The Complete Mantra for Driving Holiday Business in 2008, 2009 and Beyond
Executive Summary
Aberdeen surveyed 100 retail enterprises between July and August 2008 to determine the current state of sales, customer, and replenishment strategies as key determinants for driving successful holiday business. As the data shows, 55% of Best-in-Class retailers perceive "comping" (i.e. equaling or surpassing last years' sales on a same-store basis) and the response to their competition's holiday selling, merchandising, and loyalty-related retail strategies as a top pressure.
Best-in-Class Performance
Aberdeen used four year-over-year key performance criteria to distinguish Best-in-Class companies.
-Average sales comp: 11%
-Average gross margin: 16%
-Average customer conversion rate increase (year-over-year): 23%
-Channel in-stock performance: 90.5%
Competitive Maturity Assessment
Survey results show that the firms enjoying Best-in-Class performance shared several common characteristics:
-Fifty-five percent (55%) of Best-in-Class retailers perceive "comping" and response to their competition's holiday selling, merchandising, and loyalty-related retail strategies as a top pressure
-On average, at least 50% of the Best-in-Class focus on customer-facing and back-end technology tools that support online channel sales as e-commerce becomes more significant for topline gains during peak selling seasons such as holiday
Required Actions
-Develop the ability to accurately predict peak traffic
-Make their web site a competitive differentiator
-Create an integrated view of inventory and customer fulfillment
Comp Sales, Competition, and Replenishment are Current Top Pressures
Aberdeen surveyed 100 retail enterprises between July and August 2008 to determine the current state of sales, customer, and replenishment strategies as key determinants for driving successful holiday business. As the data shows, 55% of Best-in-Class retailers perceive "comping" (i.e. equaling or surpassing last years' sales on a same-store basis) and the response to their competition's holiday selling, merchandising, and loyalty-related retail strategies as a top pressure (Figure 1). Our research shows that the pressure of holiday sales and competitive performance is critical for retailers to address in 2008 and 2009 as 50% are challenged by the increasing cost of goods sold and 44% are striving hard to respond to low consumer confidence.
Additionally, as sales channels such as the web, catalog, and stores struggle to control the handling and capital costs of maintaining merchandise by adopting a "holiday responsive" inventory management approach where they primarily focus on high selling items and categories, stock outages in the moderate to low selling categories inevitably increase. Less safety stock to buffer or cover consumer demand swings exacerbates the problem. However, Best-in-Class retailers are two-times as likely as Laggard retailers to be aware of and tackle out-of-stocks that can lead to lost customers, and five-times as likely as Laggards to be concerned about the resulting lost sales due to poor in-stock position.
Sales and Inventory Management - Paramount Pressures
Aberdeen surveyed 100 retail enterprises between July and August 2008 to determine the current state of sales, customer, and replenishment strategies as key determinants for driving successful holiday business. As the data shows, 55% of Best-in-Class retailers perceive "comping" (i.e. equaling or surpassing last years' sales on a same-store basis) and the response to their competition's holiday selling, merchandising, and loyalty-related retail strategies as a top pressure.
Best-in-Class Performance
Aberdeen used four year-over-year key performance criteria to distinguish Best-in-Class companies.
-Average sales comp: 11%
-Average gross margin: 16%
-Average customer conversion rate increase (year-over-year): 23%
-Channel in-stock performance: 90.5%
Competitive Maturity Assessment
Survey results show that the firms enjoying Best-in-Class performance shared several common characteristics:
-Fifty-five percent (55%) of Best-in-Class retailers perceive "comping" and response to their competition's holiday selling, merchandising, and loyalty-related retail strategies as a top pressure
-On average, at least 50% of the Best-in-Class focus on customer-facing and back-end technology tools that support online channel sales as e-commerce becomes more significant for topline gains during peak selling seasons such as holiday
Required Actions
-Develop the ability to accurately predict peak traffic
-Make their web site a competitive differentiator
-Create an integrated view of inventory and customer fulfillment
Comp Sales, Competition, and Replenishment are Current Top Pressures
Aberdeen surveyed 100 retail enterprises between July and August 2008 to determine the current state of sales, customer, and replenishment strategies as key determinants for driving successful holiday business. As the data shows, 55% of Best-in-Class retailers perceive "comping" (i.e. equaling or surpassing last years' sales on a same-store basis) and the response to their competition's holiday selling, merchandising, and loyalty-related retail strategies as a top pressure (Figure 1). Our research shows that the pressure of holiday sales and competitive performance is critical for retailers to address in 2008 and 2009 as 50% are challenged by the increasing cost of goods sold and 44% are striving hard to respond to low consumer confidence.
