profits get hammered. Expedite your deliveries with your vendors. Expedite, expedite, expedite.

 

Step 6: Focus on your best items

Knowing what not to buy right now is just as important as knowing what to buy. Identify those items that aren’t critical to maintaining in stock right up until the end of the season. These items may have been critical to maintaining full assortments, but dollars invested in additional inventories of those items at this time of year aren’t as likely to generate the same sales volume as the best selling items, and they carry with them a much greater markdown risk.

 

Step 7: Identify slow sellers early, and mark them down

Just as September, October and November have identified your best sellers, those months will also identify the slow sellers, the dogs. These are items that simply have not moved at full retail prices. The key to protecting your profits is to clear them out now, when a 30% discount, for instance, will get the job done, rather than later when there’s a whole lot more on clearance, and it might take 50% or 75% off to move them out. Further, by clearing them out early, you free up your displays to focus your customer’s attention on your key items.

 

Step 8: Plan for gift card redemptions after the holidays

Gift cards have emerged as an important component of holiday gift giving. You take the cash in before the holidays, but redeem them afterwards. The critical objective is to redeem them for full margin sales, rather than clearance sales. If you’ve planned your inventory prudently, there’s not likely to be as much clearance inventory, and there’s room to bring in early transitional inventory in mid December, which doesn’t have to be marked down and can be sold at full margins.

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