No matter how much retailers try to dictate the year through sales and promotions, they are inherently slaves to the calendar as consumer preferences undergo multiple changes throughout the year.
The changes in product and industry demands are extremely beneficial to some retailers, allowing them to offer seasonal lines and specials- ranging from summer/winter clothing lines to the availability of certain agricultural products. Consumers often gain increased benefits by buying products for the “off season,” such as coats or winter boots as summer approaches, or other types of clearance sales. These businesses are able to benefit by aligning rotating inventories with fluctuating consumer demand.
On the flip side, consider businesses that have products or services more heavily targeted at certain seasons of the year. For instance, think about ice cream sales. With the exception of certain inevitable craving moments, ice cream store owners tend to see large spikes in sales during the summer months. Or take ski resorts as a counter example. They depend on the winter months to generate most of the operating revenue for the entire year!
Retail businesses are heavily reliant on projections of sales spikes and slowdowns in order to make the right decisions throughout the year. The holiday seasons in the fourth quarter tend to bring in the most customers and sales for the retail industry. Some crafty retailers have even managed to invent seasons- like “back to school” season for example. It is important for businesses to have the right amount of resources to help customers, as well as the appropriate mix of inventory to maximize sales and increase customer satisfaction as well as brand positioning. During slow periods, it is important to have enough cash on hand to pay for fixed expenses that are associated with businesses. Proper planning is crucial for businesses to keep up with the fluctuations of cash flow throughout the year.
Accurate projections are directly related to successful financial planning for the year. Retail businesses need to determine the correct products and respective quantities to stock. The goal is to allocate the right amount of resources to help consumers during busy periods. Tracking history of sales and creating forecasts through an ERP system have helped businesses determine the traffic expected in their stores, whether it be online or in brick and mortar locations. Retail businesses control the cost of resources and make correct decisions, such as buying additional servers or hiring of seasonal workers so that customers have the best shopping experience. ERP systems can save businesses money by preventing overspending on stock that will not move and by purchasing enough stock to fulfill customer demand, thus preventing lost sales.
During lean times, it is important for businesses to monitor cash flow. Businesses can control cash on hand during slow times by offering incentives to customers on payments on their purchases as well as delaying payments made to vendors using an ERP system. Retail companies can also look at their current inventory levels to determine the right price cuts to attract customers for excess and aged inventory based on data provided by an ERP system. Decisions made during non-peak times on inventory and cash can help retailers be prepared to purchase and sell the correct level of inventory during slow and peak seasons.
Proper planning is crucial for retailers as the industry relies heavily on forecasted sales during peak seasons. Cash woes during lean seasons and unexpected expenses can affect businesses and cripple their bottom line. It is imperative for retailers to maintain a more wholistic view of their annual sales forecasts. With the use of an ERP system businesses have been able to have more accurate forecasts as well as transparency to data and a better understanding of how to handle fluctuations of cash throughout the year. Contact HSO today for more information.
About HSO Retail
HSO, Microsoft’s ERP Partner of the Year 2014, is a leading provider of enterprise business solutions for the Multi-Channel Retail and Service industries, including Microsoft Dynamics AX, CRM, Office365 and SharePoint. For more information, contact HSO at (847) 348-0588, through email info-usa@hso.com or visit www.hso.com/us.
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