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Holiday inventory: Tips your small business can use to manage inventory during the holidays.

How to navigate supply chain issues, timing, buying, and more

By Danielle Higley

The holiday season is an exciting — and stressful — time for small business owners. Increased foot traffic, bigger sales goals, and the desire to turn new customers into regular patrons means more pressure than any other time of year.

Piling atop the typical challenges of entrepreneurship, business owners are faced with every conceivable balancing act: Where to put all that additional inventory when there’s limited shelf space. How to get big-ticket items out the door. Ensuring that each item is in the right place at the right time. Meanwhile, 2020 and 2021’s supply chain issues loom like ghosts of Christmases past.

Yet despite all these concerns, Dierdre Appelhans and Barbra Huntting, co-owners of The Read Queen Bookstore & Café, exhibit an admirable sense of peace and confidence going into the 2022 holiday shopping season.

Two and a half years after opening their doors in Lafayette, Colorado, they’re sharing their lessons learned. Here are four of their small business insights for retailers looking to make a holiday inventory plan.

1.   Use the summer to plan for holiday inventory

Unfortunately, this first tip comes too late for 2022, but next year, keep this stat in mind: According to a 2022 holiday survey by QuickBooks, September and October are now the most common months to begin holiday shopping. That means holiday inventory has to be out and available for people to buy way before the turkey arrives.

“What I heard initially was that you really should be done with your Christmas shopping in October,” says Appelhans. “I started ordering earlier this year because this is now our third Christmas, and we’ve learned a lot over the previous two.”

For The Read Queen, that first Christmas took place in 2020, in the midst of shipping delays and other supply chain issues caused by the global pandemic. “Our first year was pretty tough,” Appelhans says. “The way that retail ordering works is that you order things [from suppliers], and if they ship when they’re in stock, they ship. If they’re not in stock on the day they pack the boxes, you just don’t get it.”

Their first year, Appelhans says she and Huntting would receive boxes with just a quarter of their ordered inventory. They learned quickly that their best bet was to simply turn right around and immediately place another order, hoping to get another 25%. “We had no idea what was going to show up. That was really tough.”

This year, Appelhans isn’t expecting that level of shipping complications, but she’s also not taking any chances. “Everything significant has been ordered,” she says. “The first year, we ordered very late. Second year — last year — we ordered a little earlier. This year, I was thinking about it, writing lists, and making plans in July. And I’ve been buying from August through October aggressively.”

2.   Learn to pivot fast to reflect customer preferences

“Being able to pivot with what people want has been really, really important,” says Appelhans. She laughs, remembering how that first Christmas, she and Huntting could have filled the store halfway with puzzles and sold every last one.

“[In 2020], people wanted puzzles because they knew they were going to be locked up in their house, not visiting anyone,” she says. “Now, people still want puzzles — especially at the holidays. But our puzzle inventory is probably down by about 40, 30, 35%, because people want other things now — their life is different.”

This year, The Read Queen is stocking more games, scarves, mittens, and candles. “And stationery!” Appelhans exclaims. “So much more stationery than we initially thought.”

But that stationary, too, has been a lesson. “We are constantly looking for new vendors, and it’s one of the hard areas to shop because our customers are very particular about what they like,” she says. “I’ve found that out of five different card lines, maybe one will be a keeper.”

Most important for keeping costs down, she says, is ordering small. “When I’m trying to find new things, I can’t order too big. Doesn’t matter how cheap it is. Even if it’s a fabulous sale on a new line, it’s not worth it. If you overbuy, you can’t give those cards away.”

For Appelhans, it’s much better to order small and run out than order big and wind up with leftovers, or have too much business debt. Plus, she says, those small test orders help make holiday buying a lot easier. “If it sells in a small batch in the summer, then I know it’ll be really popular at Christmas.”

3.   Give customers time to consider big-ticket items

One strategy Appelhans says has worked well is to put her most expensive items out early. For The Read Queen, that means high-quality family games at a price point of around $65.

“We put those out early because we want customers to see that we are carrying an expanded collection of these games. People need time to plan out their holiday shopping, and we wanted them to have some time to look at and think about them.”

The most expensive items vary at any small business, but The Read Queen’s strategy makes a lot of sense. “Rather than springing a high price-point game on our customers on November 1, we put those out at the end of July. That way, people can think about it and say, ‘Oh, this is the game I want for my family this year.’”

Best of all, Appelhans says her customers notice and appreciate The Read Queen’s approach.

“We’ve actually received feedback from customers who purchased their games already, back in October. They’ll say, ‘Oh, I’ve been looking at this for a few weeks, and I’ve decided this is what I want.’ or ‘Oh, I’m so excited. My family’s really big into games, and I saw that this year, you guys have really expanded that section.’ So they’re offering that information, which lets us know that that was the right decision.”

But just as big-ticket items go out early, Appelhans says she prefers to put less expensive merchandise out later, especially where space is a concern. “We do hold on to stocking stuffers a bit longer,” she says. These small, “impulse buy” items can wait in the wings until holiday shoppers begin making their purchases in earnest.

4.   When in doubt, just put it out

The Read Queen, like many small businesses, has limited space. As a result, it’s incredibly important that each item stocked is worth the room it consumes. “We refer to it as ‘paying your rent,’” Appelhans laughs. “As in, ‘this book is not paying its rent.’ Or, ‘this one inch is not paying its rent.’”

During the holidays, it’s easy for that careful management of space to become an obsession. In the beginning, Appelhans says she and Huntting worried that if they put all their holiday inventory out too early, there might not be enough left in December. This year she’s less concerned. “I guess I’m of the opinion now that it’s better to get it out on the floor. Sell it, make the money, buy more if you can. If you can’t buy more of it, buy something else.”

But what if the item doesn’t sell?

“People — customers — like to see things in different places. You can put something in one place and nobody pays any attention to it. And you think, ‘Wow, I guess this is a dud.’ Then you just move it to the other side of the room, and suddenly everyone sees it and it’s popular.”

Of course, some items are simply duds no matter where they are. And in that case, Appelhans says the best thing any store manager can do is free up the space.

“Because we’re small, we need the shelf real estate to show off merchandise that is engaging and attracting customers. It’s better to just sell [unpopular items] off fast at a breakeven cost and get something else out on the floor.”

Remember that inventory is just a small piece of the holiday puzzle

Managing a small business during the holidays (which apparently start in September) is no easy feat. Staying organized and productive in your preparation phase is the most important part. And nothing says “Merry Christmas” quite like a long list of inventory management decisions.

Yet the holiday shopping season really can be an inspiring and invigorating time. Your customers could shop anywhere, but they’re choosing to shop with you and support the small business you built.

“We’re really, really aware that our customers are making a conscious choice to support the brick and mortar business in their community,” says Appelhans. “We don’t take that for granted.”

For more small business holiday tips, visit QuickBooks’ holiday hub.

About the Author: Danielle Higley is a copywriter for TSheets by QuickBooks, a time tracking and scheduling solution. She has a BA in English literature and has spent her career writing and editing marketing materials for small businesses. She recently started an editorial consulting company.

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