It’s almost the most wonderful time of year, and retail businesses might say it’s “almost” wonderful. The holiday season means heightened operations, a stressed supply chain, and increased expenses. For you as a retailer, trying to accomplish all your tasks in preparation for the holiday season can feel impossible despite the uncertainty the pandemic has played.
With the pandemic retail tale of two, speculations lie with both consumer spending decreases and increases; a decrease from those with financial stress due to pandemic related pay cuts or unemployment, and an increase in holiday spending due to savings from cancelled travel. According to Deloitte’s annual holiday retail forecast, sales are predicted to rise between 1% and 1.5%, and Fortune.com discussed how retailers should expect increased sales, especially for online retailers and e-commerce.
There are many different types of retail businesses with unique operations and considerations for holiday preparations but having sufficient cash flow to maximize the most demanding yet lucrative time of year can help you reach your 2020 revenue goals. Gearing up for the holidays can feel easy with a little preparation, a strong plan, and a reliable lender in your back pocket. Here is a compiled guide to help you ensure that you are equipped for the high-volume of sales and hectic operation demand of the happiest season of all.
It All Starts with Cash Flow
Analyze the past to make projections
If you have been in the business a few years, and have past sales data to analyze, it can be the key to anticipating holiday surge sales and making a smart financial strategy. Track previous cash flow history, how much you earned, and how great your holiday expenses were. Utilizing projections from your financial reports to anticipate supply needs can help you build the right amount of inventory, and avail discounted bulk stock. The sooner you have projections and working capital, the cheaper you may strike a deal with vendors. It’s essential to plan ahead by looking at the past, and having sufficient cash flow for inventory, marketing, and holiday operations is critical to success.
Looking at the past for patterns and trends between normal sale seasons and the holiday season is also important to help you outline your holiday plan. Beyond tracking sale numbers, consider best sellers and what made them stand out as well as which items you struggled to sell. Additionally, analyzing past marketing efforts and expenses should help you determine how much you should spend and where. Look at what type of ads, email campaigns, or blog posts drove the highest amount of traffic to your site when developing your strategy. If you know what worked, and what didn’t before, you are in a better position to direct your operational sales approach accordingly.
Plan for holiday cash flow with a working capital loan
After looking at past financial reports, you should look at your current cash flow to ensure that you have the access to working capital to fill the surge purchase orders and pay for increased operating expenses. You do not want to miss out on filling customers’ orders during November and December, so businesses who experience season sales, are likely to pre-purchase their holiday cash with a working capital loan. A sign of a healthy and growing business is a business loan, so don’t hesitate if you have the financial records and a few years of sales in your books to seek out financing to prepare for high-volume holiday sales.
Being prepared with working capital also means planning ahead of time. Proactively preparing for a holiday business loan three to six months in advance is best practice, but retailers experience constant trend changes, and the pandemic has brought uncertainty to holiday prep. While there is support for expected increased holiday sales this season, many small/medium-sized retailers are taking a wait-and-see approach. According to Paypal’s August survey, only a fraction of merchants are planning in advance for the holiday shopping season. Waiting for a traditional three-month bank loan, may not be in the holiday playbook for 2020, but luckily, there are alternative lenders, such as LQD Business Finance, that can provide retail businesses with fast cash. Waiting for demand might save you money, but without cash flow to execute sales, you may lose profit opportunities, so determine projections and a strategy as quickly as you’re able, so you can apply for a business loan if need be.
Staff up and Plan for Help
With consumer spending surges, another cost you may face is seasonal staffing. Due to the high unemployment rate that has struck the nation, retailers are having greater challenges now more than ever. For online retailers or e-commerce-based businesses, planning for labor shortages to help fill and ship orders might be more certain than in-store retailers who may have reduced staff from in-store shopping restrictions. Either case, when considering additional help, projecting your sales, and reviewing previous holiday records to determine when it’s truly needed, can help you hire wisely.
To find the right people, consider going through a temp agency, hiring people you’ve worked with before, or hiring students. Some tips from Forbes on effectively hiring for the holiday season include to rely on referrals, to be realistic about training for temporary hires, and to offer positions to your customers who know your brand and might be enthusiastic about your business.
Optimize Digital Sales and Increase Marketing
Digit sales and e-commerce demand
The accelerated growth of e-commerce and online retail has digital sales tools and operations stress tested to the max, and the 2020 holidays is no time to sleep. Not only does Deloitte forecast a small increase in retail sales this year, but a further e-commerce sales increase of 25%-35% this season.
Now is an important time to ensure that your digital sales tools are updated, and your Customer Relationship Management (CRM) is tested and ready for increased sales performance. From in-store, to mobile devices, to online browsing, investing in omni-channel solutions for all purchasing and shipping touchpoints can ensure that your customers shopping experiences across is seamless. Also, investing in low-cost efficient e-commerce tools for more payment options is expected from your customers. Consider implementing multiple payment methods, a “buy now, pay later” option, and installment payment options.
