Shoot While the Ducks Are in the Air
The holiday shopping season is important to retailers, and its importance is growing. As the chart below from the National Retail Federation shows, there's a dramatic growth trend of holiday sales in total. Direct retailers (i.e., catalog and e-commerce), unconstrained by store walls, generally see even a greater percentage of their annual sales during the holiday period.
A September 2014 report by Deloitte forecasts overall holiday sales this year will increase between 4 percent and 4.5 percent, while nonstore sales will increase at a much higher rate, between 13.5 percent and 14 percent. Holiday sales can account for 30 percent or more of annual sales for a lot of retailers, with most transactions occurring in a four-week to six-week period. For many retailers, the importance of holiday sales and profits cannot be overstated.
Because of the magnitude of sales occurring in such a compressed time period, the quality of inventory planning is often the difference maker between average and outstanding holiday sales and profits.
Bill End, avid outdoorsman and former CEO at L.L.Bean and Lands’ End, would frequently say, "We've got to shoot while the ducks are in the air." He was explaining the importance of aggressively marketing while consumers were naturally shopping, but the same adage applies to inventory planning and decision making.
While there are many factors involved with successful holiday inventory planning, most of which would have been executed over the preceding 12 months or more, I want to focus on the most important inventory actions you can control in the next few weeks. As we've observed with our Direct Tech customers, now is the time to do the following:
1. Aggressively monitor inventory positions and forecasted end-of-year inventory levels by product. Know where you have inventory overages and shortages, and actively communicate that information to the rest of the company. You likely can't reorder inventory at this point, but you have a huge opportunity to aggressively market the inventory you own.
2. Be part of the e-commerce marketing team. Provide them with daily visibility of your inventory ownership. Focus on the the best-selling products where you have adequate inventory to support additional marketing via emails, feature positions on your website, web ads, etc. You're competing with the world for your customer's holiday spending. Make sure you put your best possible products in front of them every day — every minute if you can manage it — since online marketing isn't time constrained.
3. Discount your overstocks NOW! The next six weeks present your best opportunity to sell through excess inventory at the highest margin. Consumers are shopping, and the "ducks are in the air." Your best chance to sell problem inventory is now; don't miss it.
"Ducks are in the air!" Your success from now until the end of the year may well depend on how quickly and accurately you "aim and shoot," by proactively aligning your inventory ownership with your marketing events.
Joe is Vice President of Product Solutions at Software Paradigms International (SPI), an award-winning provider of technology solutions, including merchandise planning applications, mobile applications, eCommerce development and hosting and integration services, to retailers for more than 20 years.
Joe is a 34-year veteran of the retail industry with hands-on experience in marketing, merchandising, inventory management and business development at multichannel retail companies including Lands’ End, LifeSketch.com, Nordstrom.com and Duluth Trading Company. At SPI, Joe uses his experience to help customers and prospects understand how to improve sales and profits through applying industry best practices in merchandise planning and inventory management systems and processes.