During the holiday season, retailers look for opportunities to connect with customers. Shoppers typically spend more during this time of the year. For many stores, customer traffic during the holidays can make or break the year in terms of revenue and profitability.
According to the National Retail Federation (NRF), the period between Thanksgiving and New Year’s Eve can represent as much as 20 to 40 percent of annual sales for retail stores. In 2012, holiday sales represented 19.3 percent of total retail industry sales or $579.5 billion in the U.S.
During the holiday rush, big box retailers stack up billions of dollars of inventory, much of which is stored under consignment (i.e., the goods are owned by the manufacturer until the distributor makes the sale).
For manufacturers, inventory eats up a lot of financial capital and is very expensive. Therefore, the retail supply chain is incentivized to reduce the number of days in which inventory is left unsold.
Some giant retailers, such as Target, Wal-Mart, and Toys R Us even cut back on certain goods (such as toys) for fear of excess inventory. For instance, toy shipments from July to November were down 2 percent in the U.S., compared to the prior year, according to Panjiva. In 2012, there was an almost 10 percent drop.
Retailers weigh the cost of having too many unsold products against the cost of offering discounts and promotions. The last thing they want is to be stuck with all that inventory come January.
Stores that are stuck with too many products have no choice but to offer large discounts. For Black Friday, Target offered 55 percent off the price of a few digital cameras.
During this year’s Black Friday, shoppers made record-breaking purchases over the web as Internet buying increased 19 percent while mobile transactions surged 43 percent compared to 2012, according to IBM.
Smartphones and tablets now make up between 20 to 40 percent of a retailer’s sales and the trend is expected to continue.
Since early 2013, many large retailers have been optimizing their online stores for mobile devices in preparation for the holiday season. To extend payment solutions beyond traditional cash, checks, and credit cards, some stores have been experimenting with innovative payment technologies.
Earlier this year, San Francisco, Calif.-based Vend, a POS hardware supplier, released a new version of an iPad point-of-sale software that allows brick-and-mortar stores to use PayPal-powered credit and debit processing as well as mobile payments.
Shoppers are generally more excited during the holidays. Many consumers are more likely to participate in promotions due to increased visits to malls and department stores.
According to the NRF, retailers will hire between 720,000 and 780,000 seasonal employees to handle the extra demand for the 2013 holiday season.
To lure shoppers, most retailers will run special campaigns such as weekly contests, daily offers, and promotional countdowns. Some retailers even put up holiday-related merchandise well before Thanksgiving. “Each year, about 40 [percent] of consumers begin their holiday shopping before Halloween,” according to NRF.
When done right, promotions enable retailers to get more engagement and sales from their customers. Promotions also mitigate the risk of having too much inventory due to lackluster sales.
Amazon.com and other online retailers typically offer “hot deals” or “lightning deals” which feature products offered at large discounts, often at 80 percent off the suggested retail price. These online sites hope that consumers browsing for such products will eventually move on to other areas of their store where shoppers can make more purchases.
Loyalty programs typically provide financial incentives for returning customers which result in repeat orders and higher demand. For instance, Victoria’s Secret offers a Secret Reward program that offers discounts during the holiday season.
“A lot of places like Kohl’s.com and VictoriasSecret.com allow you to use three coupons codes,” shopping expert Tiffany Ivanovsky told ABC Local.
To further distinguish its promotion, the intimate apparel retailer implemented a loyalty program in which the customer finds out the value of the discount during checkout.
Gift Guides and Wish Lists
Tiffany & Co. recently introduced a calendar tab on its Facebook page that features a different Tiffany product per day throughout the holiday season. Thus, the jeweler’s Christmas countdown calendar serves as a gift guide for consumers.
Calendars are popular in the fall because many shoppers are counting down to Christmas and the start of a new year. Thus, some retailers offer gift guides which feature different products on any given day.
Nordstrom is encouraging shoppers to use wish lists which the retailer hopes would entice more consumer spending. The retailer recently concluded a $5,000 gift card giveaway in which shoppers were enticed to create wish lists on the site and to share their lists on social media.
The holidays are one of the best times of the year to engage with customers. For retailers, it’s a crucial time to push products out the door.