Sell end of season lines ‘down-under’ but not ‘under-priced’

Currencies Direct October 12th 2016 - 4 minute read

Selling seasonal product lines adds a whole layer of complexity for the online retailer: you have to grapple with a cash flow that is inconsistent throughout the year; ensure you have enough inventory to cope with the peaks and troughs of seasonal fluctuations; have new stock available for early buyers at the beginning of the season as well as sufficient stock available to cope with any late surge in demand. Plus, in the case of product lines in clothing, holiday and sportswear where sales are often directly influenced by the weather, you often need a crystal ball to help you to forecast the unexpected: the unseasonal weather whose arrival can increase, reduce or extend demand for your products, making nonsense of your carefully worked out sales and inventory plans.

I have recently experienced this dilemma from the consumer perspective, while enjoying this year’s Indian summer in the UK and attempting to buy beachwear for a late September Mediterranean holiday!

One of the biggest challenges for seasonal retailers, however, is what to do at the end of the season with the inventory that remains – probably in a limited number of styles, colours and sizes.

You don’t have to change all of your product lines every season, but un-sold seasonal inventory is takes up valuable warehouse space for the six or seven months before it is relevant again – and ties up the cash you need to invest in the current season’s lines.

It may be tempting to just ‘get rid’.  At the end of the season, however, this may mean having to discount to well below cost price (discounts of 70% or 80%), which means your profits will take a big hit.

A drawn-out period of heavy discounting can also make your shop front look tired – while continuing to offer ‘the same old stuff’ can tarnish your brand and is less likely to attract repeat visits from prospective buyers.

 

But what are the alternatives to end of season stock liquidations?

1. Sell some of your slow moving products differently

As you approach the end of season, look at those that are selling slowly and see if complementary products can be bundled with more popular items to form a gift pack or ‘everything you need for’ kit.
 
 
2. Keep customers coming back to your site

You need to maintain the flow of visitors to your store by always giving them something new to look at. Phase in next season’s products for early shoppers while the current season’s sales are winding down to keep the momentum going. This will also help to keep your shop front fresh and of interest to regular visitors.

3. Plan markdowns throughout the season

Promotional discounts are increasingly being used during the season to attract customers when sales are slower than anticipated (possibly as a result of the weather not behaving as expected for the season, as mentioned above). You may be reluctant to discount by 10% or 15% early on – but if conditions are not conducive to demand, you may prefer to accept this reduction in margin rather than risk being left with a pile of inventory as the season winds down and having to resort to substantially higher clearance markdowns.

4. Look internationally

Online retailers are increasingly extending their reach to sell off seasonal stock. Many of those based in Europe and the US, for example, see an opportunity in selling their end of season summer stock to markets in the southern hemisphere, such as Australia, South Africa or even South America. The inverse seasons and different climate patterns experienced by these markets enables the retailer to lengthen their season and avoid clearance markdowns or sell-offs, so benefitting from a chance of getting a better price for their products.

This is in fact an ideal way to move inventory as your customers who have paid full price for products at home don’t feel cheated by massive end of season discounts – and your brand is not damaged by the hosting of constant sales and discounts.

Of course, these antipodean markets will already be being served by local and cross-border sellers for whom this is their main selling season. But you still have a chance of finding customers prepared to pay full-price for items that are relevant right now – rather than customers at home expecting a steep discount as the product will likely be a season old before they get to use or wear it. Indeed if you are offering something different – or if your brand is known and valued in the target market, you may even be able to sell at a premium.

 

What if I don’t currently sell to these countries?

That needn’t stop you.

Certainly there are challenges associated with any form of cross-border selling: the possible need for localisation, language considerations, payment methods, shipping and delivery costs – even the need for different marketing approaches. So it’s good to test the water first with one target market; and you can do that relatively easily by selling on a marketplace such as Amazon in the selected country.

Once you believe there is a profitable market opportunity, you can opt to farm out order fulfilment – to Amazon, for example, under its FBA (Fulfilment by Amazon) programme. This means Amazon will manage the whole shipping/returns process for you.

Of course this means additional fees and a reduced margin, so you would need to be confident that your end of season products would sell in the new geographical market; that you have sufficient inventory to make the exercise worthwhile, and that after retrieving your sales and converting them into your domestic currency you haven’t ended up making a loss!

Currency conversion can equally create opportunities for international sellers when exchange rates move to make their goods cheaper than the local competition. Risk from market volatility can also be avoided with the help of specialist foreign exchange providers who offer services like forward contracts. For more information about making your cross-border trade more profitable contact our online sellers team on +44 (0) 20 7847 9269 or email etailers@currenciesdirect.com.

 

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Currencies Direct

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