For optimal user experience, please upgrade your browser.
Online

Christmas (Buying) in July

Floating Widget

Floating Item Container

Floating Rate Widget

0
RATING

RATE THIS ARTICLE

BE THE FIRST TO RATE THIS ARTICLE

Please Select
Your Rating

Preparing for those stocking-stuffing consumers, e-commerce retailers are making holiday planning a top priority.

Holiday sales from November to December rose 5.7 percent (to $462 billion) last year compared with 2009 — the largest seasonal percentage increase since 2004, according to the NRF. These figures have retailers wondering if they can improve results even more this year.

The holiday matters
Eric Best, co-founder and CEO of online tech firm Mercent, works year-round with retailers to prepare for the holiday season. Mercent has built a strong track record for improving e-commerce sales and expects to deliver its typical results this coming holiday season.

What’s typical? Using Mercent Retail solution, which optimizes paid search campaigns to drive sales for every SKU and merchandising offer, Gardener’s Supply, headquartered in Burlington, Vt., increased return on advertising spending (ROAS) 500 percent. Year-over-year sales for FootSmart, an online retailer specializing in foot and lower body healthcare products, increased more than 400 percent, with gross profits rising substantially. REI used Mercent’s on-demand platform to automate and optimize the company’s data feed marketing efforts, while SitStay.com’s sales on Amazon.com increased after using Mercent.

As these and other clients look at their holiday planning, “They are becoming more risk-tolerant as they get more comfortable with year-over-year growth, with a trend line that is now up and to the right,” Best says. “That is giving the retail planners some level of comfort that they’re going to have another successful year.”

Despite a solid January, 2011 started off slow, and some retailers are looking for holiday sales to make up for soft early quarters impacted by the Japanese earthquake and tsunami, a late holiday and bad weather.

“We actually saw a steady decline in February and March,” Best says. “Our clients were starting to feel a little jittery by the end of the first quarter, just based on their year-over-year sales comparables.

“Part of that March softness, it turns out, was related to a late Easter holiday,” he says. “January, February, March was decelerating growth. April and May have been accelerating again, getting us back in May to effectively where we expected we would be in terms of our forecast at the beginning of the year.”

Best says the trends point to a positive holiday forecast – and that forecasting itself is becoming more accurate. This allows companies to have aggressive targets in terms of their space capacity as well as their staffing expectations in the customer call center and the warehouses.

Some Mercent clients “are actually playing around with moving some inventory over to Amazon’s warehouses in advance of the holiday, using Amazon’s warehouses as contingent square footage,” Best says. “This allows them to handle the peak holiday volumes without having to necessarily make permanent infrastructure investments in warehouse space.”

Big holiday spend & buy
One of Mercent’s clients, a Midwest-based children’s product retailer, is using 47 percent of its total 2011 ad spend in the fourth quarter to capture holiday shoppers.

“The holiday is definitely one of our more exciting time periods,” says a spokeswoman for the company. “We always see the greatest growth during this time period and we get to showcase a higher amount of SKUs to fulfill the demand.”

Her company’s 2010 holiday assortment was conservative, she says, but “this year we have quadrupled our holiday gear and are thrilled about that because we usually sell out rather quickly.”

In August, this retailer will create holiday search, display and affiliate ads to hit around October. “The reason we start earlier is due to our large product assortment push, as well as wanting to keep the same ‘voice’ prevalent throughout all our text ads,” the spokeswoman says.

On the buying side, children’s department store CookiesKids.com is planning holiday buys earlier than ever, says founder Al Falack. Beginning in February, he says, the company started importing goods directly from manufacturers.

“We also plan on sending a high percentage of our toys to be fulfilled directly by Amazon.com,” Falack says. “Our primary goal is to complete buying by June 25th, with deliveries no later than October 15th. We think that if we could get a head start with receiving the inventory we will have more time to focus on aggressively marketing and selling versus chasing product.”

Amazon.com is the company’s biggest channel for the holiday season. Therefore, “in addition to following and keeping up with trends in terms of popular games and toys, it’s imperative we understand the mindset of Amazon shoppers — how they discover, evaluate and ultimately purchase products,” he says. “This impacts the way we market, promote and sell products through this channel.”

Possible holiday trends
There’s clearly a focus on the social influence for this year’s holiday planning, Best says, with retailers paying particular attention to Facebook and mobile shopping trends. “There are questions and a lot of investment occurring in mobile shopping,” he says, “which, in some ways, has potential to impact traditional bricks-and-mortar retailers even more than the pure-play e-commerce companies, because you can tie in-store shopping behaviors to digital information that you can syndicate on these devices.”

And holiday planning is no longer just a domestic proposition; even for the smaller-scale retailers, there’s planning to capture international markets. Firms like FiftyOne, which helps domestic retailers with offshore fulfillment, have filled smaller retailers’ desire to meet international demand.

Best says people are focused on Europe and Australia because of the exchange rate. “Some of it is the fact that you have cheaper, higher capacity shipping options for actually drop-shipping product overseas,” he says. “And some of it is that there are software tools that are available that make it easier to do current [currency] conversion and handle international fulfillment.”

Another 2011 shift is that consumers’ capriciousness is being indulged through private sales sites like Rue La La, Gilt, Groupon and LivingSocial. “[These sites] have implications for the holiday,” Best says. “We saw it last year. From October [2010] to January, we had a big U-shaped curve where December and January represented a spike. There’s always the peak selling days of December 12 and 13, but in the aggregate the days following Christmas and heading into early January actually contributed more volume overall than those peak selling days.”

Best believes this new consumer behavior is a reflection of the Groupon and LivingSocial deals.
“Consumers are doing exactly what retailers are training them to do, which is to either take advantage of those early door-buster discounts or wait until December 26 to take further advantage of discounted pricing,” he says.

For retailers that have yet to complete their holiday planning, Best recommends locking down promotional calendars while becoming more front- and back-loaded than in years past.

“The overall holiday sales volume is going to occur around Black Friday, Cyber Monday and post-Christmas,” Best says. “By August, you should have variable capacity to be more responsive to last-minute opportunities that are presented either through your advertising programs or through your supply chain.

“You should be thinking about what happens if sales significantly outpace or under-pace your expectations,” he says. In other words, “What are your contingency plans?”

comments

0