Are You Ready? 

The Holiday Checklist - Part 1

Back to School is essentially over.  Now is the time to re-assess your holiday plans.  This is the first of a series of posts on getting ready for the upcoming, all-important Holiday season.  The topic is too large to cover in one post, so there will be separate posts focusing on different topics over the next few weeks. 

Part 1 - Holiday Merchandise Assortments

Most retailers have seen a weak, if not unsurprising Back-to-School season.  BTS selling is usually one of the key indicators of Holiday sales potential.  Depending on your trend, it's likely that your Holiday sales are planned flat to down from a very tough 2008.   A recent article in the Chicago Tribune discussed retailers reducing inventories more than the drop in sales would indicate.  The big question, then, becomes "how do you offer a compelling assortment on a much lower inventory?".  Here are some thoughts on how to do just that:

Overarching strategy.  Given the environment, the customer this year is looking for three key elements in Holiday shopping.  They are:

1. Price/Value
2. Quality
3. Newness and/or Fun

Keeping that in mind, the assortment plan should:

• Build on the opening and upper price points, funding this by cutting the middle price points. 
• The customer is obviously cautious about spending and is looking for value.  Show her you "get it" by building the depth and presence of opening price points, keeping in mind your brand quality proposition.  This merchandise should be great value, not cheap.
• A larger relative investment in opening price points creates a dollar deficit since you will obviously need to sell more units to achieve the same dollars.  To fill this deficit, increase inventory at the upper price points.    To do this successfully, however, you must make these higher price point items special.  Simply putting more high-priced merchandise on the floor will not achieve the goal.  In a related post, I discussed how Amazon is forecasted to sell over 500,000 Kindles in 2009 at around $300 apiece.  This is from essentially zero sales in 2007.  The customer will buy it if it's special.  Keep the value proposition by working on a shorter markup and focus on margin dollars and not markup percentages.Search out smaller vendors with unique, fun, and exciting merchandise.  There's a Kindle-equivalent in every category of business if you look hard enough for it. 
• Fund all this by cutting back on the middle price zone.  Look for the slow-turning categories and SKUs, the "but we've always carried this" merchandise, and redundant items.  This is, most likely, where the most inventory dollars are tied up and where most of the post-holiday markdowns will come from.
• Once you've done this, do the math to make sure you've got the same total inventory dollars of the original plan.  Remember, the lower your inventory dollar investment, the higher the sell-through has to be to make the same sales.
• Give the lady what she wants.  Take a hard look at your key item/best sellers from last year along with the key items from this year and ask yourself these questions:
• Are the key items from last year still relevant?  If you've carried these for years, do you expect them to do the same business as last year?
• Are your current best sellers relevant to the holiday season?  If so, can they replace the business from last year's key item business?  If not, what is the right balance between the two?
• Best sellers are your lowest liability merchandise.  This is the place to be aggressive.
• Show optimism with color.  During the depression of the 1930's, bright red lipstick was a best seller.  Regardless of the category, or price zone, there has never been a better time to put exciting fashion colors into the assortment.
• Be Fresh.  This season you must have new, fresh merchandise on the floor.  Take a hard look at the percentage of new items relative to the overall assortment, by major category.  What percentage of the total units and dollars does this represent?  How visually impactful will this be on the sales floor?

Time is of the essence.  Make sure your assortments are ready for a very challenging season.

Next post - Receipt Flows and Inventory.

 

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