With the festive season making up the most lucrative part of the year, it’s not surprising that the post-holiday period is marked by a drop in sales activity.
Once the gift-buying frenzy is over, consumers are less likely to be browsing ecommerce websites or visiting stores. As a result, most will merchants will find themselves experiencing a noticeable dip in revenue during Q1.
Data from the U.S. Census Bureau backs up this trend, with U.S. retail e-commerce sales in the first quarter of 2021 shrinking by 16.7% compared with Q4 of 2020. This is actually a smaller dip compared with previous years, where Q1 sales dropped by 21.1% and 19.7% in 2020 and 2019 respectively.
While it’s difficult to forecast what Q1 has in store for 2022, ongoing supply chain challenges during Q4 have certainly constrained consumer spending. Online shoppers spent a total of $8.9 billion on Black Friday, falling short of the $9 billion spent in 2020, while Cyber Monday saw a 1.4% decrease. While some consumers may be hoping for better deals in the New Year, looming inflation could also stifle sales activity.
So, what can merchants do to avoid the worst of the post-holiday slump? Try some of these top tips:
‘Cross-selling’ is when website visitors are presented with product suggestions during the shopping journey. These could be based on items you’ve recently browsed or products that are complementary to those already placed in the shopping cart.
The goal of cross-selling is to convince customers to purchase additional items they didn’t initially plan on buying, thus increasing AOV and creating additional revenue. A study by McKinsey found that cross-selling strategies increased sales by an average of 20% on an annual basis. This can make a significant difference to your bottom line during slower periods of the year like the post-holiday season.
Cross-selling has another benefit in the form of lowering your operational costs. For example, if customers are purchasing multiple items per order instead of one at a time, this helps to lower your shipping and packaging costs over time, which means stronger profit margins.
There are several ways that your business can cross-sell to consumers, such as:
Excess inventory has a variety of causes, from poor demand forecasting to SKU proliferation. But the holiday season itself is one of the biggest reasons excess why retailers can find themselves with too much stock on the shelf in Q1.
Taking a ‘just in case’ approach to seasonal inventory in advance of the holiday season is a good strategic move since customer demand during Q4 sees a significant uptick. But almost every retailer finds themselves with excess inventory that’s tough to shift when the New Year begins.
From holiday-themed merchandise to collections designed for gifting, a lot of inventory has a limited shelf-life once the holiday season is over. So, if you want to prevent excess holiday inventory from becoming dead stock, you’ll need to act quickly.
On the upside, excess inventory also creates a lot of opportunities for retailers to revamp their product offerings and offer something fresh in the New Year. Here are some of the best ways to tackle excess inventory in the post-holiday period:
Discounts. Putting a steep discount in place is a great way to clear out excess inventory. However, you need to be careful not to exacerbate excess inventory by ‘training’ customers to wait for post-holiday season sales.
Product bundling. Bundling is a highly effective technique to improve the value proposition of slow-moving items, pairing them with a more popular product in the same category.
Gift with purchase. Another option is to repurpose your excess inventory as a gift with purchase or for social media giveaways. These activities leave customers with a positive impression of your brand and help to drive enhanced feelings of customer loyalty.
Loyalty reward programs offer a lot of levers for brands to pull on whenever sales get a bit slow. They allow you to target your promotional efforts on your most loyal customer segment, which in turn increases Customer Lifetime Value.
Launching some fresh loyalty offerings in the post-holiday period has two key benefits. In the short term, it helps to increase sales activity. But in the long-term, a spate of membership-only deals and promotions raises awareness of what customers can gain by joining, helping to drive more loyalty program sign-ups.
There are some loyalty offers you should consider using in the New Year:
It’s worth remembering that today’s consumers are showing an increasing preference for experiential as well as discount-based rewards. According to Clarus Commerce, the amenities that would motivate customers to join a loyalty program are:
Sephora’s Holiday Savings Event is a great example of how to reward loyalty members and also publicize the benefits of your program. Their highest ‘rouge’ tier gets the biggest discount and the earliest access to the sale, while their lower tiers get less. By showing both members and non-members what they could be eligible for with higher spending, it’s a powerful motivation for all customers to spend more.
Sometimes, discounting inventory is simply not enough to drive consumer interest after the holidays. Having already experienced the likes of Black Friday and Cyber Monday, so-called ‘deal fatigue’ can set in and make consumers much less responsive to offers.
This means that items end up getting relegated to a sales section in your store or on your ecommerce website, where they can end up gathering dust. Instead, you should consider launching a flash sale after the holidays to help drive urgency to purchase.
A flash sale is when a retailer offers a substantial promotion for a very short time period, usually 24-72 hours. This usually involves steep discounts, free shipping, and/or additional perks such as gifts with purchase.
Using a limited time window helps persuade your customers to jump into action to avoid missing out on a great deal, which is perfect for times like the post-holiday season where sales are sluggish. Flash sales also offer very low stakes for new customers to try out your brand and form a relationship with your business.
However, it’s important not to use flash sales too often, or you will end up sabotaging your own promotions; if customers know that another great offer will be on its way soon, they have little incentive to purchase.
The toughest part of the post-holiday period isn’t just slower sales, but the boomerang effect of all those unwanted holiday gifts flying back into your warehouse.
According to the National Retail Federation, 13.3% of total merchandise sold during the 2020 holiday season ended up being returned – resulting in a loss of $101 billion in revenue for retailers.
It’s also looking like this year could be worse than in the past. A 2021 consumer study from Oracle, which found that 42% of people are already planning to return at least some of this year’s holiday gifts – 4% higher than 2020 (38%).
In sum, an uptick in returns will end up compounding the post-holiday slump – and this doesn’t spell good news for your business.
It’s inevitable that consumers are going to want to return items. Trying to dissuade them with a complex return process is only going to hurt your reputation and increase customer churn. Instead, use your return process as an opportunity to enhance the customer experience by making it easy to make exchanges instead.
By making exchange the first port of call in the New Year, you can transform returns from a drain on revenue into a revenue generator.
The post-holiday slump is a tough period for retailers, especially alongside the peak return season. Post-holiday selling isn’t just about steep discounts but ensuring that you provide customers with the right product recommendations and perks to make the shopping experience enticing. By following the selling strategies we’ve outlined above, you can transform Q1 from a sluggish start to the New Year into an opportunity to capitalize on changing consumer purchasing behaviors.