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With the holiday season in hindsight, it’s time to recap retail’s most important time of year to see what’s working, and what isn’t. According to data from Mastercard, we’ve just enjoyed the strongest holiday retail season in six years, capping at $850 billion and up 5.1 percent compared to last year.
Online retailers in particular are ending the year on a celebratory note, as spending in their sector went up 19.1 percent compared to 2017. “By combining the right inventory with the right mix of online versus in-store, many retailers were able to give consumers what they wanted via the right shopping channels,” says Steve Sadove, senior advisor for Mastercard and former CEO of Saks.
While retail is thriving in many ways, it could stand to grow in just as many, particularly for SMB retailers. Let’s look at what worked and what didn’t this holiday season.
Early Prep, Sales And Promotions Turn Profits For Most
In a survey of over 900 self-employed online retailers, Intuit discovered that 29 percent see their annual profits double or more during the Thanksgiving and winter holiday season. That puts a major onus on them to perform well at year’s end. Preparation starts early.
September is when most online retailers begin their holiday prep. Some start earlier, with about 20 percent preparing a full year in advance.
Despite all that buildup, there are still 1 in 5 SMB online retailers who say they don’t see an increase in profits over the holidays. “Nearly 30 percent say sales and promotions reduce profits, and they only offer deals to keep a competitive edge during the high season,” says Jeremy Sulzmann, Business Segment Leader at QuickBooks Self Employed, who was part of the team behind Intuit’s survey. The holidays have some SMBs working harder to break even.
When I spoke with Sulzmann, he told me that the biggest challenge for solo entrepreneurs and large market retailers alike is the competition, particularly the need to compete for digital ‘shelf space’.
“To combat this,” he said, “85 percent of respondents said offering sales and promotions is their go-to competition strategy.” He adds that for the majority, the sales and promotions are reflected in stronger profits.
Online Ads Preferred Over Word Of Mouth For Holiday Marketing
Promotions made the list of top five most effective ways to market for the holidays. But they’re still not as important as word of mouth. And the oft-revered word of mouth, despite having a considerable impact on SMBs compared to large retailers, one that generates profits all down the supply chain, took a backseat to what retailers say is their number one holiday marketing tool this year: online advertising. All those Google and Facebook ads seem to have paid off.
Also shortlisted as favorite marketing tools were customer reviews, which 40 percent of Intuit’s respondents consider essential to business.
When retailers combined WOM-inspired marketing strategies with digital ads, however, it paid off. Luxury sneaker brand Koio used an aggressive online and physical campaign that harnessed a coalition of over 40 top fashion influencers to build awareness around the ethically conscious luxury shoe brand.
Then, they amplified the influencer efforts with media in key cities like LA, Chicago, and New York, having a CTA that directed to stores as well as online outlets. This marketing strategy helped Koio strike a major chord with millennials in 2018.
SMBs Need To Master Their Sales Data
Marketing, promotions and preparations won’t be as effective without sales data from previous years. But most small online retailers, Intuit found, need to improve the mastery of their numbers.
“Only 1 in 4 retailers said they’ve mastered the use of their sales data,” Sulzmann told me, “which means nearly 75% believe they can make better use of their sales data. This represents a major opportunity for retailers to better maximize sales and profits.”
Most retailers work extra hours during the holiday season. Intuit’s survey finds them eschewing family time, alone time, time to rest, and time to buy gifts in order to work more. A harried 6 percent work as many as 40 extra hours per week during the holidays. Most of this time, they found, is going to sales, product supply, customer service, and fulfilling orders.
Because every sale and fulfillment generates data, next year will be easier for SMBs who organize it, analyze it, and use it in their year-end planning.
Holiday 2018 Wrap-Up
We can end this year with a toast and a smile, but as always in retail, the growth never stops. Moving into 2019, we can look forward to continued growth by doubling down on holiday preparation and starting it early, ensuring sales and promotions are turning a strong profit, making strong investments in word of mouth and online ad campaigns, and most importantly, getting a handle on the sales data from this year.
December 28, 2018 at 01:31PM
Forbes – Entrepreneurs