Additionally, as sales channels such as the web, catalog, and stores struggle to control the handling and capital costs of maintaining merchandise by adopting a "holiday responsive" inventory management approach where they primarily focus on high selling items and categories, stock outages in the moderate to low selling categories inevitably increase. Less safety stock to buffer or cover consumer demand swings exacerbates the problem. However, Best-in-Class retailers are two-times as likely as Laggard retailers to be aware of and tackle out-of-stocks that can lead to lost customers, and five-times as likely as Laggards to be concerned about the resulting lost sales due to poor in-stock position.
Sales and Inventory Management - Paramount Pressures
Source: Aberdeen Group, August 2008
The Maturity Class Framework
Aberdeen used four key performance criteria to distinguish the Best-in-Class from Industry Average and Laggard organizations. Sales comp, gross margin, customer conversion rate, and in-stock performance are some of the most critical fiscal indicators for a successful holiday or seasonal selling program in retail. Retailers surveyed reported their performance on these key performance criteria based on year-over-year results. These criteria also provide the strategy, channel operations, marketing, and finance teams with the ability to track, monitor, and justify retail expenditure on core system enhancements, merchandise, and channel execution plans.
Table 1 provides a framework with which companies can benchmark themselves.
Table 1: Top Performers Earn Best-in-Class Status
| Definition of Maturity Class | Mean Class Performance |
| Best-in-Class: Top 20% of aggregate performance scorers |
- Average sales comp: 11% - Average gross margin: 16% - Average customer conversion rate increase (year-over-year): 23% - Channel in-stock performance: 90.5% |
| Industry Average: Middle 50% of aggregate performance scorers |
- Average sales comp: 5.5% - Average gross margin: 7% - Average customer conversion rate increase(year-over-year): 4% - Channel in-stock performance: 82% |
| Laggard: Bottom 30% of aggregate performance scorers |
- Average sales comp improvement: 1.3% - Average gross margin improvement: 4.5% - Average customer conversion rate increase(year-over-year): 1.5% - Channel in-stock performance: 70% |
Overall, the technology landscape that supports holiday processes is fragmented as shown in Figure 3. There are significant variations of IT solutions that aid peak traffic handling across data, customer, and inventory process components. Our data clearly shows that while two-thirds of retailers are prepared to manage the holiday spike at the store front from a technology and process standpoint, it is the online, call center, and catalog channels that require improved focus in the areas of systems diagnostics, planned improvements, and performance criteria such as page load times, conversion, and uptime.
Technology Landscape for Holiday Readiness
Source: Aberdeen Group, August 2008
Required Actions
Laggard Steps to Success
- Evaluate performance across all channels.
- Develop and deploy a comprehensive replenishment plan.
- The ability to accurately predict peak traffic.
Industry Average Steps to Success
- The ability to accurately predict peak traffic.
- Streamline back office responsibilities for management.
Best-in-Class Steps to Success
- Create an integrated view of inventory and customer fulfillment.
- Make your web site a competitive differentiator.
- Test bandwidth and transaction volume capabilities across all channels.
Perhaps the most significant innovation and revelation to come out of this study are those applications designed to assuage holiday volume pain points, and improve the online shopping experience.
Table 5: Use of Online Personalization Tools
| Online Personalization Tools | Best-in-Class | Average | Laggard |
| Currently use | 40% | 28% | 24% |
| Plan to start using within 12 months | 20% | 26% | 24% |
| Plan to start using in 13-24 months | 7% | 12% | 18% |
| No plans to use | 33% | 35% | 35% |
Source: Aberdeen Group, August 2008
So we've evidently entered a new era of commerce,; what's changed is the almost hyperbolic growth in customer expectation on content, speed, and context. Retailers who can handle all the basics, plus some intermediate touchpoints, plus these advanced tools consumers are looking for, will find themselves well-positioned for 2008, 2009 and beyond.
So we've evidently entered a new era of commerce,; what's changed is the almost hyperbolic growth in customer expectation on content, speed, and context. Retailers who can handle all the basics, plus some intermediate touchpoints, plus these advanced tools consumers are looking for, will find themselves well-positioned for 2008, 2009 and beyond.
Read the full report here.