Are You Ready for Holiday 2011?
Holiday plans, merchandise assortments and inventory purchases are pretty well in place by now for most cross-channel retailers. But since many businesses gain such a high percentage of their sales and profits in the fourth quarter — as much as 60 percent — it's never too late to see what additional things can be done to increase sales and customer satisfaction. Here are some last-minute tips to consider:
What's the Outlook
for Holiday 2011?
Last year's holiday season saw a 3 percent to 5 percent increase in sales vs. the prior year for many of my clients' businesses. Already this year we have several large e-commerce pure-plays whose sales are trending 10 percent to 15 percent ahead of last year. Overall, retailers are being cautiously optimistic. Recent economic news, however — e.g., the decline in the stock market, slow economic and jobs growth, a stagnant housing market, the federal debt, rising gasoline and cotton prices — hasn't been good. A 3 percent to 5 percent increase in sales this year probably doesn't stay current with cost increases. Given this predicament, cross-channel retailers need to stress the convenience of shopping direct along with the subsequent savings on gas. Many of your company's products are on long lead times. From an inventory perspective, are your earlier product sales plans still realistic?
Ensure your marketing and inventory planning forecasts are in sync on a weekly basis. Get merchandise demand projections and receipt plans in line with marketing's weekly projections. That doesn't mean you need to redo all your forecasts, but a brief weekly meeting to be sure the two departments are within a respectable tolerance is necessary. If your company isn't doing this, start immediately. Marketing may be reluctant at first to release their projections weekly, but it's the best chance you have to keep your inventory in line with what's forecast.
Were there other factors that caused you to miss your inventory management goals last holiday season? Here are some examples:
- Did your e-commerce site feature products that merchandising or inventory hadn't been prepped on?
- What promotions caused unexpected peaks in orders? Was "free shipping" switched on and off, causing erratic results? A number of our clients in the past couple of years have had trouble moving inventory when they didn't offer free shipping and handling. Industry leaders like Amazon.com and L.L.Bean have conditioned customers to expect free shipping. Have you taken this into account?
- How did late delivery from vendors affect sales, back order costs and returns?
Double-check what your marketing department is planning for the holiday season. Successful strategic inventory management relies on tying creative and marketing plans to merchandising plans. Marketers and merchants need to develop companywide planning calendars and projections for all promotions in all channels — catalog, online, email, retail stores, mobile, display ads. Merchants and inventory control groups can then plan product purchasing, availability and receipts to support these events.
There are three aspects to this type of planning:
- the marketing department compiles and continually updates the marketing calendar;
- the marketing team forecasts the expected orders by week for each promotion; and
- the inventory control and merchandising teams plan the demand in units for the promotions.
Email campaigns often prove challenging for merchants. While these campaigns may appear on the marketing calendar, all too frequently no one decides which items will be promoted until four weeks to eight weeks before the actual date of the promotion. By then the merchandise has been ordered and may already have arrived in the distribution center. This lack of planning can cause friction between channels for best-selling products, leading to customer frustration and back orders.
Another trend I've seen over the years is consumers waiting longer and longer to do their holiday shopping. With the continual growth of e-commerce buying, consumers have developed a "point, click and deliver" mentality. Consumers waiting until the last minute and extended shipping times put pressure on merchandising teams to be good at projecting the compressed selling time frame. How much compression of the order curve does marketing expect?
Consider how your business is being promoted differently this year than last. Are there customer segments different from the past that could affect the order flow? Are the finalized catalog page/positions in line with your earlier plans? Is your website featuring products that you don't have depth in supply? Are there changes that can still be made and accepted by creative and web departments?
Coverage is defined as having sufficient quantities of products already in your distribution center when a promotion is in-home. Retailers need to develop coverage reports to show how much is in the distribution center vs. the initial demand projected. Since 50 percent or more of orders related to a catalog drop take place in the first four weeks after the mailing, if you don't have sufficient quantities of a product by the time the catalog hits consumers' mailboxes, you're going to create back orders early in the promotion. How's your coverage for all products?
Another area to look at is your inbound transportation. What are the ramifications for your planned service levels and what you need from your carriers? How well did your carrier(s) perform last year and what can be changed?
Expected Receipt Dates and Product Info
These are two things that will help your customer contact center keep the customer fully informed. This is often a source of friction between merchandising, inventory and the customer contact center when it's not maintained in a timely manner. Is this information up-to-date and ready to go?
Follow up with your vendors a couple weeks in advance of a shipping date. This will help you head off any late shipping surprises. If you're working with drop-ship vendors, make sure their stock levels are ready to support your projected sales.
If you sell in multiple channels, how nimble is your inventory strategy? If you mail catalogs in drops, products need to be reserved for customer response later in the cycle. That said, don't let inventory get "frozen" in a channel. Is it clearly identified in your company who will make decisions as to when specific product inventory should be released to other channels?
Christmas' Second Season
Post-Christmas sales and the use of gift cards start on Christmas Day. Do you have a plan in place to attract consumers to spend their Christmas gift cards? Having one will help extend the life of your most profitable season.
One thing brick-and-mortar retailers have been extremely good at is finishing the Christmas season on budget with their inventory plans. They're often more nimble than catalog brands, yet e-commerce is often the great equalizer as it gives all companies tremendous flexibility and agility. Do you have your liquidation strategies in place?
Get Ready for Holiday 2012
In the midst of your busy season it's hard to think of anything but getting through it all. However, start a journal to log your observations about what went right and what can be improved upon in your planning, forecasting and inventory performance. Then start the new year with a post-mortem of your results and develop a strategy for improvement. Here are some potential topics to consider:
- identify the pain points — both yours and your customers — during your peak season;
- formalize a post-mortem process of evaluating performance;
- improve vendor compliance;
- identify changes in planning, forecasting and streamlining purchasing processes;
- improve forecasting and planning for your e-commerce site;
- integrate marketing and inventory schedules;
- develop better communication between e-commerce and marketing teams;
- identify changes in your organization; and
- improve key inventory control benchmarks for customer service and profitability.
Here's hoping your business has a profitable holiday season. There are always ways to be proactive to turn in an even better performance. It's time well spent.
Curt Barry is president of F. Curtis Barry & Co., a multichannel consulting firm specializing in process improvement, order and warehouse management systems, inventory forecasting and management, fulfillment center design, and benchmarking. Reach Curt at email@example.com.