The golden quarter makes or breaks the year for most retailers. The debate in every weekly trading meeting is the same: are the offers driving cash margin, or just giving away full-price sales? Getting the blend right is the holy grail.
When to go into Christmas
Is it me, or does Christmas start earlier every year? Timing is a tricky call.
- Go too early and Christmas stock takes space from everyday lines that would sell better. It can also cause negative PR for being ahead of the customer mindset.
- Go too late and you risk not lapping last year, or falling behind competitors. That's especially true if you're not known for Christmas and need to plant the seed in good time.
Effective retailers strike the balance by allocating space slightly ahead of the sales curve, and often in phases, increasing Christmas footage in line with demand. In a 40,000 sq ft store that's manageable. A smaller store has to sweat the space, so the judgement is critical.
Don't forget back of house. Stockrooms don't have elastic walls, and inventory clogging them up causes problems on the shop floor.
How deep to go on Black Friday
Customers are motivated by a big saving, especially for a short time. Black Friday works best on higher-ticket items where the savings are considerable, and it can attract new customers you keep for months.
But the promotional depth has to be right. Go too rich and you give away precious margin unnecessarily. Go too weak and footfall and traffic suffer. Stick to the rules on establishing prices too. Customers can check more easily than ever, and any doubt about the integrity of a saving damages trust.
Some retailers prefer everyday low prices, arguing it's the price you pay that matters, not the saving you make. It can work, but it runs the risk of becoming stale. Events create excitement.
Remember the "bring forward" effect
A big Black Friday can take sales from the weeks that follow. Most customers have a fixed Christmas budget. If Black Friday takes £100 of a £300 budget instead of £80, there's less to spend later.
That may be true of the market overall, but you can still take share from competitors with a more compelling plan. Model the whole quarter, not just the event week.
Watch the calendar too. Which financial week Christmas falls in, and how many trading days there are before it, can make all the difference to like-for-like comparisons.
Make the offer disruptive
Only a small share of purchase and brand decisions are made in advance. The rest can be influenced at the shelf edge or while browsing online. A bargain clearly signed and stacked in volume at the entrance radiates confidence. Customers assume it must be a genuine deal, and when it's gone, it's gone.
Seasonal range is a lever too. New products that meet gift-giving missions bring in customers who wouldn't otherwise have shopped with you.
Sell the experience, not just the price
Too many Christmas ads tell customers what they already know. Retail is about the experience, and after location, service is the thing most likely to make a customer choose one store over another.
I'd like to see retailers show they've identified customers' pain points and are fixing them: enough colleagues to help and pack, hassle-free checkouts, guaranteed availability. Kindness resonates, especially at this time of year.
A simple checklist
- Agree the objective for each phase: traffic, conversion or basket.
- Plan space and stock in phases, ahead of the curve but not to excess.
- Set promotional depth by category, measured on cash margin, not sales.
- Model bring-forward across the whole quarter.
- Add seasonal ranges that meet new gifting missions.
- Staff for peak and fix the pain points before the busiest weeks.
- Hold something back for Boxing Day and January.
Get the blend right and you drive traffic, lift conversion and grow the basket, while keeping the CFO happy with the profit made in such a critical period.