Halloween in August? Improved strategic sourcing benefiting retailers

on Thursday, September 8, 2011

Halloween in August? Improved strategic sourcing benefiting retailers  Retail store operators have been aggressively working to draw in new customers over the first half of this year, as the economic recovery began to falter and consumer spending started to slow. The appearance of holiday-inspired goods months before the actual holiday arrives is sometimes perplexing to shoppers, but it serves as a retail sourcing initiative that often pays off for companies, according to experts.

Consumers making quick trips to CVS or Walgreens stores over the past few weeks may have been surprised to see that stores had already stocked shelves with Halloween candy and costumes. Though it is understandable that Halloween-inspired products would appear in stores around late September, allowing for one month of shopping, such items have been popping up increasingly earlier.

Some major chains in the U.S. introduced Halloween candies and other products as early as mid-August this year, NPR reports. The move is a strategic one, industry experts contend, as many companies are overhauling their purchasing services departments as they work to compete against heightened competition.

The National Retail Federation, an organization that advocates for U.S. stores like Target and Macy's, affirms that many stores are responding to high demand for holiday themed products, and there is an overall framework guiding the recent push to place such items on shelves earlier and earlier in the year.

"We do hear from retailers that there is a demand for early holiday merchandise," National Retail Federation director of media relations Kathy Grannis said.

Retail management experts contend that more factors are at play in the recent phenomenon, affirming sales of holiday items have increased over the past few decades, but to the extent that such a rise would prompt businesses to implement such changes.

Purdue University business professor Richard Feinberg asserts the shift has resulted from the fierce competition among retail stores. The recession altered consumers' spending habits, and while U.S. consumer spending has inched up over the past few months, shocks to the economy have prompted many to seek out the best available deals.

"The marketplace is so competitive that they can't take a chance that people are going to spend their $50 somewhere else. Stores have become labs for telling them what to order."

The scheme is actually benefiting companies in terms of their understanding of consumer spending habits, procurement consultants say. By introducing Halloween products in August, storeowners are able to track what items are selling well and what candy or Halloween costumes are in high-demand.

Americans' taste preferences are notoriously ephemeral, and while it may seem a bit unorthodox to see Halloween candy in Walgreens when it's still summertime, consumers are ultimately benefiting – at least in theory.

Companies have become exceedingly adept over the past five years at achieving procurement cost reductions, according to Feinberg. As revenues fell during the recession, business owners were forced to revamp their strategic sourcing best practices as they strived to improve their profit margins. Retailers have learned to effectively keep trim inventories – exceptionally important as companies profit more from selling out of goods than from have excess inventory.

With the economy sputtering over the past three months, retailers have ratcheted up their marketing and strategic sourcing initiatives, and such efforts appear to be working, some analysts affirm. The Federal Reserve said on Wednesday that its 12 bank regions expanded this summer as a result of increased consumer spending in areas across the U.S., The Associated Press reports.

Retailers have been steadily pushing back their introduction of holiday products as they work to expand shopping periods during which consumer spending historically is higher, asserted David F. Miller, the executive director of the Miller Center for Retailing Education and Research at the University of Florida.

Whereas retailers usually began the Christmas shopping season on the day after Thanksgiving, or "Black Friday," retailers have been working to attract bargain-hunting shoppers earlier in the year. Businesses hope they can drive up sales with such a scheme as consumers typically spend heavily during the holiday shopping season, Miller contends.

Moreover, experts assert the earlier introduction of products helps stores to leave items on shelves longer. This, according to Syracuse University assistant professor Dinesh Gauri, enables stores to sell products for longer periods of time and delay the marking down of prices, which helps companies to potentially increase revenue.

Businesses' success over the past few years is, upon first glance, surprising given the tepid economic climate and pervasive sense of fear that have been hallmarks of this post-recessionary era. The New York Times reports the odds the U.S. economy is falling into a so-called double-dip recession have climbed precipitously recently, based on historical data.

Yet, industry experts are confident that sales will jump this holiday shopping season. The chief economist of the International Council of Shopping Centers projects sales to rise 3.5 percent during November and December this year when compared to the same period in 2010, according to The Los Angeles Times.

Even though economic growth has slowed, businesses have continued to log revenue and profit margin growth, driven by business cost reductions accomplished through spend management and strategic sourcing best practices, among other initiatives.

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