8/01/13

Special Report: Retailers map out their holiday strategies

Retailers must prepare their holiday strategies now to be ready in time for the busiest shopping season of all.

Internet Retailer

The dog days of summer may seem early for retailers to lock down their holiday season strategies, but considering that 32% of e-commerce sales in 2012 were generated between October and December, holiday planning can't start soon enough.

Successful holiday planning begins with retailers setting the goals they want to achieve and then identifying the tactics that'll allow them to succeed. Next, retailers should map out a week-by-week calendar that sets forth clear objectives and spending targets to ensure they don't prematurely exhaust their budgets. The road map should also include contingencies to respond to competitors' holiday strategies and consumer spending levels.

Lastly, retailers should analyze their performance during the previous holiday season to identify which marketing and promotional strategies worked and which didn't, where operational bottlenecks occurred and why, and when sales spiked. Performing such an analysis typically takes about a month.

"It's what we call the SEAL model: strategy, execution, adaptability and learning," says Udayan Bose, CEO of search advertising and marketing firm NetElixir. "The holiday selling season is a dynamic time, but many retailers don't prepare a holiday strategy. The SEAL model helps retailers understand what resources they need to successfully develop and execute their next holiday strategy and where they need help doing it. We recommend that all holiday-focused retailers do it by August."

An in-depth analysis of the previous holiday season reduces the chance retailers will overlook details that can have a huge impact on their sales, such as fulfillment.

"Many retailers tend to focus their attention on the marketing and promotional side of their businesses when planning for the holidays and pay less attention to operations and engineering back-end solutions," says Perry Belcastro, vice president of fulfillment services for Saddle Creek Logistics Services, a provider of fulfillment, warehousing, transportation and packaging services.

The surest way to get off on the wrong foot is by failing to ensure the warehouse is fully staffed with properly trained employees or failing to confirm that suppliers can fill and ship orders as anticipated when the first wave of holiday shoppers begin placing orders in October.

"There are a plenty of details beyond marketing and storefront operations that retailers need to be thinking about when planning for the holidays, but this can be overlooked," Belcastro says. "Retailers often feel they have addressed operational needs in their day-to-day operations planning." Any holiday strategy must leave room for flexibility, as retailers will find they are constantly fine-tuning their tactics to respond to consumers' holiday shopping behaviors and to competitors' moves.

"Retailers need to monitor their competitors day to day and analyze what kind of results a competitor's strategy is generating and how it affects their own holiday strategy," Bose explains. "Retailers may find out they are advertising on many of the same keywords as their competitors, so those words aren't yielding as high a rate of return."

To help retailers keep track of what their competition is up to, NetElixir has created a social media keyword tracking and sourcing technology that identifies in real time which keywords competitors are using in paid search campaigns, as well what customers are tweeting about. The technology automatically breaks the tweets into unique keywords that can be added, in one click, to a Google AdWords account via NetElixir's search engine marketing technology product LXRRetail. "Tweaking campaigns during the holiday season is a necessity and retailers need to be thinking creatively about how they can do that to stay ahead of the competition," Bose says. "Adaptability is about 20% of holiday planning."

Adapting fulfillment

In conjunction with adding labor, augmenting warehouse layouts and picking locations to optimize peak volume throughput also plays a big role in how well retailers adapt to the spike in orders and their ability to offer special value-added services during the holiday season, such as gift wrapping. Positioning best sellers in the most efficient locations to optimize employee travel and packing station flow can not only reduce costs, but also make sure peak volume orders are getting shipped on time. "Retailers may also want to consider reconfiguring space to add a gift-wrapping station if needed, even if it is only temporary," Belcastro says.

Retailers should also keep in close contact with suppliers during the holiday season. Doing so will allow retailers to more accurately understand when product shipments will arrive so the retailer can plan accordingly. During the intensely busy holiday season, this means having staff available to unload and stock inventory, and update the inventory status and counts that appear on the web. Retailers should also check that suppliers are shipping the correct number of SKUs in an order and that each item has the right bar code so that it can be correctly identified during the picking process.

"When it comes to fulfillment during the holidays, fulfillment operations managers need to plan beyond more than just how to manage the increase in order volume," Belcastro says. "The last thing retailers want are surprises when it comes to receiving shipments that can lead to stocking delays and negatively impact the availability of product in the warehouse. In addition, retailers need to be deeply involved with suppliers to ensure timelines are managed and product is shipped as expected to fulfillment operations."

Saddle Creek operates 37 locations across the United States that provide logistics, fulfillment, warehousing, transportation and contract packaging services to retailers. Saddle Creek's fulfillment services include the configuration of distribution and contact centers, returns processing, order management systems and systems integration.

Understanding search

Knowing which products are generating the most search queries during the holiday season is another variable retailers ought to track so they can adjust their search marketing and advertising accordingly.

"Retailers want to be advertising on keywords for these products to maximize their revenues," Bose says. "They also want to be identifying keywords for high-margin and high-velocity items. Advertising on low-margin and low-velocity items is something retailers want to avoid because the return is not that good. It is essential to customize bidding strategies per the margin/velocity grid. Retailers can't be using the same strategy for high-margin, high-velocity products as low-margin, high-velocity products."

Increasing visibility among mobile users is another element retailers should tackle in their holiday planning. NetElixir predicts that about 25% of search queries during the upcoming holiday season will take place on mobile devices, up from about 17% in 2012. Retailers, however, can't lump search behavior for tablets and smartphones together, because consumer behavior differs between the two devices.

Consumers performing a search on a smartphone are typically on the go searching with a specific intent, such as to locate the nearest store where they can purchase a holiday gift on their shopping list. Consumers searching on tablets, on the other hand, are often at home and more inclined to browse for gift ideas.

"Understanding consumer engagement patterns with mobile devices as it relates to search is a big part of developing a mobile search strategy," Bose says. "Most retailers don't yet understand how consumers search on mobile devices and need a partner that can help them gain consumer insights and develop an effective mobile search strategy."

Critical dates

A key element for judging the success of any holiday strategy is whether consumers receive their orders in time for the big day, as it directly influences customer satisfaction. Work backward from Christmas with carriers to estimate the required transit time to delivery and ensure there is clear communication to consumers regarding cut-off dates for delivery in time for the holiday, says Saddle Creek's Belcastro.

One way retailers can shorten delivery times is to place inventory closer to customers. While using multiple warehouses can, in some cases, enable same-day or next-day delivery, retailers need to consider whether they have the capability to fully stock multiple warehouses.

"This is an infrastructure issue that impacts business beyond the holidays, so retailers need to make sure they have the inventory to fill each warehouse and the financial resources to make this strategy work," Belcastro says. "This would enable lower cost one- and two-day delivery for shipments to most of the United States."

Finally, retailers want to make sure their holiday strategy is in place and has been thoroughly reviewed and ready by early September to avoid any last-minute technical or operational glitches once the holiday shopping season starts in earnest in October. Hitting that deadline means holiday planning needs to commence at least six months before early-bird holiday shoppers appear. "Holiday shoppers are placing orders earlier and earlier, which means retailers need to be ready to go when they are," Belcastro says.

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