July is the time to start planning for the biggest trading period of the year: Christmas.
In part four of this five week retail makeover, fashion finance expert Melissa Brown tells what mistakes to avoid when planning for the festive season.
With the pressure to make Christmas sales budgets and to have a record season, there can be pressure on retailers to drive sales at any costs. However while this might mean a sales budget is met, it’s not always good for business.
What do I mean by sales at any cost?
I’m not talking high pressure sales tactics but rather the move by retailers to start the sales season early with a pre-Christmas sale.
I have noticed in the last few years that the post-Christmas sales are often starting before Christmas with retailers having a knee-jerk reaction to potentially lower sales than expected.
Of course, once one retailer presses the sales button, it seems there’s a domino effect with other retailers abandoning any prior sales strategies and simply following suit.
The danger of course is in educating customers that by delaying their Christmas spending retailers will bring forward post- Christmas sales.
Customers aren’t stupid and if they realise that retailers will start their post-Christmas sales on December 20, you can be sure they’ll start delaying their Christmas spending until then and brave the crowds.
By bringing forward post-Christmas sales, retailers are simply cannibalising profits they could have made if they had kept their full margins therefore exceeding their budget, potentially significantly, to make the same margin.
So what is my advice for a retailer that is tempted to hit a sales budget with a sneaky pre-Christmas sale?
1. For a start, you need to be focusing on more than simply sales budgets. If you are solely concentrating on sales targets and ignoring profit margins then you are missing the point. Great sales figures made by discounting really aren’t great sales at all.
2. Don’t be tempted to hit the sales button if you’re not reaching your sales targets. Keep the sales for post-Christmas and aim for your target with other more creative tactics instead.
3. Talk to your customers. Mine that great database you hopefully have. If they’re not shopping with you then find out where they are, what others are doing and try something different.
4. Create unique Christmas shopping experiences for valued customers.
5. Create an inexpensive Christmas give-away or trial-offer rather than resorting to a sale. I believe the temptation to resort to pre- Christmas sales to make sales budgets is simply laziness on the part of many retailers.
For others it’s panic at not hitting sales targets but for the most part it’s laziness. Instead of cannibalising profit margins at Christmas time look for ways that you can give real value to your customers instead of simply through price.
I wish you every success for the holiday season when it hits.