6 Tips to Deliver a Profitable Holiday Selling Season
‘Tis the season… to make hay!
For most independent retailers, December is an absolutely critical month. Traffic flow and sales are at their peak, and the cash flow generated during this month is essential to having the working capital to get through the slow winter months. And so, it’s sell, sell, sell. But December is not just about driving sales volume, it’s also about driving profitability and cash flow.
For most independent retailers, this is a matter of balancing risk and reward. Attempting to maximize sales, trying to capture that very last sale on Christmas Eve, often requires you to take in that last delivery of merchandise. But that last delivery also increases the risk of having more, rather that less, inventory at the end of it all, with all of the markdown exposure that comes with it. And clearing that left over inventory can require some heavy discounting, slashing profitability and cash flow.
Here are 6 tips to help you thread that needle, and maximize your profitability and cash flow:
- Identify your target end-of-December inventory levels, preferably by department and category. These targets should be calculated so that you can make – and beat – your December sales plans without ending the month with too much inventory. Establishing this benchmark is critical, especially if your drop-off in sales from December to January is particularly steep.
- Are you on track to come in heavy or light? Based on your current inventory, including any anticipated additional merchandise deliveries, calculate how much inventory you anticipate ending December with. Are you going to be heavy or light? By how much? What actions need to be taken to correct this? Are their last minute purchase orders that need to be cancelled? Or are you going to come in light? Do you need to place any additional purchase orders to fill in the gaps, or would it be better to hold your cash and force the sales of what you already own.
- Buy cash, not inventory. If you need to bring in additional inventory, buy only those items, and only in those quantities, that you know you will sell before the holiday. At this point, you do not want to buy anything that might be left hanging around, still on hand at the end of December. Narrow your focus to only the very best items in only the very best categories.
- Expedite, expedite, expedite. We’re going into the home stretch of the year, and every day counts. This is no time to tolerate late deliveries or back orders. Stay in constant touch with your vendors, expediting any last minute purchase orders you might have placed. If your vendors can’t ship you what you want on time, then you don’t want it!
- Give the laggards a head start. Identify now any slow selling merchandise that needs an early markdown. If you wait until clearance time to mark the laggards down, they’ll be competing with all of the other markdowns, and will still be laggards. The discount you offer now, when traffic is high, will be less than the discount you’ll need to offer later on this merchandise.
- Allow your presentations to break early. Don’t be afraid to let your assortments and displays break before Christmas. The last week before the holiday is Frenzy Week. Last minute shoppers are driven to buy what they can, not necessarily what they want. Use this to your advantage, to draw down your inventory levels. Your presentations may look pretty ragged on the morning after, but your bank account will be flush, and you’ll have the wherewithal to quickly restock and reset your store for the winter with fresh merchandise and the right stock levels for going forward.
Great finishes to the holiday selling season don’t just happen, they need to be made to happen. And the yardstick for measuring your success is the profitability of the season, and the amount of cash you harvest from it. Now is the time to plan for and execute that great finish.