Marketing early and often
Digital marketing and internet space during the holidays are extremely competitive. You can expect amplified marketing efforts and budgets from competitors to reach targeted audiences for a short amount of time. Make a holiday marketing plan, and plan early! Marketing budgets should be planned out a year in advance, and although some major retailers do create their marketing calendar a year early, it is still crucial to be observant and dynamically change day to day throughout the season.
If you’re still getting started or revamping your marketing strategy, create a marketing calendar with ads, paid traffic, e-mails, and social media posts. Try to be educational, inspirational, and include call-to-actions. Use marketing efforts while gearing up for the season to build up the holiday spirit and get your customers in the holiday spending and gift-giving mood.
And if you are advertising and creating holiday content, think about promotional pricing. If you are a brick-and-mortar retailer, think about in-store promotions and geofencing ads. Try offering your best prices to compete with the significantly reduced, surge-driving prices of the retail sale days (think Black Friday and Cyber Monday). If lowering prices is not an option, envision adding gifts or free shipping for the holidays. Whichever your promotional strategy or unique selling proposition may be, your customers will know your competitors’ prices, so make sure you are always tracking and comparing too.
Provide Excellent Holiday Customer Experience
‘Tis the season to make sure your customers are jolly
The holiday shopping season is filled with festivities, family, and familiar sights and smells that bring joy to holiday shoppers. But while consumers look forward to it, it can also be a hectic and stressful time of year for retailers, like you. Be intentional that you do not present your customers with frustration or stress and provide a top-notch customer experience, whether in-person or online. To be competitive during the most wonderful time of year, retailers should make sure their customer experience is intensified and ready to handle order increases.
Get into the holiday spirit
If you are an in-store retailer, set the mood and provide an enticing and enjoyable shopping experience. Try to come up with creative ways to add value to your customer holiday experience without hurting your margins. Review your refund policy, offer gift wrap to ease the stress of your customers, or add holiday themed touches to product packaging. For in-store holiday shopping this year, consider providing masks or hand sanitizer, but also consider visitors’ senses to make them feel at ease and to trigger nostalgia and the holiday gift-giving mood.
Inventory, Inventory, Inventory
Stock up your shelves
Last but not lease, holiday prepping calls for a stocked inventory. Gift-giving season to retailers means high demand, tighter deadlines, and holiday favorites to fly off their shelves. If you are advertising or have promotional sales for specific items, stock up on those. If you are aware of product trends and customer favorites, make sure you have plenty of it available. You should prepare the working capital needed to stock up on inventory as well as ensure that your suppliers and vendors are prepared with well-communicated quality expectations and shipping deadlines.
If you want to maximize profits from sales during the busy season, you must be fully equipped with enough inventory, and the right amount. As a retailer, managing inventory for the in-demand season is a top priority, and you know better than anyone about the fine line between enough stock and too little.
According to Retail Wire, average overstocks cost retailers 3.2% in lost revenue, and understocks cause 4.1% of lost revenue. Getting stuck with post-holiday excess inventory means deep wholesale discounts, liquidating your inventory, or donating it. Out-of-stock items, however, can not only cost you revenue, but also hurt your customer retention. Harvard Business Review conducted a survey revealing that up to nearly half of consumers will go to another store to buy the out-of-stock item costing you business and handing it over to your competitor. Double-check your research, look at your books, invest in software management tools, and obtain enough cash to access sufficient inventory.
In order to acquire bulk inventory and pay for holiday operations, financing your working capital with an inventory finance loan, is a novel solution for the retail industry. Increasing stock for the holidays makes for a larger asset to leverage; therefor, inventory financing can be advantageous at this time of year. Using short-term inventory as collateral can free up cash to be used for any expenses: restocking of inventory, marketing, or seasonal payroll increases. As you sell off your seasonal goods, you settle the low-risk loan.
Additionally, this alternative financing solution is easier to obtain than conventional funding. With a lending company, such as LQD Business Finance, you can qualify and acquire the full loan size that you need. As a tech-enabled, lending company, you can get an inventory loan of up to 10 million in under 30 days with LQD Business Finance.
For retailers who are gearing up for the holidays, remember, review past financial reports to make projections, plan for labor shortages, make sure marketing and advertising campaigns are planned, and that sales and CRM tools are ready to provide your customers with added value and a joyful holiday experience. As a retail business, ensure that you have a well-stocked and managed inventory as well as sufficient working capital for holiday season expenses. In conclusion, inventory financing can be your lifeline to the cash flow you need, and a working capital loan is a golden ticket to fulfill orders and set you apart from your competitors. Apply for an inventory finance loan with LQD Business Finance to make the most of the 2020 holiday season and end the most unprecedented year by capping your revenue goals.