5 Factors to Help Plan Your Holiday Inventory

by Susan Johnston on October 1, 2012
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The leaves have barely started turning colors, but it’s not too early to start planning your holiday inventory, especially if you order products from overseas.

“If the product is imported, the lead times are getting longer and longer,” says Carie Doll, chief merchandising officer at Costa Mesa, Calif.-based Anna’s Linens. “With production timelines and labor availability in China, we really have about a nine-month planning cycle.”

Yet ordering too early can backfire, because your forecasting excludes recent developments. Jon Schreibfeder, president of Coppell, Texas-based Effective Inventory Management suggests that you “bring inventory in as close to when you need it as possible. Give yourself as much time as you can to get a better forecast.”

Here are five factors to consider when planning your holiday inventory:

  1. Past use. “The most significant data input is going to be the most recent year’s selling history,” says Doll, who also considers the previous two years, given that other factors can influence sales from year to year. Of course, if you aren’t selling the same products as last year, Schreibfeder suggests comparing similar products. For instance, you might sell a brand-new digital camera but could compare it to last year’s model for forecasting purposes.
  2. Internal trends. In addition to sales stats from previous years, Schreibfeder suggests looking at which products are increasing or decreasing in popularity now (“internal trends,” as he calls them). Doll pays careful attention to color, too. “Sometimes there can be shifts in color preferences over the year, so we track everything at the SKU level,” she says. “We know color trends as they begin to move up or down in the hierarchy and track them across all our product categories.”
  3. External trends. Other factors, such as weather or the local economy can influence sales, too. For instance, last year’s unseasonably warm winter drove down sales of certain products at Anna’s Linens, Doll notes. “The warm weather dramatically impacted the sales of blankets and throws which make up a significant portion of our cold weather offerings,” says Doll. “Flannel sheets and down comforters are a smaller segment of the business but were impacted as well.” And if a major local employer has recently laid people off — or doled out bonuses — that can also impact your bottom line.
  4. Promotions or other events. Look at the products or promotions your vendors are pushing and consider which ones you might offer yourself, Schreibfeder suggests. Will you be hosting a local author for a reading? Or cross-promoting your Nutcracker-themed Christmas tree ornaments with a local dance studio? Order accordingly.
  5. Collaborative information. Lastly, consult your salespeople and other staff to collect what Schreibfeder calls “collaborative information.” That is, “things that are changing in the marketplace, such as competitors leaving or entering the business, or things that people are observing, like certain products gaining or losing popularity,” he says.

Susan Johnston is a business writer for Intuit and is passionate about solving small business problems.

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