Advice for small businesses on how to prepare for the holiday season by generating customer loyalty, implementing timely marketing, and determining inventory size.
Many small and mid-sized retailers will do as much as 20-40 percent of their annual sales in the final two months of the calendar year, according to the National Retail Federation (NRF), the nation's largest retail trade association. Other service businesses, such as restaurateurs, caterers, travel agents, etc., are also dependent on doing brisk business each holiday season. It's fair to say that, for many small businesses, the holiday season is a crucial make-or-break period during which they earn the profits that they must live off of for the slow first months of the next year.
"It's an absolutely critical period for maximizing sales and profits, and for squirreling away the necessary cash to carry the business until the spring selling season blooms anew," says Ted Hurlbut, a retail consultant and principal of Hurlbut & Associates. "September, October, and November are critical months for small retailers. Good planning then leads to the kind of December that will set them up to go into the New Year in a strong position."
That's why an economic recession, stormy weather, or fewer shopping days during the holidays can have a lasting impact on a small business. Retail sales in the U.S. dropped 2.8 percent during the 2008 holiday season, according to NRF -- the first recorded decline in sales since the group started collecting holiday sales statistics in 1995. Among small businesses, 29 percent reported lower sales than those reporting higher sales during the 2008 holiday period, according to the National Federation of Independent Business (NFIB), which conducts regular surveys on small business outlook.
The following pages will detail how to distinguish your small business during the holiday season, how to develop a sales plan for the holidays, and how to use marketing strategies -- including online -- to boost holiday sales.
Laying the Groundwork for Holiday Sales
Get started by generating customer loyalty. One of the biggest mistakes small businesses make is waiting too long to develop a holiday sales strategy. The planning doesn't start in November. That's too late. An NRF survey of holiday shoppers in 2008 found that 40 percent had started their holiday shopping before Halloween. So your planning for holiday sales should start much sooner than that if you want to be a contender. Start thinking about the next holiday season in January and make it a year-long effort to win the loyalty of customers so that they frequent your business year-round. Holiday sales, during which customers tend to spend more, will be a natural extension of this plan.
"That train is pulling out of the station earlier and earlier each year," says John Jantsch, marketing coach and author of the book and blog Duct Tape Marketing (2008 Thomas Nelson). "Some businesses have lived for so long with this cyclical view: I don't have to do things right all year long because the holidays will bail us out." But as the recession in 2008 and the ensuing drop in holiday sales showed everyone, Jantsch says, that may no longer be the case for many businesses.
The preparation for a successful holiday season is a year-long affair. "If price is driving any of the equation in any shape or form, they're going to lose," Jantsch says. "There are some very large chains giving away the store. The Abercrombie and Fitch and Gaps of the world are fighting for their survival. You have to find a way to be different that in many ways is not related to product you're offering."
One of the advantages small businesses have -- in particular, retailers -- is that they have a presence in the community that can be used to their advantage. Here are ways to use this attribute to distinguish your business during the holidays:
Developing a Holiday Sales Plan
Choose your merchandise assortment wisely. When it comes to actually pinpointing what merchandise to stock and how to market these products during the holidays, the best strategy is to narrow and focus merchandise assortments, so that by the end of the selling season, the weight of the remaining inventory is on the proven best sellers, Hurlbut says. "Even retailers whose focus the rest of the year is on offering their customers a complete shopping experience must recognize that at this time of the year, the business must become item driven," he says.
The goal is to stock the products that your customer wants. During the holidays, shoppers' objectives evolve from considering a wide range of potential gift items to pinpointing particular products that they know "can't miss." In the last few days of the season, they are likely looking for one or two items they know will be just right for their friends or loved ones. Stocking merchandise assortments that meet customer expectations will ensure that sales and profits are maximized -- and markdowns are minimized.
Here are steps you can take to develop a holiday sales plan:
Take steps while the holiday season is underway. Once you have developed a detailed holiday sales plan, you can't just sit back and rest on your laurels. A small business needs to remain nimble and able to respond quickly to market events and surges or drops in demand. The following are steps you can take to stay on your toes during the holiday sales season:
Timely marketing to drive holiday sales
Small businesses can be at a disadvantage when it comes to holiday advertising. The big chains take out full-page ads, or spring for inserts, in newspapers around the country. They buy TV spots during prime time. And they blanket the radio markets, too. Those advertising markets are also open to small and mid-sized businesses, although they may be too pricey. But the Internet has provided a host of new ways to reach customers for low or no cost. In fairness, the best marketing medium for your business depends who you are targeting. NRF found that 78 percent of adults over 55 read a daily newspaper, but 48 percent of young adults aged 18-34 use instant messaging at least once a week.
Here are some online marketing strategies too consider when trying to boost sales during the holidays:
Maximizing Profits during the Holiday Season
by Ted Hurlbut
The time to plan for a great finish to the season is now.
by Ted Hurlbut
Even in the rush and crush of the season, it's essential to do the end-of-season planning necessary not just to maximize sales but also to protect margins and cash flow.
Six Key Ways to Handle the Holiday Rush
Here are six ways to take advantage of the holiday business wave
National Retail Federation's Holiday Survival Kit
The retail trade group has a variety of statistics and charts segmented by types of industries that could help you plan for your holiday sales season.
Online Advertising through Social Media, IncTechnology.com, January 2009
Online Video Ads: How to Use Them, IncTechnology.com, August 2008
Targeted Search -- How to Optimize It, IncTechnology.com, March 2008
ELIZABETH WASSERMAN is editor of Inc.'s technology website, IncTechnology.com. Based in the Washington, D.C. area, she has more than 15 years experience writing about business, technology, and politics for newspapers, magazines and websites. Her work has appeared in such publications as Congressional Quarterly, Business Week, Portfolio and Slate.