Christmas is traditionally the most profitable time of year for retailers. This year, however, the retail sector is facing a unique set of challenges. The public are tightening their belts ever further - a recent GfK NOP survey suggested that consumer confidence is at its lowest point since records began, and discretionary expenditure is tumbling.
However, 'tis still (potentially) the season to be jolly - it appears that most consumers set aside money in advance for Christmas shopping, with around 65% suggesting that their normal income will cover the extra expenditure. While there is likely to be a lower average spend this year in comparison to 2007, there seems to be little change in intended spending on presents for close family. Indeed, the average respondent to the GfK NOP survey indicated that they were intending to spend £295 on presents for their immediate family, out of a total of £399 on gifts.
Christmas is still a hugely important time for retailers, and there are significant profits to be made. However, making the most of the shopping season will require a little creative thought and an understanding of consumer mentality.
Start Christmas early
Timing is amongst the most important factors to consider at Christmas. Figures show that the biggest spenders are also those who shop early (before the end of October). As such, offering 'early-bird' deals to encourage advance spending is likely to pay dividends.
Offer a little extra
Reductions or promotions, such as the perennially popular buy-one-get-one-free, tend to entice customers into a shop. You should consider whether or not you need to make a profit on these promotions; it is sometimes effective to instead use them as a loss leader to encourage traffic through your shop. If you are going to do this you should give careful thought to the layout of your products; shoppers should be guided towards the goods on which you are most likely to make a sale, or towards those on which you have the highest mark-up. This is just as pertinent for online stores as it is for high street retailers.
Use VAT wisely
The reduction in the rate of VAT also presents potential opportunities for certain parts of the retail sector. If you are offering luxury items, or you have a loyal customer base that is not overly concerned with price, you may choose to consider whether it is worth the additional administration involved with reducing the VAT to 15%. High-end consumers are unlikely to care about saving 2.5% if you are offering an enjoyable, effective shopping experience and high quality products - indeed, few will even notice.
This strategy should not be followed if your customer base is motivated by price concerns; in these cases, you should be squeezing your margins as far as possible in order to encourage a high volume of sales.
All but the kitchen sink
Christmas is a particularly hectic time for consumers, many of whom are pressed for time as well as cash. This is particularly true once December looms and the last-minute rush begins. Unless you are a specifically niche retailer, you should try to cater for a wide variety of your customers' needs. It is important to give consumers as many reasons as possible to visit your outlet, and to spend more time there.
This also presents opportunities for up-selling and cross-selling; a sound knowledge of your customers will enable you to tailor promotions that will appeal to your key demographics. Effective promotions should result in customers leaving with products that they had not initially intended to purchase.
The customer is always king
It is easy to think that, in the current market conditions, price is the be all and end all. Indeed, many consumers' purchases this year will be motivated primarily by affordability. However, it is important to remember that many individuals are still willing to spend a little more in return for a more enjoyable, less stressful shopping experience.
As such, your marketing and management decisions this year must be based on a good knowledge of your customers. The importance of this knowledge will grow exponentially; aside from the extra revenue derived from sales, Christmas is a hugely important time as consumers visit retailers that they would not normally frequent. As such, even if your turnover predictions for the festive season are low, you should still devote your energy to developing awareness of your business and expanding your customer base. In this way, even a below average Christmas can turn into a very happy New Year.