Data and AI Technology Deliver the Ultimate Holiday Gift: Business Success
One of the first references to Christmas in July was in an 1892 French opera when in response to children singing Christmas carols during the summer a character says, “When you sing Christmas in July, you rush the season.” For retailers, the idea of planning Christmas in July is anything but rushing the season.
A successful holiday season in retail takes months of planning. From forecasting consumer trends, purchasing inventory, planning displays, and scheduling and hiring employees (to name just a few tasks), retailers spend the better half of every year preparing for five weeks of skyrocketing sales and, let’s be honest, a little bit of chaos. Black Friday alone sees a 663 percent increase in sales worldwide when compared to an ordinary day.
As e-commerce continues to take preference over brick-and-mortar shopping, and with the supply chain still recovering from the outcomes of the COVID-19 pandemic, retailers are still learning to navigate a new type of holiday season.
This year’s market disruptions make planning and preparing particularly difficult. How do retailers know what the economy will look like in three months when there's so much uncertainty in employment participation rates, raw material costs, oil and gas prices, and consumer spending?
The short answer is that they don’t. But they don’t need to; what they do need to know is what it could look like.
‘Tis the Planning Season
Right now, many business leaders have their eyes on the current market. Will there be a recession? How is inflation impacting consumer spending? How much will wage expenses increase by? However, if they take their eye off the longer term, they can lose out on a successful holiday season.
Unlike 2020 and 2021, there are now two years of important data available — data that examines consumer sentiment, the labor market, raw material costs and more from the unprecedented business disruption and market volatility we’ve experienced. Therefore, business leaders have the data they need to help forecast for a successful holiday season even with current market uncertainties.
Scenario planning is a great way for businesses to look at all the “what-if” questions and ground their answers in actual data. When business leaders discover which external economic indicators would most affect their business, scenario planning helps them then create different business “realities” based on how those indicators could play out.
This creates a type of guard rail using optimistic and pessimistic outcomes for leaders to forecast between. And because leaders now have a better understanding of which indicators would most affect their business, they know what to monitor and how changes within those indicators will affect their forecast — giving them the opportunity to adjust as needed.
Strategic Insights Bring Glad Tidings
Business leaders can’t be expected to understand the economy and the market on a granular level, but the more granular the real-time data they use is, the better and more accurate a business forecast is. When it comes to holiday planning during a volatile market, it’s especially important to be planning with and monitoring the right set of data.
This is where economists come into play. Economists can easily help business leaders identify which external factors will be most impactful. Then, they can help build econometric models to determine the magnitude of the impact and understand the headwinds and tailwinds on the horizon.
When business leaders are given the space to sit down with an expert economist, it allows them to go beyond the technology to truly understand how external economic factors can affect their business and why it’s important to continually incorporate it into their planning and forecasting processes — even when the market isn't as volatile as it is today.
Ring Up the New Year
The 2021 holiday season was riddled with supply chain nightmares as consumers and retailers alike learned just how bad the crisis was. Shelves were left half stocked with the few items retailers were able to get in on time, and once goods hit the shelf consumers were quick to purchase. This is a new year, with new data and a new understanding of current uncertainties.
As the world continues to open up, consumer trends and buying habits will evolve, which will continue to create new shortages of high-demand consumer goods until the supply chain is fixed. When business leaders have the right data, they can understand future product demand 12, 18 and even 24 months in advance. With enough lead time and visibility, retailers can gain a holistic view of the shopper experience in order to have the right inventory in place for the holiday season.
When that lead time isn’t available, economists can be especially helpful. For example, when there's a sudden shortage of a specific good — think baby formula and microchips — economists can help business leaders understand not only how the shortage could directly affect their business, but also if any other economic factors will be affected. Then business leaders have the data they need to update their forecasts and create new plans to ensure a successful holiday season.
The holiday season will remain no matter what the current economic uncertainties are. When business leaders are empowered with the right information to make strong business decisions, they can turn a potential down season into a profitable one.
Rich Wagner is the CEO and president of Prevedere, a company offering cloud-based business intelligence solutions that deliver unprecedented forecast accuracy by harnessing the predictive power of global economic data.
Related story: 2022 Holiday Season Forecast, Planning for 2023 Success