How to prepare inventory for Christmas sales peak?

Key takeaways:

• your inventory can increase twice fold over Christmas
• on standard, 40% of retail sales happen during Q4 sales spree
• properly dealing with the Christmas peak requires either more staff or more warehouse space
• Despite the shopping madness. 30% of your inventory will remain unsold over Christmas, waiting for January sales

It’s a common phenomenon in the retail and e-commerce world. Sales do peak over Christmas time quite substantially, which you probably clearly see on your sales graph, just like the one below. Most e-commerce players have a strong seasonality over Christmas time. It’s standard that businesses create almost 40% of their revenue only in the last two or three months of the year.

This is a big challenge for purchase orders, logistics, and customer support processes. We frequently see owners or management of a company stay in the warehouse during the season for the whole night, preparing packages for customers. They do whatever they can to keep up with the high flow. The warehouse is full of goods, and new pallets will arrive in the morning. Of course, someone has to receive it and put-away on shelves. Chaos everywhere. 

Sometimes Christmas peak means that your inventory is higher more than 200%

But long working hours and mere presence in the warehouse don’t solve much. Sadly – despite efforts – we see businesses facing stock-outs (they ran out of a particular item and can’t satisfy demand anymore). This means lost sales and smaller profits. And on the other hand, the warehouse is full of potential unwanted products that no one will buy during this peak, and they will stay in the inventory till January. 

On average, we see 30% of inventory unsold during Christmas, waiting in the warehouse till New Years’. Do January discounts look familiar to you? Everybody does that. Deals like -30%, -40%, or even -60% till the unwanted inventory will be sold. This means a loss in most cases, and it is mostly avoidable.

What are the proper steps you should consider when you want to be ready for the Christmas sales peak?

Two strategies on how to be ready for Christmas peak

You have two possible strategies on how to be ready for the Christmas peak. Both are just balancing between limited resources and constraints. The first one is that you try to postpone the purchase, receiving and put-away as close to the Christmas peak as possible. But not too close, not to increase the loss of sales due to stockouts, etc. The second one is about the spread of purchasing and mainly receiving of inventory over time.    

The strategy of optimization of warehouse capacity

This strategy is a bit risky, but it means that you can handle the Christmas peak in the same warehouse without any additional capacities. Usually, this strategy tends to have more human resources because you have to receive and sell your inventory in a very short time.

The strategy of optimization of labor sources

In this strategy, you start to purchase inventory for the Christmas peak a little bit earlier, and due to this, your peaks in receiving and put-away will be much lower. So you don’t need as many human resources as in the previous one, but you will definitely need a warehouse capacity. The risk of stockout will probably be lower.

You will need to prepare a sales forecast and purchase order plan to be ready for perfect execution in both cases. 

Prepare sales forecast for Christmas

Sales forecasting is the way to understand your historical sales quickly. Attributes like seasonality, trend, Christmas patterns, etc. will be identified, and you can use it for the future plan. 

You can use Inventoro sales forecast for a really low price. We are focused on small and medium companies from retail, wholesales, and e-commerce.

Be ready with your purchase order plan

Once you have ready your sales forecast for the Christmas peak, you can then decide what you need to buy from your suppliers. The crucial information is what, when, and how many you need to buy. 

Consider that your suppliers will probably face some outages in deliveries. You should validate their lead times, and these times you should consider in the process of creating purchase orders.

Like with the sales forecasting, you can use Inventoro for purchase order optimization and automatic replenishment.

Purchase only these products your customers will buy

In the last two years, companies added, on average, 40% of new products into their portfolio. This means enormous pressure on purchasing, logistics, warehouse capacity, people, customer support, and many other company processes. Of course, it’s one of the most important causes of excess and dead inventory growth.

The ability to pick the right products separates the best companies from the average. Don’t forget to analyze your current portfolio and gather just these products your customers are willing to buy. 

You can use our product segmentation, which helps you with understanding which products are winners and which are losers.