Does your business have a holiday season checklist for promotions and optimized inventory levels?
Do you know how much you are losing when you discount too little or too much?
Most of the retail businesses expect to receive 35% to 60% of their orders in Q4, particularly during Black Friday, Cyber Monday and December before Christmas. It takes months to plan for the holiday marketing content, inventory purchases and / or manufacturing, discount and promotion decisions, new product launch schedules, logistical planning and so on and so forth...
We see many retailers discount 20% to 75%. This is a very wide range and the discount decisions are based on many factors. Many of the retailers leave money on the table, end up with excess or too little inventory and hurt their brand value with not so wisely thought or last minute promotion decisions.
At Ralaole, we advise our clients think about proactively protecting their brand value first and treat excess inventory and newly purchased inventory promotions differently. For excess inventory, we calculate estimated inventory carrying costs and hope to reduce the cost of carrying inventory with the discounts. In plain English, the discount amount shouldn't exceed the inventory carrying cost.
For the inventory purchased to sell during the holiday season, we emphasize protection of the brand value even more and optimize the inventory purchases. Another thing to consider is; how much you want to convert top, middle and bottom funnel to sales during the holiday season (we recommend starting top funnel ads at least couple of months before the holidays). To keep this article easy to understand, it is safe to say that there is an optimum discount level to maximize profits (economics 101). At Ralaole, we calculate the optimum discount level for our clients (different for each product, productline and channel). The short term optimization is easier to calculate as it is about the total profits for that holiday season. We also keep in mind the future profits as a discount can attract a new customer and may generate repeated purchases and brand loyalty or reduce perceived brand value. We work with marketing, logistics, manufacturing, sales / listings and customer relations departments collaboratively and time our promo / discounts for the entire holiday season. It doesn't matter how big or small these different departments are, what matters is to come together and collaborate wisely for the best outcome.
In addition, we recommend having a dynamic discount calendar during Black Friday, Cyber Monday and the entire holiday season, and change the discount rates based on inventory levels, customer reaction, new client sales vs repeated purchase ratios.
Please feel free to contact us if you need help with holiday pricing, discounting and demand planning strategies.
What does the holiday season mean to businesses? We hope it means maximized current and future revenues and profits for your business.
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