It's no secret that up to 40 percent of most merchants' annual sales occur in the critical fourth quarter holiday period, according to industry estimates — most in the six weeks prior to Christmas. With this, seasonal customer demand is an opportunity to increase sales, reduce back orders and cut down end-of-year overstocks with well-managed forecasting and inventory planning.
In the traditional catalog arena, profitability analysis is pretty straightforward: Merchandising contribution margin is composed of demand, returns, net sales, cost of goods sold and advertising expense. In e-commerce, merchants have a different kind of profit analysis and planning process, due to the dynamic nature of the web.
For direct merchandisers, the Internet brings opportunities for additional sales and another touchpoint to build relationships with customers. As Internet-based sales have risen to 50 percent of total sales or more for many companies, they’ve also introduced new challenges to demand forecasting and inventory management. Many traditional catalog merchants feel less in control of their inventory planning than in the past.
Instead of anticipating the doom and gloom of market conditions no one can predict, stay focused on the fundamentals to get through these tough times, and position yourself for greater profitability when up markets return. Simply put, it’s a matter of what you know, when you know it and what you do about it.
It’s a problem as fundamental as supply and demand: When supply fails to meet demand, you have to back-order. When supply exceeds demand, you have overstock. When it all works according to plan, pinch yourself; you may be dreaming. Or, you may be one of the smart multichannel marketers who bucks business as usual to adopt a more realistic approach to the planning and purchasing of product. An approach called “continuous inventory” yields several benefits: • more predictable demand streams; • more accurate inventory levels; • special vendor pricing; • optimized shipping; and • improved customer experiences. The best part about continuous inventory
Increasingly, catalogers are moving into the multichannel model, and the numbers tell you why. A 2006 Direct Marketing Association survey showed that buyers who use two channels to purchase from a marketer spend 32 percent more on goods and buy 12 percent more frequently than those who purchase from a single channel. Furthermore, customers who purchase from three channels are 73 percent more likely to buy similar products from that merchant, strengthening brand loyalty across all channels while increasing the volume and frequency of sales. The key to expanding into a multichannel marketplace is how you handle the channels. The tendency is to