Holidays are a time for peace, relaxation, and fun. But for business owners, the holiday season finds a new meaning: a time of high sale volumes. But this also comes with challenges, such as anticipating the number of orders and sales.
Therefore, remaining ahead of your inventory game will keep you and your customers happy during the most wonderful time of the year. While there are several things you need to do to plan for holiday inventory, you also need to ensure you have the cash flow ready to purchase the stock required to meet demand.
Tips to Ensure You Have Proper Inventory Levels in Time of the Holidays
Mark Your Calendar
Most red-letter days squeeze into a handful of weeks in November and December. These include Thanksgiving, Cyber Monday, Black Friday, Christmas Eve, Christmas Day, Hanukkah, Boxing Day, and New Year's Eve. However, you should start your holiday inventory planning and purchase before September 30. Many retail executives do that in the summer, allowing them to have their holiday inventory before mid-fall.
You cannot only rely on the customers' shopping timelines when preparing your inventory. If you use them to store and distribute your products, you need to consider other factors, such as your supplier's schedule and warehouse schedule. Ensure you also include their deadlines for ordering and shipping when preparing your calendar for initial holiday inventory orders and any stock replenishing you may need during the season.
Predicting the stock quantities you'll need is a lifesaver when putting together a holiday inventory ordering plan. Stocking your shelves with the right products to meet increasing customer demand in the holiday season ensures you don't lose business to competitors. But that requires you to forecast inventory amounts several months ahead.
You can run inventory forecasts by checking the previous holidays' sales data. You will note crucial shopping patterns that will likely replicate this year's holiday season. Although customers may have different shopping habits yearly, past Q4 sales data is concrete and a good starting point for forecasting. Calculate the amount of product you need to fill orders and try to remember any overstocks you could have prevented or any stockouts that could lead to a loss of sales.
After checking these records, you can move on to draw information from other sources. Credible sources you can look into include competitor sites, eCommerce blogs, SEO tools, etc. Check the trends in these resources to know the products to stock and their amounts.
If you can accurately evaluate your anticipated demand, other holiday inventory plan factors become more evident. You can use the information to determine the marketing budget, holiday inventory budget, and whether you need to hire additional staff.
Conduct Inventory Audits
Regular inventory audits are vital in preventing disasters from sneaking up on you. An inventory audit involves cross-examining your fiscal records to ensure they match your stock counts. Failing to execute this crucial exercise may see you sell items that are no longer in store.
Remain updated on the inventory levels by performing inventory counts. You can even perform a cut-off analysis where you temporarily pause operations to ensure accurate counts. Also, note the fast-moving products and those that have sat on the shelf the longest to determine what you need to clear to give space for new products.
While counting your inventory, note that best sellers may not necessarily be the most profitable products in your business. Therefore, besides looking at the amount you make from sales, ensure you check how much you lose when getting, handling, and shipping the inventory before completing a sale. Costs such as storage, special handling, and delivery may influence your profit.
So, always check the Cost of Goods Sold (COGS) against their revenue. When you know the most profitable items, you can reorder stock efficiently and also have a clue about the promotions to offer during rush days, such as Cyber Monday, Black Friday, and Super Saturday.
Stock Up Early
The whole point of preparing a holiday inventory ordering plan early is so that you can order stock in advance to ensure it arrives on time without complications. Tackling holiday inventory needs early is good for your peace of mind and avoids unnecessary delays or missed sales. Manufacturers and suppliers will be receiving massive orders, so you reach out to your vendors in advance to let them know your forecasted order volume.
It's also good to know the last possible date to make orders if you run low on stock than anticipated. Provided you have the cash flow to purchase the needed stock, you'll have no problem stocking up in advance.
Have a Stock Replenishment Plan
Regardless of the amount of research you may put into forecasting demand, there's no guarantee that you'll get it right. The current year's holiday season may be one of its kind, with people shopping as they have never done before. Even when you look at your sales records, you'll find times when sales hit unanticipated highs or lows.
But one thing is sure; you don't want to tell your buyers that you have run out of stock. It'd be heartbreaking to lose massive sales opportunities when the crowd shops more than you expected. For that reason, you need to plan how to keep adequate stock to satisfy any demand.
Fortunately, you can avoid such embarrassing scenarios by setting reorder points (ROPs) and having a plan to transfer stock between locations. Setting reorder points helps you maintain minimum stock levels to avoid running out of stock and losing sales. Any time you manually enter or scan your items into your Point of Sale System (POS), ensure you set a reorder point that helps you note the products you need to replenish during the sales period.
If you have several stores, you can consider stock transfers between locations. It is less risky compared to ordering more inventories from your supplier. A centralized point-of-sale system makes it even easier to make such a transfer since you can get an overview of stock levels across all locations.
However, ordering more stock and failing to sell it is not good either. You might end up overstocking products that are difficult to sell at the end of the holiday period. The only option might be selling them at a discounted price during boxing day sales, negatively affecting your cash flow. Therefore, careful planning and caution are called for.
Invest in an Inventory Management Software
Inventory management is crucial for a business to succeed. Unfortunately, consolidating all the channels, warehouse facilities, and in-transit shipping are challenging parts of inventory management at any time of the year. Something is always happening in one direction as you look at the other.
Luckily, the market is full of inventory management software options that can help streamline your inventory processes. They synchronize your warehouses, sales channels, and orders into one central online dashboard, thus allowing you to look up any inventory data with a few clicks. Some can even update your product pages with every purchase, which helps avoid overselling.
Financing for Your Holiday Inventory
After preparing your holiday inventory, the question of how you'll pay for the stock comes up. You'll need some additional cash if you're getting a bulked-up inventory and more packing and shipping supplies. This also has to be enough to cover any other unpredicted costs.
Securing financing ahead of time crosses cash flow off of your business's festive season wish list. However, since fast financing is often expensive, you need to get the required capital in advance to keep your debt costs down.
First, you need a good idea of the amount of inventory your business needs for the holiday season. Then you can apply for the financing required to stock up and maintain those estimated levels.
Popular financing methods include:
Business Line of Credit
This type of financing provides a financial safety net you can have in your back pocket just in case. It covers gaps in the cash flow, can serve as an emergency budget and helps you maintain a well-stocked inventory. Unfortunately, the line of credit has its downsides. Many lenders set a specified trading history to qualify for financing, and your business turnover usually determines the amount you can get. Therefore, you may not get adequate funds to plan your holiday inventory even if you prove to the lender that your business is growing fast.
This funding option helps stock the inventory you need, even if you have little cash. The products you purchase serve as collateral for this financing. Unfortunately, inventory financing is an expensive funding option in the long term. Some lenders may also request you to provide an additional form of collateral apart from the inventory.
Financing Option Aligned with Sales
A funding option that would beat any other type of financing when planning your holiday inventory aligns with sales. Traditional bank products, including inventory financing, line of credit, etc., all have an aspect that will negatively affect your business. This can be anything from requiring collateral to lengthy approval processes and high-interest rates.
Luckily, you can get a funding option built specifically for eCommerce businesses that consider the unique challenges these businesses encounter. Such a financing model understands the opportunities available for eCommerce business and thus does not hesitate to provide the cash needed to ensure adequate stock that meets demands. The funding option syncs with actual sales, so you repay only after selling your holiday inventory.
Plan Ahead and Have a Fruitful Holiday Season
You may do all you need to plan for your business's holiday inventory. But only when you have cash flow ready to purchase the required stock can you consider yourself prepared to reap the most during the festive season.