In e-commerce, major sales spikes tend to come around the same time every year. Why is it that peak seasons still manage to hit your business like a whirlwind?
If you’re like most retailers, you already know that with a little extra planning, you could capture more revenue from massive sales events like Black Friday. However, making time to focus on the right peak season strategies at the right time is easier said than done.
This year, don’t just “get through it alive”. With Amazon Prime Day around the corner, it’s time to fine-tune and optimize. In this guide, we’ll show you how the right data and planning can help you build a stronger peak season sales strategy for your e-commerce business.
In the US, and throughout much of the world, e-commerce sales tend to peak around the three key times of year.
Of course, the shopping events you choose to participate in will always depend on your market and category. Other major shopping holidays in the US include:
If you sell internationally, consider planning for additional peak times in other countries, including:
The most successful e-commerce businesses take the time to prepare for peak season sales long before they hit. The great news is, once you know what you’re looking for, it’s not hard to do.
Here are some of the most impactful ways to use your business data and core key performance indicators (KPIs) to create a game plan that helps you get the most of every season.
To make the most of the busiest seasons, you first need to know where you stand. Is the business cash flow positive? How much capital is available to invest in holiday season campaigns and promotions?
Your profit and loss (P&L) statement will give you the big picture of how much cash you’re spending and making, so that you know exactly how much capital you have available to invest in your peak season initiatives.
Your core P&L metrics will include your:
If possible, ask your accountant or financial advisor to take a closer look at your current numbers compared to previous years. With a little tweaking and fat-trimming in the quarters leading up to your peak season, you may be able to put together a healthy Q4 marketing budget faster than you think.
Why do yourself what someone else can do better and cheaper?
With more time and energy to focus on your highest-impact tasks, it pays to outsource things like web development, logistics, marketing, and customer support to an external specialist. This is especially true ahead of peak seasons, when you have multiple priorities competing for your attention.
To perform an outsourcing cost analysis, define the exact business function you want to outsource and add up all the costs required. Then compare this figure against what it would cost to perform the same function in-house. Don’t forget to consider “hidden” staffing costs, like employee benefits, taxes, overtime, etc.
To secure top talent at a potential discount, consider sourcing from an agency in one of the following countries:
As with every hire, make sure any partners you contract with are well-treated, compliant with international labor laws, and paid fair and transparent local wages.
Nothing’s worse than stocking out of your best-sellers during peak season.
To keep the revenue flowing, make inventory planning a priority in the weeks leading up to a major shopping event or holiday season. With a strong inventory strategy, you can make sure the right products remain in stock, while reducing the likelihood of overspending on carrying costs.
Here are some of the key metrics to consider as you streamline your inventory strategy:
Your inventory turnover ratio is a measure of how often you sell and replenish your stock of a given product within a given time period (typically, one year). To determine your ITR, divide your cost of goods sold (COGS) by the average value of inventory within that time period.
A high inventory turnover ratio is generally good, because it means your products are moving quickly and you’re not tying up too much capital in slow-moving stock and storage costs. To improve your ITR, use demand forecasting software to identify key patterns in seasonality and adjust your e-commerce fulfillment process to make sure you’re keeping just the right amount of inventory in stock.
For peak shopping events like Prime Day and Cyber5, it’s critical to have enough inventory on-hand to meet increased demand. That’s where your stockout rate comes in.
Your stockout rate tells you what percentage of your products aren’t available when a customer made a purchase. At least three months ahead of your peak seasons, take time to assess the stockout rate of every product in your inventory. Then use your inventory planning software to adjust your purchase order quantities.
If you’re still worried about stockouts after reviewing your past order volumes, you can also look at implementing a backordering system to capture sales from customers willing to wait for the product to come back in stock.
Your return rate tells you two things: how happy customers are with your products (or with the condition they were in when they arrived), and how much time, cash, and effort you can expect to invest in reverse logistics for the coming peak season.
