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BFS Capital Blog

Preparing Retail Inventory for the Holiday Season

November 1, 2016

Last minute holiday shopping is fine for consumers, but most small businesses can’t afford to wait to do their holiday inventory planning.

For many small retailers, as much as 30 percent of their annual sales occur in the final two months of the calendar year, according to the National Retail Federation. So there’s little room for error in having the right stuff to sell to your customers during this critical time.

Here are some tips to help your business ring in the New Year on a happy note.

Know What You Have and What You Need

Before starting anything else, you need to analyze your inventory. If you have records from the previous year, review what sold well during the holiday season. You’ll also need to know what products sold best during the current year as those items are likely to drive your December sales. Conversely, if you have items that haven’t sold well in September and October, mark them down or remove them before the season starts.  Your goal is to focus on your best sellers.

To fully understand what is trending in your sector, talk to vendors and scope out competitors and websites. You also need to venture outside your immediate area to get a broader perspective on what is selling.

If you have a physical store, figure out if you have enough of space to store the additional holiday season inventory.  You should also consider ordering enough types of products to cycle new merchandise every two weeks during this season to give customers a reason to come back.

Determine how much inventory you want to have in stock at the end of the season so you don’t run out of your best-selling items too early and lose critical sales in the last few weeks. However, you also want to avoid excess inventory that will have need to be heavily discounted, which will cut into your profits.

Set Your Monetary Goal

Once you’ve analyzed your sales data and identified what are likely to be your best selling items, figure out what is a realistic monetary sales goal for this season. Once you have an estimate, the next step is to determine whether you can afford the costs to purchase inventory.

If you do not have the cash readily available or don’t want to tie up your cash reserves or business credit lines, a good solution is a short-term inventory loan that is paid off with the proceeds of your holiday sales.  For this type of loan, it’s better to estimate the amount you can pay back shortly after the season ends and not go significantly over that amount.

BFS Capital is among the alternative lenders that offer short-term flexible inventory financing that will allow you to get the inventory you need to have a robust holiday season.  Loans from BFS Capital range from $4,000 to $2,000,000.

Keep Talking

Before the holiday rush starts, get a delivery date from your vendor for every single item and quantities you are ordering.  When speaking with vendors, ask about substitute items for those that aren’t available.

Make sure you stay in constant touch with your vendors throughout the holiday season. You need to know what is selling and what turned out to be a dud. Many vendors are willing to provide substitute items for poor-selling merchandise.  Remember, you have the power to negotiate with your vendors, don’t just accept the first offer if you think it’s too low.