How to Maximize Your Small Business Profits This Holiday Season
While it may be difficult to predict precisely how the holiday season will pan out, it is critical for businesses to prepare, especially when data shows consumers have been starting their holiday purchasing earlier and earlier each year.
According to the National Retail Federation, the reasons are two-fold: the need to stretch their budgets and, at the same time, prevent elevated stress levels caused by holiday shopping. Over 60 percent of shoppers last year said they began shopping by early November, a 10-point jump from 10 years ago.
The Key to Planning Your Holiday Sales Strategy
To help you create the best holiday sales strategy for your business, here are some quick ideas to get a head start this year.
- Begin Promotions ASAP. Don't wait for the traditional day after Thanksgiving holiday kickoff timeframe. Plan on launching this season's sales sooner than later. Create your sales and marketing plan around a holiday shopping season that begins in October to give customers a reason to shop for gifts at your store as soon as possible.
- Obtain Adequate Working Capital. Before the start of the holiday season, you may need additional cash to restock and update inventory, which could significantly deplete working capital. Remember to set aside funds to cover payroll and holiday bonuses as well.
- Focus on Your Loyal Customers. You may be able to maximize revenue by concentrating marketing efforts on your loyal base, as they are much easier to sell to compared to new customers.
- Create an Editorial Calendar. Planning ahead by building out content for your social media is critical to successfully promoting awareness for sales events. By creating an editorial schedule, you can guarantee content to back up your sales tactics. Consider collaborating with influencers to drum up publicity for your holiday campaigns.
Report: Holiday Retail Sales Will be More Subdued
With the inflation rate remaining high and consumers having to scrutinize their spending habits over the past year, there have been rumblings that a restrained holiday season may be ahead of us.
According to a recent report by Deloitte, the 2022 holiday retail sales between November and January are expected to climb between 4 to 6 percent. The forecasted numbers are lower when compared to the previous year. In 2021, retail sales between that timeframe increased by 15.1 percent (seasonally adjusted to exclude gasoline and automotive).
The reduced predicted growth is due to the economic slowdown this year, said Daniel Bachman, Deloitte's U.S. economic forecaster, adding that retail sales will probably be impacted by weakening demand for durable goods, a term for longer lifespan items that were popular purchases during the pandemic.
"However, we anticipate more spending on consumer services, such as restaurants, as the effects of the pandemic continue to wane," Bachman said. "Inflation will also help to raise dollar sales, although retailers will see less growth in sales volume."
Meanwhile, the Deloitte analysis predicts a year-over-year holiday e-commerce sales growth of 12.8 to 14.3 percent from November to January, compared to 8.4 percent the year prior.
The shift in how consumers are spending in the upcoming holiday season is expected, given the rising inflation rates, said Nick Handrinos, Deloitte's vice chair.
"Retail sales are set to increase as a result of higher prices, and this dynamic has the potential to further drive e-commerce sales as consumers look for online deals to maximize their spending," Handrinos said. "Retailers across channels who remain aligned with consumer demand and offer convenient and affordable options can be well positioned for success this season."
“Retail sales are set to increase as a result of higher prices, and this dynamic has the potential to further drive e-commerce sales as consumers look for online deals to maximize their spending.” - Nick Handrinos, Deloitte Vice Chair.
Predicting the Upcoming Holiday Season
Over the past two years, predicting holiday shopping season trends has been challenging, given the changing market conditions, tendencies, and consumer wants and expectations. However, some predictions, backed by solid data, are available to help businesses plan their holiday sales strategies. One example is Salesforce's 2022 Holiday Insights report. Predictions in the report include:
- Inflation will lead to an early start to holiday shopping. The real pressures of inflation are forecasted to cause 4 in 10 shoppers to begin holiday shopping earlier this year, with nearly 30 percent of sales happening in the weeks before Thanksgiving.
- Price increases will possibly lead to fewer orders in general. Inflation has deflated consumer spending, leading to a 5 percent drop in U.S. consumers' total online orders as online prices worldwide rise 7 percent.
- Tightened profit margins. The added cost of doing business from suppliers, transportation, and labor is expected to surpass retailers' capacity to pass it along to customers. This, in turn, places 10 percent of profits at risk.
"Retailers mustn’t let margin be the Grinch that steals the holiday," said Rob Garf, VP, and GM of Retail, Salesforce. "It’s critical to contain costs by automating and scaling operations – particularly by streamlining processes and removing friction as consumers increasingly shop across digital and physical touchpoints."
The take-away: Whether it’s optimizing your website to make sure it doesn’t crash from the added holiday traffic or communicating clearly with suppliers and vendors, there are a myriad of ways small business can use to ensure a successfully season. If you’re interested in digging deeper into the upcoming holiday trends, click here to learn more.