Ian HallIan HallSeptember 4, 2019
present-1209742_1280-1280x847.jpg

17min685

You don’t have to be a retail expert to foresee an uplift in turkeys, alcohol, and mince pies through December, but in reality almost all products see a dramatic increase leading up to Christmas.

Simply put, people buy more of (almost) everything.

The week leading up to Christmas is by far the biggest sales week of the year for almost all suppliers (unless you are in the Valentines or Easter egg business), but an often overlooked fact is that the week after Christmas normally sees the lowest sales of the year. Fresh suppliers, in particular, need to consider the impact on waste and replenishment orders that comes from people having plenty of food in, living off turkey sandwiches for seven days, and shops that are barely open.

The graph below is a typical annual profile of weekly sales for a supplier that has ‘core grocery’ products (Jan-Dec):

 

 

Let’s start by making a key distinction – Christmas products vs seasonally affected products:

  • Christmas-only products are those which are ranged temporarily, and are sometimes even themed (such as dog toys that look like reindeers). They often come in as a job-lot, depending on shelf-life, and are cleared immediately after Christmas.
  • Seasonally affected lines can have just as big an uplift in sales at this time of year, but are ranged all year round (e.g. Stilton cheese). Almost all lines in a store are seasonally affected in some way at Christmas.

For Christmas-only products, there are limits to what you can do at this time of year, and seasonal product forecasts tend to be self-fulfilling, i.e. with products sourced from the Far East, the volumes are typically agreed in March, shipped through the summer, into retailer depot in September, and in store at the start of October ( often much to general public outcry).

 

 

Everything that is shipped to the retailer gets sold (sometimes on markdown post-Christmas), and best sellers can run out early – unless you are Mystic Meg you will have either guessed at (sorry, ‘forecast’) too much volume, or too little. The balance for the supplier is to avoid missing sales by supplying too little versus getting hammered for markdown rebates in January when the excess stock is cleared at a fraction of the RRP.

All other products in store will be affected, to a greater or lesser degree, by the general uplift in sales; but why does this matter if stores order more every time they sell one? Three important reasons:

  • If suppliers don’t forecast accurately they may not be able to produce enough to replenish orders
  • Depots are incredibly busy through December – it is not always easy to get delivery slots (if you supply washing powder you are going to be de-prioritised vs Christmas crackers and mince pies)
  • Most of the sales uplift occurs in the seven days leading up to Christmas – by the time products are replenished, it’s over

We would probably all recognise these typical Christmas shopper habits:

  • four weeks to Christmas – we load up the cupboards
  • one week to go – buy all the fresh stuff, and impulse/distress purchases
  • one week after Christmas – we live on turkey sandwiches, and the shops are not open for normal trading hours.
  • January – everyone renews their gym memberships, has some vague thoughts about ‘dry-January’, and lives off soup and Slim-Fast

But of course, it’s a bit more complicated than that.

There are some subtle trends to be aware of:

The ‘mother-in-law effect’

Most consumers trade up to more premium products in December. Nobody quite knows why – maybe it’s because you have more visitors, or want to impress the in-laws, but people buy more quilted toilet rolls and branded washing up liquid.

The shopper is not always the consumer

Of vital importance all year round, but amplified at Christmas; for example, most beer is purchased by women but consumed by men. Take this one step further when you consider pet food, and further still when you realise that people buy gifts for friends with dogs and cats! So whilst you might not have thought about it, sales of dog toys rise disproportionately in December (and not just on Christmas-only lines – even things like tennis balls may quadruple in sales). Just because dogs don’t eat more in December does not mean that pet food is a static category from a sales perspective!

Weather makes a difference

A cold snap will lead to panic-buying (even things like dishwasher salt and cat-litter to clear snow!)

Christmas Day falls on different days of the week

It is really important to know which day Christmas falls on (yes, I know it’s December 25th, but which day of the week is that?). Christmas is a Wednesday this year; that probably means that people will be doing their ‘big shop’ on the preceding weekend (Friday/Saturday/Sunday).

Very few people leave their main shop until Christmas Eve but, equally, if Christmas falls on a Friday, not many people are going to buy their sprouts and double cream five days before. This has a big effect on the last few days of sales, and is extremely important for suppliers of short-life products. In 2017 the peak trading day was Friday 22nd; this will probably extend to Saturday 21st this year

Depots have fixed capacity

Retailer depots will be bursting at the seams, and booking slots are limited, so you need to be precise with delivery planning and highly reactive to traffic challenges – get on the front foot and talk to your retailer customers in advance.

Planning and forecasting varies by category

Some categories are harder than others to get right. Some can be forecast at the category level, for example if products can be easily substituted, and are impulse purchases, such as dog toys – if one toy runs out, chances are that the shopper will buy a different one. In other categories, forecasting only makes sense at SKU level – if you run out of sprouts, people won’t simply buy broccoli as a substitute, and I for one would be dismayed to be offered Dairylea with my glass of port just because the shop was out of Stilton

Waste and availability remains a delicate balance

The age-old balance between availability and wastage is never more important than at Christmas. You don’t want to run out of stock and lose sales to competitors at this key trading time, but excess stock will turn into waste in the days after Christmas, or seven days, 21 days, 30 days later, depending on shelf-life

So what – what can you do with this insight?

1. Monitor sales daily – it is no good reviewing on a weekly basis and not being able to react in time.

2. Collaborate with your retailer now – share your forecasts for December, and share analysis from last year – poor availability can be eliminated with better forecasts, but time and time again we see suppliers losing sales in December because their lead times do not allow them to react quickly to sales that could easily have been anticipated. Get the stock through the depots and allocated to store ahead of the sales spike.

3. Use detailed historic data to forecast – blend sales and availability information to get the best picture you can of true demand. Where appropriate, ensure that you forecast at SKU, not category level; Stilton and Brie do not behave the same as the cheese category in general.

4. Monitor (depot and store) stock not just sales – you cannot react quickly enough to sales in late December, so track stock levels and use these to predict potential availability and waste issues.

5. Manage stock run-down on seasonal and short-life SKUs – remember those days afterChristmas when the stores will be closed, and nobody is shopping.

6. Plan replenishment and ‘business as usual’ trading for early January – unless you sell Weightwatchers products or Baileys

7. Analyse your data to win more business – analysis in January is the best way to predict order volumes for next year, and the earlier you do this, the more effectively you can begin to collaborate with the retailers.




Inform. Inspire. Include.
A free way to improve your business.

Customer Experience Magazine is the online magazine packed full of industry news, blogs, features, reports, case studies, video bites and international stories all focusing on customer experience.


CONTACT US

CALL US ANYTIME



Contact Information

For article submissions:
Editor
Paul Ainsworth
editorial@cxm.co.uk

For general inquiries, advertising and partnership information:
advertising@cxm.co.uk
Tel: 0207 1932 428

For Masterclass enquiries:
antonija@cxm.co.uk
Tel: 0207 1937 483

Awards International ltd
Acacia Farm, Lower Road,
Royston, Herts, SG8 0EE
Company number: 6707388

JOBS IN CUSTOMER SUPPORT

Find a job in customer support with Jobsora


Newsletter