Unless you're in a tropical climate, the January blues are a cold reality for just about everybody, especially small retailers. Gone are the merry customers and frenzied last-minute shoppers with their endless gift lists and deep pockets. With all the promise of the New Year, comes the reality of returns, markdowns, and holiday cleanup that can eat away at healthy holiday profits.
For savvy retailers, it doesn't have to be this way. Emerging from the holidays with a healthy bottom line lies in the ability to act proactively in season, and address any potential issues before they become problems.
Begin by acknowledging that very few people have any shopping money left in January, so attempting to clear out large quantities of excess inventory in January is an exercise in futility. Therefore it is imperative to carefully manage inventory levels in December, to ensure that by Christmas Eve, the bulk of the holiday merchandise has been sold. After-Christmas sale events can certainly help to liquidate inventory, but should not be counted on too heavily to alleviate major inventory problems.
The best way to manage inventory levels in season is to get an accurate early read on seasonal purchases. Talk to your customers, shop the competition, and monitor early sales of key holiday items. If you've made a mistake or overcommitted, address it immediately with the vendor, and negotiate a return or a trade for more saleable goods. If the vendor will not accept a return or trade, negotiate a lower wholesale price in order to promote the item at a more attractive retail. Most vendors realize that your businesses thrive together on mutual cooperation and satisfaction.
It is imperative to enter in to the holiday season with healthy margins on purchases, especially in a difficult retail climate. If sales are slow in season, adopting a promotional sales strategy will quickly eradicate any post-season profit potential for retailers operating on a simple "keystone +$2" markup formula. If a promotional strategy becomes necessary, don't wait until January or Christmas Eve to mark goods down, as shoppers won't necessarily wait and will probably go elsewhere for a better deal.
Adopt strategic store policies that both encourage customer loyalty and mitigate post-holiday profit erosion. These can include adjusting the return and exchange policy during the holiday months to allow "store credit only" or "designated holiday items not returnable" or "final sale." Consider advertising a policy to meet competitors' pricing on identical merchandise.
Plan to cut post-holiday costs by decreasing staff hours immediately following the after-Christmas sale event. Notify staff well in advance of post-holiday schedule changes to avoid causing hurt feelings or unplanned financial hardship.
Most importantly, plan to refresh the store with an exciting new merchandise assortment and visual display, immediately following the holiday rush. Once the holidays have passed and the New Year is approaching, customers are moving on to the next thing, and the store should reflect that forward motion. Fresh colors, spring and valentine themes in-store and in window displays, create positive feelings and reasons anew to enter the store. Purchase conservatively, however, mindful of the fact that January is traditionally a low volume selling month.
A combination of proactive inventory management and diligent focus on the bottom line are the key components of a financially successful holiday season.
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