It’s a common complaint that Christmas comes too early every year, with retailers filling their shops with baubles and glitter months in advance of the day itself. But those working in retail and hospitality have to think about the festive season long before regular folk have started to write their Christmas lists. And November is the big month for businesses operating via e-commerce, as people get their orders in early to ensure presents are delivered on time.
So, while others think of the build-up to Christmas as a time of celebration, for many smaller companies, it’s a source of much anxiety. Retail analyst Verdict has predicted that 2013 will see the biggest festive spend since before the recession and small firms are keen to get a slice of the action. But retailers have to balance the pressures of buying and paying for adequate levels of stock, waiting on slow seasonal payment of their own invoices, as well as finding the money to cover other costs, such as extra staffing and big quarterly rent demands.
Some of the key things currently troubling smaller retailers are likely to include:
Christmas lines should have been planned for some time so that merchandise is ordered far enough in advance to ensure it’s on the shelves when the shopping rush starts in earnest. But sitting on large quantities of dead stock is a disaster for any retailer, particularly small ones who have limited cash and storage space. Computerised inventory management systems certainly make keeping track of stock easier, but surprising numbers of the smallest firms still use traditional methods, such as visual stocktakes using tick sheets. If you’re one of these old media types, it may be time to think about moving into the 21st century and speeding up your processes. Inventory software packages are cheap or even free and can avoid businesses making mistakes, or ending up with stock they can’t shift.
What to order?
Again, the objective is to give customers what they want, when they want it, without getting lumbered with lots of stock that no one will buy. Business gurus have long spoken of the 80-20 rule, also known as Pareto’s Principle, the idea that 80 per cent of a company’s sales comes from 20 per cent of its products. You should know what is in demand, ensure that you have these items in adequate stock, and market and price them accordingly. Sales forecasting from previous years should help you to identify the things that are most popular with customers, those that you don’t need to hold, and those that are necessary in limited numbers, but are unlikely to be in frequent demand.
November is the month to have the greatest marketing impact for Christmas sales, according to credit services firm Experian. So, if retailers are planning promotions online to attract people to their bricks and mortar store or, equally, if they’re trying to drum up traffic to their internet retail site, they should be designing and deploying their Christmas email campaigns now. Experian’s analysis of 2012’s online festive sales found that email marketing that was sent in November resulted in 70 per cent more sales than that in December. People were also 40 per cent more likely to open promotional emails sent in the morning than those that arrived in the afternoon. Not surprisingly, using words such as ‘sale’ and ‘Christmas/New Year’ in email headings is most effective at getting people to open a message.
In England, Wales and Ireland, tradition dictates that tenants of commercial premises pay their last tranche of three months’ rent in advance on Christmas Day itself – hardly the present that most business owners would wish for and something that pushes too many retailers into insolvency in the New Year, according to R3, the Association of Business Recovery Professionals. R3 advises firms that can see trouble on the horizon to talk to their landlords as soon as possible. It may be possible to arrange a turnover-linked rent temporarily or frequent, smaller rent payments to facilitate cash flow.
The money pressures that many companies feel around Christmas are not helped by the tendency for customers to be slow settling their bills around this time, as everyone feels the squeeze on their finances. Make sure you have tight credit controls in place to monitor and chase payments and, if you’re struggling to pay your own bills, talk to your creditors to negotiate terms. If you can see short-term financing issues looming, make provision for this rather than waiting for the crisis to hit before taking action. Think about what bridging facility you might put in place to avoid any problems with cash flow, be it a short-term loan to ensure you have enough money in the business until the New Year or other options such as invoice financing.
Christmas should be a time of good cheer, but it does require planning for smaller businesses. Have a continuity strategy in place and keep it updated to ensure that your festive season goes with a swing and doesn’t leave your enterprise with a nasty hangover come the New Year.
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