Holiday Season Sales with Purchase Order Financing
Posted on October 29, 2013 in Purchase Order Finance
This is the time of year when many retailers begin to gear up for the holiday season. Long before Santa loads his sleigh, the rush begins to bring consumers the latest and greatest that their heart's desire. For the manufacturers, the “rush” starts with making goods in Santa's workshop, also known as the factory. For retailers, the “rush” is when those goods pour into distribution centers to bring glad tidings and good gifts to men, women and children.
Consumers are counting the days until the calendar changes to December 25, while manufacturers and retailers begin making plans and preparations in the spring. They understand that not only must they provide the right products, but they must also have the right quantity to satisfy demand.
Unpredictable events from that other mythical creature, Mother Nature, can interrupt even the best supply chain plans. Other game changers include shifts in consumer spending and operations that are understaffed.
For these reasons, retailers in particular must learn how to balance merchandise flow with the holiday season. Most have integrated sophisticated technology to help them sort through how much to buy and from which sources. Technology also improves projections of inbound inventory. This reduces the costs of expedited shipments during latter months.
Gearing Up for the Season
A successful holiday season of sales will only happen if retailers land on consumers' “nice” list. There are other strategies that retailers have adopted to create a season of rewards for consumers. Here is an overview of what many retailers do to get ready for shoppers.
Review Previous Holiday Marketing Plans
A remix only works when people like the first version. Retailers look at what they did in previous years to see which holiday marketing activities attracted the most consumers. This information also shows the type of consumers interested in the merchandise and whether more or less is needed for the current year.
Generally, marketing initiatives will vary based on the retail store and the consumer most likely to shop in the store. For some consumers, email marketing is the best way to capture their attention. Others might respond better to online shopping deals or customer appreciation days.
Use Social Media Marketing Tools
Social media continues to be one of the most cost-effective ways to reach consumers. Posting daily deals and special events are excellent ways to incorporate social media sites in marketing plans. Retailers can leverage an audience who wants to spend money where they spend a high percentage of their time.
Create a Calendar
Organization is essential as retailers prepare for holiday season sales. This small act reaps huge dividends as retailers plan and prep to make consumers happy. Last-minute planning is just as bad as trying to find last-minute shopping deals. Goals are not likely to be accomplished and stores might run out of an item sooner than expected. Taking time to think ahead about logistics and marketing activities will save future headaches.
Begin Preparations Early – Procrastination Costs
A little known logistics secret is that more warehouse space exists during the first six months. Conversely, there is usually more merchandise than space during the last six months of the year. Whether retailers use trains, ships, airplanes, trucks or reindeer, warehouse rates increase during fall months to house needed merchandise.
Clearly, the challenge is to balance the advantage of starting early with the business reality of forecasting holiday sales. As a rule of thumb, importing merchandise should be squared away by mid-summer. A calendar of events typically mirrors the following:
By the End of April
During this time, retailers begin lining up suppliers to solidify production costs. Early orders help with projections for manufacturing products and procuring supplies, which can trickle down to savings for retailers. Commitments are confirmed through purchase orders. Additionally, retailers can begin getting quotes for freight services and delivery timelines.
May and June
As spring turns to summer, retailers are confirming product orders with manufacturers and distributors. Changes or new product lines are also confirmed to make sure what is ordered is what retailers will receive. Freight quotes and shipment schedules are usually finalized by the end of June.
July and August
While this is not really Christmas in July, things are beginning to look like the holidays as retailers begin receiving Top of Production merchandise. Marketing plans are also reviewed for the holiday season.
This is not the time for surprises; bills of lading are being prepared with copies sent to retailers. Customs house brokers and freight forwarders become best friends to retailers. Shipments of samples, if applicable, are confirmed and marketing plans can begin.
October Through Mid-December
In addition to the commencement of marketing the things on Santa's list, retailers are also preparing to increase staffing needs. Typically, this will help them handle the holiday rush before and immediately following Christmas as consumers respond to advertisements.
Use Purchase Order Financing to Seal the deal
How is this all possible? Some retailers have flexible financial terms with traditional lending institutions to support their plans for holiday season sales. Others have solid partnerships with factoring companies to use purchase order financing as a tool to prepare for the holiday season. Using the latter option is a solution for stuffing retailers' holiday stocking with the right amount of cash to see black by the end of the season.
Generally, the process works for retailers that have seasonal sales spikes often experienced during the holidays. Letters of credit are issued for import transactions. In addition, receivable based letters of credit can help retailers secure enough inventory to meet consumer expectations.
Christmas sales are crucial to annual revenues for retailers. The right mix of planning, preparation, marketing, talented sales associates and financing will keep Santa coming back for more.