Shut up and take my money!

  • August 6th, 2019

Holiday Season is undoubtedly the most awaited period of the year for people all across the world. Starting November, there is a string of festivals celebrated in the United States. The excitement kicks off with Halloween which is celebrated towards the end of October and it continues till the first week of January.

What is Holiday Season?

Holiday season is the period starting from Thanksgiving and ending on the 2nd of January next year. Encompassing a number of celebratory occasions from Thanksgiving to the New Year’s, this is a period of joy for consumers and retailers alike. For people, Holiday Season to most means enjoying a break from work, spending time with family and loved ones, taking part in festivities and traditions and of course, buying and exchanging gifts, which is what the Holiday Season is known for. Here’s a quick rundown of a few key festivals falling inside the Holiday Season.

Thanksgiving – Falling on the last Thursday of November, it is the day people get together with family, cook, watch sports and have a sumptuous dinner. Not much consumerism is involved.

Black Friday – Black Friday is the day after Thanksgiving. It is the biggest shopping day of the year. The term “black” is an accounting expression for the practice of recording profits in an accounting ledger in black ink; losses are recorded in red ink. It is common for retailers to offer special promotions during the pre-dawn hours of Black Friday to attract customers.

Cyber Monday – The Monday after the Thanksgiving weekend has been termed by marketing companies as Cyber Monday, offering great deals and discounts for electronic goods.

Others – Hanukkah is a Jewish holiday and is observed for eight days (mainly around late December) depending on the Hebrew calendar. It is also known as the Festival of Lights and the Feast of Dedication. Kwanzaa is celebrated by African Americans in the United States. It is observed from December 26th to January 1st. Signifying the birth of Christ, Christmas is celebrated by billions of people around the world.

The Holiday Season for me has always been that time where we get off of school for a few weeks to enjoy friends, family, playing in all of the snow, and CHRISTMAS! From Christmas movies to Christmas cookies, this has always been a time full of love, joy, and cheer; all of the warmth you can ask for cold winter nights. – Thomas Peterson The holiday season is a time to spend with family, eat delicious food, and to sleep. This is when kids are out of school and adults are home from work. We can finally go ice skating, drink hot chocolate and sit by the fireplace. – Campbell Hawk

What does Holiday Season mean for business?

It’s the busiest time of the year for retailers, where they make most of their money. According to the National Retail Federation, the holiday sales for this year can increase 3.7 percent to $630.5 billion, compared to last year’s 4.1 percent growth.

Black Friday and Retail Spending

Retailers spend an entire year planning their Black Friday sales. They use this day as an opportunity to offer rock-bottom prices on overstock inventory and move it out of their back rooms. Black Friday is also the day when retailers offer discounts on seasonal items, such as holiday decorations and items consumers typically buy as holiday gifts. They also offer significant discounts on big-ticket items, such as top-selling televisions and smart device brands.

Read the National Retail Federation’s detailed analysis of 2016’s Black Friday sales here.

Here’s a sneak peak of Holiday Season sales and spending stats for the retail industry and consumers:

  • The holiday season accounts for as much as 30% of a retailer’s annual sales
  • Average increase in holiday sales for the past 7 years in 3.6%
    • In 2015, holiday sales increased by 3.2% over the previous year
  • Average spend of a consumer during the holiday season is over $800
    • Consumers consistently increase their spend every holiday, with 2015 witnessing an 22.8% increase
  • Generous holiday promotions invite shoppers to retail channels
    • 3% of shoppers claim ‘discounts’ to be their driving factor
    • 1% of shoppers claim ‘Everyday Low Prices’ to be their driving factor

Importance of Holiday Season for America’s largest retailer:

Sales contribution of holiday to the retailer ~ 20%

  • Sales during 2015 holiday period ~ $54B
  • Annual sales 2015 ~ $273B

Below is a graph on their holiday sales since 2002:

Amongst other parameters that get affected for retail businesses are hiring and working capital. Due to number of orders and delivery shipments peaking during this period, not only do they have to hire thousands of extra associates but the working capital goes up as well, i.e. operational and delivery costs, as many companies offer free shipping. The holiday season rush also allows managers limited amount of time to plan for all of this, hence an analytical framework to support business planning becomes very vital for all retailers trying to make hay in the Holiday Season. Here is where Mu Sigma has come in, helping America’s largest retailer maximize the opportunity available by looking at things through a customer’s lens. Over the past 5 years, we have been enabling them to achieve positive year on year growth by driving better business planning for the Holiday season. Decisions around assortment, pricing and marketing are driven by understanding and identifying patterns in customer behavior and shifting trends.

Stay tuned for the next article in this Series, where we talk about the execution of the analytical framework for Holiday Season.