Neil Sansom, marketing director of online clothes company MandMDirect, saw a 30 per cent increase in his company’s turnover last December, but expects this year’s Christmas sales to be more difficult.
‘It will be a tough Christmas because people have less disposable income, and with fears about unemployment, customers will be more price conscious. The retail landscape will be very competitive. As such, I expect to see a last-minute surge in shopping, as consumers hold out for the best deal.
‘We will probably give some extra discounts, because if we didn’t customers would go elsewhere for value,’ he adds.
But Sansom is in a fortunate sector. Online sales for December 2008 were up 14 per cent on the previous year, compared with a contraction of 3.3 per cent for high street sales, which fell to their lowest level in 14 years. So far, all indications suggest a similar story for this year.
Speeding ahead
For Alan Braithwaite, chairman of LCPConsulting and visiting professor at Cranfield University, the benefits of being online in the current climate are self-evident. ‘No-one with a reasonable retail presence can afford not to use [the internet]. It reinstates your brand and means that you can interact with the customer through a variety of channels.
‘To some extent, the internet has cannibalised the high street, with people looking in shops and then ordering online. But even online, people will still only buy from businesses they trust,’ he says.
Braithwaite agrees that the key to maximising Christmas sales for online retailers is to have strong offers in place. ‘The Christmas market is unbelievably competitive. As people have more time when they’re at home shopping, they’ll be using tools like price comparison websites to get the best deals. So it’s vital that retailers stay on top of trends, prices and offers available.’
But as a medium that customers can click out of as easily as they can access, e-retailers can’t afford to get anything wrong. ‘Being online, you can’t lead a customer somewhere they don’t want to go, and there are no salespeople trying to encourage additional purchases,’ says Braithwaite. ‘Not having a rapport with people is a definite disadvantage. And if a customer gets frustrated by the layout of your website, you’ve instantly lost them. So it’s really worth investing in a good layout and design.’
Sansom says that, as an online retailer, one of his biggest concerns is ensuring that customers receive all their deliveries on time. ‘We have around 50 people working on our customer service team to deal with any wayward deliveries. As we get closer, we make sure all customers are aware of the last delivery date – which is normally two to three days before Christmas. If it needs to be delivered that day, then we have a courier service running right up until Christmas Eve. You can’t afford to risk losing custom.’
Ian Middleton, managing director of Argenteus Jewellery, intends to extend the e-commerce arm of his business, but says uncertainty over Royal Mail has meant he will delay plans until next year. Instead, instore planning will remain his focus.
‘Service is everything. It’s important to keep the atmosphere happy and festive, because the last thing you want is disgruntled consumers. Christmas can be a great time for new customers. If you get it right, they’ll be coming back later in the year.’
But one thing Middleton is adamant he won’t be doing this year – as seemed to be the high street trend in 2008 – is pre-Christmas discounting. ‘I really don’t understand the rationale behind that, as Christmas is supposed to be the busiest time of the year. We make around 40 per cent of our profits in that period. So it makes no sense to knock a hole in your margins like that,’ he insists.
Buying jewellery is still about the experience, according to Middleton. ‘It’s something that is aspirational and that people buy into because of the perception of it having an intrinsic, personal value. The “pile it high and sell it cheap” approach, with sales signs plastered everywhere, spoils the effect of that illusion. Cutting prices to increase revenue equates to the maxim that turnover is for vanity, profits for sanity.’
Likewise, Christmas is no time to start experimenting with your stock range. ‘Don’t go for new territory at Christmas – that’s another thing that we’ve learnt from experience. Stick with your well-established, marketable lines,’ adds Middleton.
Having the right quantity of stock is a key concern for Middleton, as is the split between “sale or return” goods, which can be returned to wholesalers if unsold, and other items, which may be priced more attractively but represent a gamble.
Braithwaite advises all retailers to be cautious with their stock levels this year. ‘The worst possible thing will be for retailers to be left with stock in January. As businesses move into the peak season, they should review their winners and make sure that they back them. If products look like they are not going to hit forecast, advertise more and do deals. Doing that early will work much better than having to slash prices later on.’
Smooth operations
For both high street and online retailers, having enough staff is crucial. ‘The biggest issue for us will be the manpower in the call centre. We take on a lot of casual workers in mid-October and train them to get up to speed for the peak,’ says Sansom.
Employee know-how is vital, agrees Middleton. ‘We are careful not to have too many members of staff in who aren’t experienced. That has been a problem before. We also sit down in October with our rotas and make sure no-one will be off over that period. We use a lot of temps at Christmas, so we make sure we don’t leave them in charge of anything that requires specialist knowledge.’
Maintaining a steady flow of customers is equally important operationally – for one thing, you don’t want workers bored one moment and frantic the next. ‘We’ll definitely be offering “buy one get one free” offers before December so the footfall evens out over the Christmas period,’ says Samson.
Rewarding loyalty
Though Middleton spurns the idea of discounting in the run-up to Christmas, Argenteus does offer double points on its loyalty card in November to get customers in the store the following month.
Mark Davis, owner of website Obsession Art, agrees that this is an important time to market to your loyal customers in order to attract their business throughout the rest of the year. ‘We have a strong client base, so we’ll be sending all our customers who have made purchases above £100 a Christmas card,’ he says.
There’s no denying that this year will be make or break for many businesses, with professional services firm BDO predicting that there will be more than 5,000 company failures next year (compared with an estimated 4,630 in 2009).
However, Christmas hasn’t been cancelled, as some would have us believe. ‘I think it will be better than the worst predictions, but it’s not going to be exciting,’ counsels Braithwaite. ‘I’d expect it to be flat or down on last year, and a lot of retailers will, and should, be budgeting on that basis.’
