Yes, the holiday shopping season is short–and apparently getting shorter.
The average holiday shopping duration among consumers in the US has gone from an average of 7.1 weeks in 2018 to an anticipated 5.8 weeks in 2022 according to Statistica.
A shorter holiday season coupled with the current economic downshift means retailers, like you, must maximize holiday sales with the time you have.
How can you best do this?
Here are four profit-generating strategies you can implement–sooner rather than later:
1. Optimize pricing for varied income brackets
Retailers who provide products with a range of prices, low to high, tend to do well because they attract the broadest range of consumers from all income brackets.
Amazon is an excellent example of this. Its catalogue comprises 400 million products, with items ranging in cost from under $10 to thousands of dollars.
When lower-income households feel pressure due to inflation, and more of their monthly income goes toward living expenses of housing, rent, energy, and food costs, then lower-priced products are appealing.
This said luxury items tend to fare well too during a downturn because of their exposure to high-income consumers, less affected by recessions.
Actually, the luxury category is quite resilient, growing more than 13% in 2022, compared with only about 6% growth for retail overall in the US.
Now, while an omnichannel retailer like Amazon’s immense capacity is unique, the principle remains the same for leading retailers–a wide range of product pricing is strategic and desirable.
We see the theory proven again with The Bay. The national retailer cleverly revived the defunct discount brand, Zellers, to fortify its lower-range pricing strategy and is now able to compete with Dollar Stores’ ever-increasing popularity.
Todd Vasos, CEO of Dollar General, said the stores saw a rise in higher-income households shopping there too.
In the second quarter this year, Dollar General’s revenue was $9.4 billion — a 9% increase from a year ago — while the retailer’s net profit grew by more than 6%.
So, as discount brands see an uplift and high-end brands maintain, it’s wise for retailers not to get stuck in the middle.
The numbers show you must offer either competitive pricing or unique/luxury items to attract and keep customers during the holiday season.
2. Think like your consumers
In this day and age, there are umpteen choices of what your customers could want from you as a retailer, regardless of whether you specialize in one vertical or many.
It’s seemingly impossible to know what all those wants could be.
Or is it?
Because the holiday season is the busiest for retailers, it’s an opportune time to learn about them. Get into the mind of your consumers–how, why, what, where, and when they buy from you.
You most likely have all of the data you need, but may not know how to turn it into profitable action. This data is like gold when combined with AI and predictive analytics, because together, they help you anticipate customer needs–even before they have them.
For example, leading retailers can use advanced analytics to analyze their data to uncover:
- How to optimize their e-commerce
- How to personalize loyalty programs
- How to stock the right products at the right location for the right customers
These are all forms of hyper-personalization that retailers use to help them gain insight into customers’ shopping behavior, and what they will want in the future.
If you are able to do this, you’ll order the right inventory and the right time to increase your profits, build customer loyalty and ultimately maximize the holiday sales season.
3. Mark it down…strategically
Markdowns are generally part of any product’s life cycle. They are a challenge for any retailer, which has now been compounded by excessive inventory levels, a change in consumer spending habits, high inflation, and a slowing economy.
The upside? Having excess inventory means you actually have products to sell, unlike the crushing out of stocks during the pandemic that cost the retailing industry billions.
So, if you have a ton of inventory and markdowns are a must, then the key is to sell it while making the most profit possible.
You see, if your competitor is consistently selling inventory 15-30% lower than you and you do the same, even going a bit lower to be competitive, then it becomes a race to the bottom and you lose more ROI than you need to.
Instead, prioritize strategic markdowns.
If you know what to markdown, when, and by how much – you can be ahead of the game.
The answers to these questions may seem obvious, but they really aren’t when retailers are dealing with tens of thousands of SKUs.
Theoretically, there is a perfect markdown price for every SKU at every location that maximizes profits, accounts for each product’s seasonality, minimizes cannibalization of substitutive products, and allows for possible transfer opportunities.
Unfortunately, according to Gartner research, only 29% of Tier-1 (enterprise) retailers even have the technology in place to optimize their markdowns.
With the complexity of these dynamics, volumes, and the speed at which all this takes place, manpower and spreadsheet demand forecasting simply can’t keep up; and getting it wrong costs retailers millions of dollars.
However, modern technology, like markdown optimization software, can help you find the perfect price.
Strategic markdowns using predictive models can tell you the right time to lower the price of an individual item in a particular store. This method (across thousands of products and multiple locations) will maximize life cycle profitability.
Yes, it takes some time and investment to implement technology, but retailers who do, thrive and make it to the next holiday season.
Learn more about strategic markdowns in this report Recession-Proof Retailing: How Some Retailers Thrive During Downturns.
4. Stay true to the holiday spirit
Consumerism is an unrelenting part of the holiday season around the world. With elaborate store displays and a steady stream of commercials, the unofficial start to the holiday season seems to come earlier and earlier every year.
Yet people still value the sentiment of goodwill toward their fellow man as a foundation of the season. In a downturn when households are more conscientious of how far their dollar will stretch, supporting a business that reaches beyond just themselves makes them feel like they are contributing to a greater cause.
It matters to consumers that the retailers they support are good corporate citizens.
When given the choice between two similar brands or products, 71% of consumers will purchase from a purpose-driven company over the alternative. Nearly 80% of consumers are more likely to remember a company with a strong purpose and 4.5 times more likely to recommend it to friends and family – Forbes
So, if you’re a retailer that supports various charities to help the less fortunate, invests in sustainability or climate change, and the like, let your customers know about it.
Consumers want to know you are making a difference for others, and support brands that do good locally or internationally–not just during the holiday season, but all year long.
For example, retailer FIGS creates high-quality scrubs for healthcare professionals. The company donates a pair of scrubs to healthcare workers in resource-poor countries with every item sold. To date, FIGS has donated hundreds of thousands of scrubs, as well as other medical equipment, to dozens of countries around the world.
Customers support brands that do good in the world–with their spending dollars.
Maximizing holiday sales despite a recession
While retailers have good reason to be a bit nervous about a short holiday sales performance during a downturn, there are strategies that will increase your sales, like:
- Making sure your pricing strategy appeals to the widest range of incomes possible
- Anticipating what your customers want by learning their purchasing behaviours
- Keeping your profits with strategic markdowns
- Demonstrating goodwill toward others
With these strategies in play, retailers will have happy holidays too!
With a time-sensitive holiday season, there’s no time to waste. If you’d like more information about how to maximize your sales in a downturn contact our team and download the Recession-Proof Retailing report.