Managing Your Business
The Most (Expensive) Time of the Year: How the Holidays Impact Your Business
‘Tis the season for gift-giving, spending time with your loved ones and indulging in delicious food. However, amidst the holiday season (and the months leading up to it), businesses scramble to prepare for Black Friday, Small Business Saturday, Christmas shopping in November/December, and Cyber Monday for those who have an online front. It is a time for growth—some businesses generate most of their revenue during the holidays, accounting for up to 40% of annual sales. Some perform worse than others due to the lack of spending in the industry. Which can your business relate most to?
Almost 70% of total expenditures in 2017 was attributed to personal consumer spending, equivalent to almost 12.9 trillion dollars. The projected expenditures by buyers for gifts, non-gift holiday purchases, and other non-gift purchases during the holidays are equivalent to $1,008 per person. By polishing your marketing and operations leading up to the holidays, your company, too, can thrive from this year’s vigorous shopping trends.
Highest-Performing Industries During the Holidays
If sales peak in the holiday months, which companies leverage patron spending the best? Here are the four industries that consistently trend positively during the holidays:
Cosmetics, electronics, toys, and fashion items make the retail shopping list every year, resulting in 2017’s record-breaking holiday retail sales totaling to $717.5 billion (a 5.3% increase from the previous year). The National Retail Foundation forecasts holiday sales to grow in 2018 by 4.3-4.8%, totaling to $720.9 billion.
Combining Amazon and other online stores during the 2017 holiday season, U.S. shoppers spent $108 billion, $6.6 billion coming from Cyber Monday alone. Although online retail competes with in-store retail in terms of cost, item availability, and convenience, online retailers still struggle with shipping and manufacturing logistics. E-commerce businesses require plenty of planning and preparation for the holidays, as most businesses do.
Food & Beverage
In 2017, food and beverage stores sold $122.1 billion and $128.1 billion worth of goods, respectively. Liquor stores, specifically, experience higher sales during celebratory events such as the holidays. Overall spending is expected to inflate in 2018, and customers are ready to indulge in holiday treats such as candy, alcohol, desserts, and holiday meat. Get your social media ready (or stay far away) for pictures of your next festive meal or hot beverage.
2017 was a difficult year due to events such as Hurricane Harvey and the California wildfires, and 2018 followed suit with a continuation of wildfires and Hurricane Michael. Organizations expected to receive fewer donations during the holiday season in place of disaster relief efforts, but to their surprise, donations on #GivingTuesday rose to $274 million in 2017’s online donations. This study predicts Giving Tuesday 2018 to raise over $300 million. The new tax law and booming economy are also factored into the prediction that charitable giving will rise in the upcoming season.
Not all industries benefit from the holidays, and it’s not always because they haven’t prepared for it. According to Blue Sky Local, 61% of restaurants see a decline in customers. Business investments are less likely to follow through during this time of year. Transportation and travel numbers also fall as patrons stay close to home. This can be explained by one simple cause–people want to cut back their spending on certain expenses and prioritize for gifts and other holiday-related items.
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How to Prepare for Holiday Shoppers
Certain businesses prepare better than others by studying shopping patterns and conforming their businesses to consumer trends. In preparing for the holiday season, there are a few changes that are necessary to run a business during that time, as well as opportunities to capture customers. Getting prepared early in the year will ease your stress and give you room to adapt as the end of the year approaches.
Re-budget to Cover Increased Costs
From the business front, spending increases for every department, including:
- Working capital
- Operating expenses
This is to support the escalation of new and returning customers. If you are a bakery or deli, you might want to extend your hours for Thanksgiving and Christmas, increasing your operating expenses. If you sell products online, you’ll probably create a new advertising campaign with a higher budget than usual. And if you own a clothing or electronics store, you’ll need more staff to support the customers that visit on Black Friday.
Build a Stronger Workforce
You should also formulate a holiday plan for logistics, including operating hours and days, staff, and inventory. Base your metrics on competition, or if you have the information available, sales from the previous year. Depending on your industry, you might need to scale down your staff and save money as well. Be aware of your industry’s performance and spending patterns—has the economy shifted to favor your business, or will customers hold back during this time of year?
Diversify Marketing Efforts Against Competition
Now more than ever, your competitors are looking to attract a rising number of customers to their businesses. In order to benefit from the surge of shoppers, you must invest in stronger marketing efforts. A few marketing campaigns you can research are:
- Email offers: Discounts, bundles, free gifts with purchase.
- Advertising: Targeting your online audience during specific times.
- Social media/branding: Create a relationship with your customers by telling them more about you.
Smile & Be Thankful
Depending on your industry, your strategy will vary. If you are competing with other businesses, consider diversifying your marketing campaigns and building a stronger workforce to support the higher volume of customers. If you are competing with the season, maybe provide discounts on your products and limit the time that customers can redeem the offer. There are many ways to tackle this time of year, but with simple preparation, you can execute the holiday season with ease. ‘Tis the season for giving, so remind your customers that they are valued and thank them, and maybe they’ll help your business thrive in the years to come.