To calculate your return rate, use the formula:
Return rate (%) = Units Returned/Units Sold x 100
The average return rate for e-commerce is typically between 20 and 30%. If yours is on the higher end, audit your product reviews and customer service chat transcripts, or reach out to customers directly, to find out why and what you can do about it.
Before a major sales spike, take time to review your inventory the old fashioned way, by physically counting your products. Keep in mind that you may need to coordinate with your 3PLs to get an accurate count. Don’t forget to account for any items in transit or still in production.
Once you know your real numbers, you can compare them to the recorded data in your inventory management system to find your inventory accuracy percentage. From there, calculate your inventory accuracy using the formula:
Inventory Accuracy (%) = Counted Items/Items On Record x 100
An inventory accuracy rate of 97% or higher is generally considered good. Knowing the difference can help you plan upcoming peak season purchasing, control for shrinkage and ensure your other calculations are sufficiently accurate.
During peak seasons, you may need to meet customer expectations with faster delivery and accurate delivery estimates. You can’t let supplier delays, supply chain challenges, or an inefficient last-mile put customer satisfaction at risk.
One of the most important sourcing considerations to make ahead of a seasonal peak is supplier lead times. Because of the higher order volumes during peak shopping periods, supply chain setbacks and carrier issues are more likely to occur.
Review your suppliers and products, considering both manufacturing and transportation lead times. Calculate how long it typically takes for a product to arrive at your warehouse or fulfillment center, from the time you submit a purchase order.
From there you can use a transit time calculator to compare your actual lead times with current industry averages. If they’re longer than two weeks for land transport or 1-2 months for ocean freight, consider switching or diversifying suppliers ahead of peak seasons.
Your order cycle time tells you how long it takes from the time you receive an order until it’s delivered to the customer. This is especially important during times of increased sales, when slow order fulfillment can overwhelm your operations and end up disappointing customers.
To calculate your order cycle time, subtract the order date from the delivery date, then divide that number by total orders shipped. A lower number means you’re filling orders quickly and efficiently, while a higher number could mean you’ll need to make changes ahead of your next peak season.
If your order cycle time is too long, you may need to upgrade to a more efficient 3PL ahead of peak seasons. Or, if you operate your own facilities, it could be time to invest in a tech upgrade or retraining program.
A high order cycle time may also mean it’s time to reevaluate your shipping options or diversify your carrier lineup. ShipMatrix often publishes on-time delivery data for major carriers’ holiday performance to help you make the best decision.
Even adding just one carrier ahead of a peak season could save your sales and customer experience in the event of a strike or other shipping crisis.
Here are some options to consider:
As the next big holiday or shopping event gets near, it’s important to know how much profit each product is contributing to your business.
Start by taking a close look at the margins for each of your products individually. Then decide which products deserve more investment during this shopping season and which need to be cut or reduced or in order to maximize your margins.
As a founder, it can be difficult to be objective. You’re attached to your products, especially if they’re your own inventions. Remember, focusing on your numbers will always guide you to the best outcomes for your business.
The following key metrics will help you take an objective look at your product offering:
Advertising can get expensive, especially around peak sales seasons.
Know your ad costs and make sure your brand is positioned to get maximum value. This will help you understand when to invest in ads and when to turn to owned content, social media, and email marketing.
Don’t forget to track these essential metrics to confirm your campaigns’ profitability:
Peak seasons don’t have to be a time for scrambling to keep up with orders, stocking out of inventory, and running your ad budget into the ground.
With better planning, seasonal sales can jumpstart your growth (instead of your nerves).
To capture peak season demand, start early. Keep close tabs on your data and let your numbers be your guide. With the right insights into each key area of your business, you can boost your sales and margins at the times when it counts the most.
Need a simple way to track your business KPIs? Sellers Signals can help. Sign up and get free data analytics on everything from your multichannel sales, to your inventory and customer reviews.
