If you’re in the retail game, then you probably have mixed feelings about the holiday season. It can be one of the most stressful times of the year— filled with inventory and cash flow challenges— but also the most lucrative.
According to the National Retail Federation, the average consumer will spend $1047.83 on gifts during the holiday season. That’s a whopping 4% increase from the previous year. This study also shows that the holidays can account for 20% of total annual revenue. For stores related to children— like hobby, toy and game stores— this figure is closer to 30%.
But this massive spike doesn’t just come naturally. In order to capitalize on the holiday opportunity in your store, you need to plan ahead by anticipating and strategizing to avoid inventory and cash flow issues.
When customers come to your store with a specific purchase in mind and find that item out of stock, they have a bad experience. During the stressful holiday season, creating a solid customer experience should be your main priority. Not to mention, the potential to miss out on massive revenue from simply not ordering enough inventory.
That’s why it’s crucial for your store to keep inventory levels high. But, it’s also important to avoid over correcting by purchasing too much. Having extra stock— especially for seasonal items— can take a financial toll too.
To prevent this problem, be sure to put time and energy into predicting the inventory levels you’ll need. You can base these predictions off of a few things, including
Big data can also help you take a more scientific approach to ordering holiday retail inventory the right way by analyzing social media, logistics data, and more.
In addition to the items that you have in your store, you’ll also have to consider eCommerce inventory levels. With more customers buying products online each year, this can be a huge area of opportunity.
Keeping online distribution centers and warehouses stocked is critical, too. Dropshipping has also become a common way for retailers to offer more products, but without stocking up ahead of time. Once a customer places an order, the dropshipper then fills that order (without you lifting a finger).
Doing your homework to find out what the best holiday sellers are is one thing. The next step— actually placing the order, receiving the merchandise in a timely manner, and selling it effectively— is the important step.
Working capital is the lifeblood of your retail business, especially as you face holiday inventory challenges. Simply put, you can calculate your working capital by subtracting your liabilities from your expenses.
This working capital is what you’ll use at various points throughout the year to drive additional sales. In most cases, purchasing additional holiday inventory will put your expenses above where they’d be otherwise.
An effective holiday sales push will require far more working capital than other times of the year. But if you haven’t yet seen an increase in sales, then you’ll need to venture outside your revenue to get it.
When you need additional working capital to cover holiday inventory expenses, getting a small business loan or line of credit may be the way to go. This fast financing option gives you the money you need to make purchases right away, and the freedom to pay back the loan after you’ve earned additional revenue.
You know you’ll need additional hands on deck to seamlessly manage the holiday traffic— the National Retail Federation estimates that stores will hire up to 590,000 temporary workers over the course of the holidays. But you can’t afford to wait until seasonal sales kick in and you have the cash flow on hand to hire your new employees. So what are your options?
You can’t wait until holiday sales are in full swing to start hiring (and training) new employees. If you do, then you’ll have frustrated shoppers on your hands. Hiring seasonal help before the big push allows you to properly educate and train your employees, so that they’re seasoned and ready to help shoppers during the peak of your holiday sales.
A small business loan or line of credit for your retail store can help you cover all of these necessary expenses. As the season progresses, you’ll have the cash you need to pay both your employees and for your financing.
Even the best-prepared retailers run out of stock eventually. Unfortunately, it’s just part of the cycle.
But by confronting holiday inventory and cash flow challenges head-on, your goal shouldn’t be to avoid reordering inventory. Instead, it should be to devise a smart, foolproof system that enables you to quickly and efficiently restock when necessary.
To keep your inventory expenses as low as possible, be sure that you’re getting the best holiday rate. You may also be able to purchase slightly more than you’re projecting to sell in order to get a better deal.
If you have a long-standing relationship, try negotiating a prime position with your supplier. This might mean first access to newly available holiday sellers, or same-day shipping.
To improve cash flow during this expensive time, you may also be able to delay invoice payments. Be sure to take advantage of every available opportunity.
You know you’ll have countless expenses during the holidays. There are probably tons of unpredictable expenses, too. So, which type of funding makes the most sense?
SBA loans have the lowest rate, but this long, drawn-out process isn’t the best fit for financing during the holidays.
Term Loans: Small business loans allow you to draw a set amount of money and pay it back over a certain period of time. There are no restrictions around how you can use the funds, so you have full freedom to use them according to your needs. And, you can get funding in as quickly as 24 hours!
Business Line of Credit: A line of credit offers you the same fast financing as a small business loan, but without requiring you to take the full amount. As you need funding, you can gradually draw more, and pay it back as you go. You’ll only have to pay interest on the amount that you take, too!
Equipment Financing: You should never underestimate the value of replacing your outdated POS with a new, up-to-date system that expedites checkouts to a few seconds. Equipment financing can help you cover the cost of replacing or adding any equipment your store needs.
It only takes 60 seconds to fill out our application, and a Business Financing Advisor will reach out right away! Start beating out your competitors now by applying today!
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Megan is passionate about helping business owners along their journey - providing them with relevant content they can use in their day-to-day operations.