Use it to impact the bottom line
Generally, retailers plan months ahead Valentine’s Day to design its product offering to its customers, just as we do for our significant other. One of the steps at the planning stage is taken by its purchasing department. Commonly, they use a supply chain concept called Seasonal Index (SI).
The SI is a calculated value to forecast customer demand trends for a product. In addition, the purchasing department utilizes historical sales data, current market information, customer preferences and tastes, brand identity, and cost per unit, among other elements to select appropriate merchandise, and quantities to determine the pricing strategy the stores should pursue for the seasonal product.
These products have the particularity that its demand varies in yearly cycles. This means that the product will have a peak time in a certain moment of a given year. Valentine’s Day products have its peak time during the first two weeks of February.
Usually, Valentine’s Day products that do not sell on or before Feb. 14 are marked down to the cost per unit, which is the price per unit that the retailer paid to the supplier or manufacturer, or break-even price. Valentine’s Day leftovers can be good incentives to increase units per transaction or UPT and consequently boost your store sales after Valentine’s Day. Instead of selling Valentine’s Day product leftovers almost for free, retailers should consider creating promotional sale offers. For example, “Buy 2 pair of socks and get one heart printed boxer for $2”.
This kind of promotional offer has its rationale. First, socks and boxers are complementary items, which mean that one may increase the sales of the other because they are somehow related; both belong to the underwear category. Second, the promotional offer persuades the customer in terms of pricing.
When the customer thinks about the offer, one of the first things that will come to his/her mind is that he/she is getting three products for a lower price. Third, the promotional offer gives a second chance to the Valentine’s Day product to sell. It can still be a potential gift to someone. And fourth, it certainly lowers Valentine’s Day inventory before the retailer has to sell it at a break-even price or lower, or ask the supplier/manufacturer for credit if available.
It is important to remember that sales representatives are an integral component of any retailer sales plans and strategy. They can greatly support promotional efforts to positively impact the bottom line.
In the other hand, retailers should avoid restocking Valentine’s Day product for next season. They can lose more than a couple of dollars, they can lose thousands. The product could get damaged by water, humidity, and fungus, leaving the retailer with an inventory impossible to sell.
On the other hand, the retailer’s loyal customers will not be motivated to buy the same last year product. They will notice it and the customers’ money will be running to the next-door store.
It is highly recommendable for retailers not to only perform forecasting exercises to predict demand, but also, to have a plan b for the worst scenario to proactively mitigate any losses.