The dog days of summer may seem too early for retailers to look at their seasonal indexes for holiday season planning; but consider this, 32% of e-commerce sales in 2012 were generated between October and December. Since this is the season that can make or break your results for the year, Omni-Channel Holiday planning can’t start soon enough. Retailers must prepare their Seasonal Index strategies now to be ready for the most important shopping period, the Holiday Season.
Do Your 2013 Holiday Sales Plans include the Dramatic Fiscal Week Changes?
Demand Forecast Checkup: This top download of 2013 reminds us about Differences between Demand Forecasting and Sales Forecasting methodology, never mind the name your software uses…you know the difference and now use Demand Forecasting. You have accurate Demand Forecast with Regular, Promotion and Close Out sales broken out to deliver a base demand forecast to use with your seasonal index multipliers.
Mission Critical: Are Your Seasonal Indexes mapped into the Correct Fiscal weeks for the Rest of the Year?
Take a look at overall trends and key differences in the holiday period, 2013 versus 2012. You should take these differences into account when planning:
- E-commerce sales are increasing at a rate of 18.4 percent annually. Brick and mortar store sales for the same period increased by 4.0 percent, as reported by the Commerce Department.1
- Thanksgiving falls on November 28, the latest possible date. It is falling 6 days later than last year.
- Hanukkah 2013 begins November 27 and ends December 5. Hanukkah coincides with Thanksgiving, on 11/28/2013. This happens once every 133 years. Last year Hanukkah began on December 8th, 12 days later than this year.
These 3 factors contribute to a holiday shopping season that is significantly different than last year’s. This year there are 26 shopping days between Thanksgiving and Christmas, creating the shortest possible shopping season. Christmas Season 2012 had the longest possible shopping season of 32 days.
Creating seasonal indexes for these 3 weekly fiscal factors will be a significant challenge for most organizations. Seasonal indexes drive the flow of product into stores and distribution centers, leading to your promotional success, customer satisfaction, and ultimately your profitability. These same issues exist for the other moving holidays of the year: Passover, Easter, Memorial Day, Labor Day, Mother’s and Father’s Day, and even Back to School (yes for some that’s a holiday).
Also, you need your promotional plan and demand forecast to accurately portray this dramatic fiscal calendar shift so that your exception reporting will flag you with enough time to still take action. Your this year versus last year report can lead to bad decisions. You do have dynamic and configurable exception reporting that is automated, right?
Newer approaches to Seasonal Front Loading
Traditionally most product inventory is front loaded to stores and distribution centers without any problems, except for products with short shelf-life. These products need time phased multiple orders placed. Systems that support holistic inventory optimization may not front load to the degree that some retailers manually do today as it adds needless additional carry costs and lowers profit earnings.
As retailers continue to drive for higher efficiencies, more are adopting a bottoms up and consensus driven approach in demand forecasting. See Supply Chain Brain’s: Consensus driven Demand Planning and our article on the difference between a bottoms up purchase flag (service level) versus a tops down, plan driven purchase flag: Why Your Inventory Replenishment Costs Will Explode this Fall.
Retailers are also looking to improve their planning process, build organizational consensus, and be more responsive to service issues. They are pooling their inventory at higher levels in their supply chain and making it available for Omni-Channel demand and for more efficient bottoms up demand driven replenishment. See Supply Chain Brain’s article: Multichannel Fulfillment Is The New Normal. This new approach only makes sense if you have the right demand forecasting and exception reporting tools available to increase supply chain visibility in order to be more responsive to changes in demand.
Impact of Inventory on Lost Sales and Customer Perception
Retailers are facing real challenges with the Omni-Channel shopper. A recent study of shopping habits in the US brought forward some frightening trends:
- 58% of adult smartphone users and 1/3 of all US adult shoppers now regularly “showroom.”
- Comparison shopping on a smartphone while in-store is up 400% over last year
The shopping process is rapidly evolving. Historically, shoppers went to a retail location, excited at the opportunity to purchase something they expected to be available. If it wasn’t available, they were told when the product would be back in stock, hopefully the next day, or the next closest location where it was in stock. Today’s shopper has higher expectations. If you are out of stock from poor planning, shoppers pull out their phones to find where your competitor has it locally, or buy it from Amazon or Google. Lost Sales are often the result of poor seasonal indexes. The relationship between Lost Sales and Seasonal Indexes is often forgotten until it is to late to act.
You Need an Effective Seasonal Index Strategy
Software as a Service systems, like Data Profits iKIS, are designed to support today’s retail environment. You can create effective and efficient seasonal indexes (multipliers) as part of your review processes. If you need help or would like to see an automated set of tools that integrate your custom business rules to improve your sales, promotional lift and customer satisfaction, give us a call. Let’s set up a review meeting or a demo. It’s time to ‘Tighten the Links in Your Chain™!’
Read and Learn More: Demand Forecast Seasonal Index Disasters to Avoid
1. US Department of Commerce , QUARTERLY RETAIL E-COMMERCE SALES 2nd QUARTER 2013, August 15, 2013
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