Sometimes, it feels like the only thing preventing retailers from pushing their winter holiday products out on the first day of October is the fact that their display areas are still reserved for Halloween products. In a way, it makes sense to keep seasonal products out for as long as possible to maximize the enormous impact their sales can have on margin.
But while it’s one thing to try to extend high-margin seasonal sales, it’s another to manage seasonal merchandise planning properly. You shouldn’t allocate all your available promotional space for Christmas-themed products in October if they won’t start selling in large volumes until November.
And accurately forecasting the right quantities to allocate is even more critical if you don’t want to compromise sales for other products in your assortment. To avoid this, you must be able to account for the interplay between retail space and replenishment. As retailers set space aside for their holiday and year-end items, they must also be able to replenish that space accordingly.
Common Challenges with Seasonal Merchandise Planning
When it comes to stocking up for a season, there are two major outcomes that almost every retailer is all too familiar with:
- Excess stock at season’s end resulting in a) waste or b) capital tied up in dead or slow-moving stock
- Insufficient stock resulting in lost sales during the season
Most retailers are aware of these risks, and many already have excellent forecasting processes and good allocation management in place. But while they might have solved the initial problem of getting the right amount of stock to stores, they can’t address the root of the problem without optimizing their space and replenishment as well.
Retailers who lack a clear, fleshed out process for seasonal merchandise planning usually end up in one of the following situations:
- Stock idles in the back room while shelves are quickly emptied
- An army of store merchandisers is needed to maintain consistently full shelves, while creating a nightmare for store operations
In the end, the retailer still ends up either losing sales due to poor space management or throwing all their resources toward battling empty shelves, jeopardizing customer service levels. How, then, should retailers adjust their planning processes to avoid these common pitfalls?
The Solution: Demand-Driven Space Allotment
As the season progresses, the space you allot to seasonal products must be increased and reduced in line with both your ramp-up and ramp-down plans as well as updated demand forecasts for each store. Leveraging localized demand forecasts is especially important when your stores all have different shapes, sizes, and sales volumes that won’t be served well by a “one size fits all” plan.
Demand forecast analysis may reveal that you should allocate only one space to your Christmas-themed chocolates at first because demand hasn’t yet risen for them. As the season moves into full swing and forecasts for that product increase, you should expand your displays to multiple locations—shelves, endcaps, tables, and so on—to maximize sales opportunities.
Retailers usually experience a pronounced sales peak, after which the season winds down and forecasts decrease. This is the natural time to start reducing space, placing the seasonal chocolates only at strategic locations to encourage discount or impulse purchasing so you can preserve usable space while clearing unsold product. In doing so, you even free up space for the next season or campaign that may be ramping up.
But this isn’t the only benefit that space optimization has to offer.
Drive Additional Sales: Make the Most of Shopper Missions
Each store, with its own floorplan and display areas, has specific display locations where Christmas-themed chocolates won’t just sell—they’ll actually drive sales for other products in your assortment. How so?
Many shoppers visit stores with a specific goal in mind—what retailers often call a “shopper mission.” Because people are so responsive to visual cues, presenting additional items related to seasonal shopper missions can be quite effective at increasing basket size and driving additional sales.
For example, a shopper who picks up Christmas-themed chocolates rather than normal chocolates may be on a mission to buy everything they need to host their extended family for the holiday. This mission likely includes the ingredients for the dinner itself, but could also include stocking stuffers for nieces and nephews and scented candles to keep the house smelling nice.
So, even shoppers on a mission can be quite open to suggestion for additional purchases when products related to their mission are placed in their path. In the context of the “family holiday” mission that includes Christmas-themed chocolates, that could mean everything from ham or brisket to heritage carrots, or from holiday cards to gift cards.
But how can all these considerations be implemented in stores automatically, without time-consuming manual planning during an already stressful season?
An Automated Space Planning Solution Maximizes Seasonal Revenue
A good space planning solution can analyze how different spaces function within each store, then automatically calculate how to maximize revenue and improve sales at those locations. That means, for instance, ensuring that higher-margin seasonal items are placed where they’re most likely to sell while ensuring normal assortment is also properly presented on shelves. Not only can retailers increase seasonal sales, they can also boost sales for regular assortment.
To capitalize on these types of opportunities, retailers need to plan at a granular level—store by store, cluster by cluster, and week by week. In some cases, even intra-day changes can be impactful—swapping out lunch items for dinner items in the food-to-go section of a grocery store, for example. Unfortunately, trying to execute planning at this level manually is enormously labor intensive, even with all the associated benefits.
Luckily, modern planning systems are able to automate the majority of seasonal merchandise planning work. In the hands of a central planning team, a solution that’s been provided sufficiently detailed store-level information can be exceptionally powerful. The result: a holiday season where you know you’re making the most of your space so you can concentrate on other things—above all on your customers.