SALES

Maximizing Profits During the Hoilday Season

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As surely as the days grow shorter and the air goes from being crisp and refreshing to downright cold, small retailers know that their hottest, brightest time of year is fast approaching. Many small retailers will do as much as a third of their business in the final two months of the calendar year. It's an absolutely critical period for maximizing sales and profits, and squirreling away the necessary cash to carry the business until the spring selling season blooms anew.

November is a critical month for small retailers to be sure that they are well positioned to have the kind of December which will set them up to go into the New Year in the strongest position. The objective is to maximize both sales and gross profits while minimizing potential markdown exposure.

The strategy is to narrow and focus merchandise assortments, so that by the end of the selling season the weight of the available inventory to sell is on the proven best sellers. Even retailers whose "raison d'etre" the rest of the year is offering their customers a complete shopping experience must recognize that at this time of the year the business must become item driven. Focus your purchases for late November/early December delivery on your best selling items.

Think of it from a customer's perspective. As they shop throughout December, their objective evolves from seeking a full range of potential gift items to seeking that item they know is a "can't miss." When they are shopping those last few days they are looking for those one or two items that they just know will be right! Merchandise assortments that meet those customers expectations will assure that sales are maximized and markdowns are minimized.

Here's a quick checklist of things to keep in mind as you go through November, and gear up for that big final push:

  1. Begin to narrow your assortments to focus on your best items now. Your best sellers in October and November are most likely to be the key items that will drive your business in December. These are items that customers have demonstrated they want to buy from you and that you simply can't afford to run out of before the season ends. Shift your focus from being fully assorted to being narrow and deep by identifying those key items.
  2. Finalize your November and December sales plans. How has the season trended so far? What kind of sales increases do you anticipate in November and December? How much do you plan to sell of your best items, and how much do you anticipate those items contributing to total sales? This is a critical step. It's not enough to identify your best selling items; you must also quantify how many units of these items you expect to sell, and how that fits back into your overall sales plan.
  3. Plan your ending inventory levels. Determine how much inventory of your best selling items you want to end the season with. These are your best items, they are going to generate the sales you need to make your sales plan, and because these are your best items they have the least amount of markdown risk! Planning an ending inventory assures that your displays won't break too early and that you won't run out.
  4. Develop detailed purchasing plans for the remainder of the season. These plans should include the items, delivery dates, quantities by delivery date, and vendors. Clearly communicate your needs to your vendors, and seek out alternative sources if your primary vendors aren't positioned to meet your needs. Don't assume that if you can't get it from your primary vendor that you can't get it. If it's hot, somebody will have it, or an acceptable substitute. Find it; it's critical to the success of your season!
  5. Once you've placed your purchase orders, stay on top of your vendors. Timely delivery is more critical right now than at any other time of the year. It can be the difference between selling through all of your stock and maximizing gross profit, or having to take post-season markdowns and watching your gross profits get hammered. Expedite, expedite, expedite.
  6. Knowing what not to buy right now is just as important as knowing what to buy. Identify those items that aren't critical to maintaining in stock right up until the end of the season. These items may have been critical to maintaining full assortments, but dollars invested in additional inventories of those items at this time of year aren't as likely to generate the same sales volume as the best selling items, and they carry with them a much greater markdown risk.

The time to plan for a great finish to the season is now. Planning for a small retailer can seem burdensome at any time of the year, but right now, right at this moment, it is critically important to take the time to identify your best selling items, plan out your needs carefully, and execute your plan. It can be the difference between going into January with a warm, comfortable feeling or feeling left out in the cold.

Ted Hurlbut is the Principal of Hurlbut & Associates, a merchandising and inventory management consulting firm based in Medway, Massachusetts. Hurlbut & Associates helps clients increase sales, profitability and cash flow by improving the productivity of their inventory investment. Ted possesses over 20 years of experience in a variety of merchandising, inventory management, buying, and purchasing roles, in both large corporations and smaller organizations, in retail, wholesale and distribution settings. To learn more, visit Hurlbut & Associates, at www.hurlbutassociates.com.

Last updated: Nov 1, 2004




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