The last three holiday seasons have each been unique as the pandemic first roiled consumer behavior and then unleashed pent-up demand, all the while playing havoc with the economy. This year, with inflation rising and discretionary spending squeezed, retailers are already preparing for a slower holiday shopping season, and a new set of challenging dilemmas.
For leaders in the industry, key decisions abound in what is — without question — the most important selling season of the year. Inventory planners are weighing their options. “Should we fill shelves in anticipation of holiday demand or continue liquidating and risk losing sales to stockouts?” Merchandise planners and marketing leaders are wondering, “Are the right promotions in place or are discounts too steep?” And HR leaders are asking, “What about seasonal staffing?”
Retailers need data to answer these questions strategically. Beyond past transactions, external signals like inflation, labor, and market data, consumer behaviors and trends, and supply chain, weather, and currency data can give retailers an edge in both preparing for known challenges and addressing unexpected ones as they arise. In this environment, a data-driven approach to merchandise planning, active demand management, and sales and marketing execution is more critical than ever.
So which questions are most important? And how can retailers leverage data to find the right answers? Here are three questions retailers should be asking and addressing right now to gain a holistic, real-time view of the levers that can be pulled to optimize demand while protecting margins and unlocking cost savings this holiday season.
1. What can be done to shape demand now?
Amazon.com surprised shoppers in October with a second Prime Day — a strategy intended to boost controlled demand, prepare their warehouses, and move excess inventory ahead of Black Friday. Riding the consumer interest, major retailers including Best Buy and Target quickly mounted competing sales. With the industry closely watching the impact of these initiatives on year-end sales, retailers considering deploying similar demand-shaping strategies should take care to rely on point-of-sale data, social media trends, and other market signals to get a clearer picture of where and how to link pricing and promotions to shape the most beneficial activities this season.
2. What product mix, at what price, will drive the most revenue?
There’s a give-and-take in promotions that analytics can help you fine-tune. By accounting for things like shipping costs, demand projections, and the price of production, retailers can make smarter decisions about the products they’re pushing in each location during key moments this holiday season. For example, which SKUs are your biggest sales drivers? Is there an opportunity to swap products with high production costs with cheaper options? Do bundles or promotions offer opportunities for revenue? Which SKUs are unique and therefore allow for price increases? That kind of insight can give you confidence as you experiment with pricing and assortment planning, something Bath & Body Works is doing as it adjusts its bundled soap promotions this year to protect margins in an inflationary climate.
3. Are the right resources in the right locations to make it all work?
Overstaffing can carry massive costs, yet underestimating holiday staffing needs could mean failing to fulfill orders, disappointing customers, and losing out on revenue opportunities. Lockstep collaboration between HR, finance and supply chain teams can ensure the right resources are in place to deliver value to customers while also protecting profit margins. Are there certain hires that need to be expedited, made in specific locations to meet strong floor traffic, or at specific times in order to get products to customers quicker from warehouses? A data-driven approach to seasonal staffing can help ensure resources meet business demand, and that labor costs aren’t carried unnecessarily into the new year.
While retailers likely planned for a complex fourth quarter, this year’s holiday challenges are sure to be formidable. Retailers need to leverage data in their decision making so they can pivot quickly and strategically when change occurs. Asking the right questions now, and then leveraging those questions to inform nuanced scenarios and plans, can put retailers in position to succeed in the weeks — and months — ahead.
Rohit Shrivastava is the chief product officer at Anaplan, a cloud-native, enterprise SaaS company, transforming how enterprises across industries see, plan, and drive business performance.
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