After the festive season is over, retailers will have little time to take a break because they have to face a new headache: crashing footfalls. Worse, people will start returning some of the goods they bought in the festive rush. Returns are set to be a huge logistical nightmare, especially if you’re selling online and have promised to pick up the tab for return-shipping.
This slump can be triggering.
Experts such as Kamal Kumar, sales strategist & business transformation expert, agree and add that customer retention rates have the habit of dropping sharply post a period of heavy promotion. “Customers acquired during festive or flash sales are 40% less likely to make repeat purchases,” he states, indicating that loyalty often takes a back seat as consumers chase the next discount.
So when is a good time to start looking at a contingency plan to counter the seasonal sales drop? What are the levers marketers can start pulling when footfalls dwindle? Most importantly, how must they manage their cash flow so the seasonal crash in sales appears less ominous?
A good place to start is at the forecasting stage, say experts. That is because if, during the budgeting process, they overestimate the potential sales, they might be in for a shock when the actual sales data comes back.
Better forecasting can mitigate the impact, say experts, and marketers can develop that expertise with time as they gather more data points to look back on and analyse.
Consumer electronics brand Blue Star urges marketers to look at any sales slump as a strategic issue rather than a tactical one. B. Thiagarajan, managing director, Blue Star, says discounts are a useful tool in the category as new customer acquisition is difficult — Statista data shows that customer acquisition costs have surged by 60% over the last five years — but when you build a brand on the promise of affordability and excellent customer experience, then sales are generally on an even keel through the year.
As Melwyn Viegas, engagement lead at growth advisory Aranca, puts it: “Brands can build loyalty by fostering a sense of community through personalised marketing efforts or loyalty programmes,” he adds.
Turning the tables
Santosh Sreedhar, partner at Avalon Consulting, says many brands rely on “price anchoring” during sales seasons.
“The regular period when there are no offers is important for brands to create a perception of value in the mind of the consumer, which ensures that consumers see value in the discounts offered during the sale period,” he says.
In other words, a post-sale lull can be a good time to look at ways to recoup the margin erosion brands take on during a sale. Says Bhavik Mehta, an analyst at Thinkin’ Birds, “Research from Deloitte (2023) shows that profit margins during promotional events can be 30-50% lower due to heavy discounts and increased advertising and logistics costs. In the fashion sector, margins during sales events can drop to 8-12% compared to 20-25% during non-promotional periods.”
While consumers may be driven by FOMO (fear of missing out) during sale events, brand loyalty becomes a casualty.
Divya Malpani, founder & CEO of internet-first skincare brand Skinvest, says the onus of keeping the relationship alive lies with the brand. They can use Whatsapp or SMS marketing and offer exclusive deals during the non-sale period, which fosters a sense of community among the target audience. Offering new collections or limited editions can create exclusivity without overwhelming consumers as brands are guilty of doing during peak sales.
Brands can also look at this season as a time to launch new products or new campaigns to keep the brand top of mind.
Preetam Jena, chief marketing officer & e-commerce head, Fixderma & FCL Skincare, says, the brand always includes complimentary samples with every purchase. “This helps us drive new-to-brand for a broader product range or category and it adds an element of surprise and delight to our customers’ shopping experience,” Jena adds.
Ultimately, the key to maintaining sanity when the festive lights dim is to keep in mind that every brand is prone to seasonality — whether it’s a clothing brand negotiating the ebbs and flows of the fashion calendar or an online travel agent grappling with tourism seasonality.