Holiday Shopping: 2021 Trends and Opportunities

With 2020 came a significant migration from exclusively brick-and-mortar retail to a hybrid model with inventory available for purchase online. The 2021 holiday sales season will require businesses to continue their online migration from 2020 trends, with opportunities for more refinement and improvements. The key to a successful holiday sales season? Bring as much inventory as possible online and integrate all of your customer touch points into an omnichannel of positive experiences.

Let’s take a look at some trends in retail that can strengthen your business and position you well for the new year.

Strong E-Commerce Presence

As shoppers increased online purchasing and delivery last year, the trend is expected to continue beyond the pandemic. For this reason, all businesses should strengthen their online presence, especially their e-commerce presence.

Many retail establishments benefit from a complete ecommerce solution, including a storefront, shopping cart, online payment process, and automated fulfillment. They can expand their online effectiveness with these features:

• Enable chat features between customers and store clerks to simulate the conversations customers would experience by shopping in the physical store.
• For clothing, post detailed sizing charts, imitate the dressing room mirror with try-on automation, and use size-inclusive photography featuring models of different body types.
• Create how-to videos that show customers ways to effectively use the product.
• Expand photography so customers can see all angles of the product as well as how it can be used.
• Display and sort user reviews to help customers make the best purchase decision for them.
• Implement clear navigation and search options so customers can find what they want.
• Consider a ‘buy online, pick up in store’ policy. Today, many customers research online, then visit the physical location to finalize their transaction.

Expanding your business’s e-commerce presence doesn’t just apply to retail. For example, businesses in the services space have implemented appointment-setting and payment processing. Real estate agents have enhanced virtual home tours. Many businesses with physical goods and documents have beefed up delivery options and implemented curbside pickup.

Each business has a unique sales cycle that a customer goes through when purchasing goods and services. The question for business owners to ask is how they can bring most of that experience online.

Mobile

The vast majority of transactions are now occurring on mobile devices. If your business’s mobile presence is not optimal, then you’ll want to make that a priority this year to catch up with your competitors.

Social

More and more consumers are using social media channels – Instagram, YouTube, TikTok, Snapchat, LinkedIn, Pinterest, Twitter, Clubhouse, and Facebook — to discover and purchase items that delight them. Wise business owners will invest more budget into attracting customers from this channel.

Holiday Seasons

With the move to online shopping, the holiday season has been extended from just one day or one weekend to entire months. Consumers are shopping earlier and all year long. Retailers and other businesses can benefit by always having some kind of sale or attraction going on. 

How does your business fare when it comes to a fully online experience? Use these trends to boost sales growth in 2021 and beyond.

As the holiday season quickly approaches, now is the perfect time to begin considering how you and your business can express gratitude to your customer base, colleagues, and more during the season of gratitude and beyond. 

When to Say Thank You

There are many opportunities in business to say thank you:

• When a customer or associate sends you a referral that results in business
• When an employee goes out of their way to fix a problem or make a customer happy
• When a customer makes a large purchase, large from their point of view, as well as yours.
• When a vendor over-delivers
• When someone sends a gift
• After a speaking engagement or an event when someone has hosted you
• When someone provides advice that has been helpful, whether face to face or in a book or article
• When someone does a favor or something nice that you’d like to reward

Keeping thank-you notes top of mind will help you think of more opportunities to use them.

What to Say in Your Thank-You Note

You don’t have to be an excellent writer to pen a heartfelt thank you note. Be concise about what you’re thanking them for and share a meaningful detail about the item or activity involved. And then thank them again.

If you are unsure about what to say, type up a draft first that you can edit. Then rewrite your final draft on your stationery. It’s far more personal to hand-write your thank-you note than to use a computer-generated one.

Thoughtful Details

Personalized stationery for thank-you notes is a thoughtful detail. It adds a formal and professional touch to your thank-you note, enriching the experience for the recipient. If penmanship is a concern, or the sheer volume of thank-you notes you’d like to send has your hand cramping at the thought, Handywritten offers a a fast and affordable option to outsource the effort while still retaining your sentiment and the impact of a handwritten note.

Be mindful, however, to avoid turning your thank-you note into an advertising event for your company. If you want to send promotional items such as t-shirts, mugs, or other items, do NOT include them with your thank-you card, as it shifts the focus from the individual(s) you’re thanking back to yourself. A separate follow-up package with swag is a nice way to compound the impact of your note. 

Helping others feel gratitude is the fastest way to experience happiness. Sending thank-you notes is not only good business, it’s good for our health and wellness, too.

If your business model includes granting credit to customers or accepting payment via recurring credit card charges, you need to ensure that you’re prepared for the unexpected. Inevitably, a customer might fail to pay on time, provide you with their updated credit card information, or their check bounces. So, what can a business owner do to spend as little time chasing these items while still collecting the cash? We have four suggestions: re-examine your credit card policy, be proactive, manage payment failures and disputes quickly, and develop a foolproof collections policy.

Re-examine your credit policy

Are you collecting credit card payments for goods or services retroactively? If so, is there any way you can have credit customers pay upfront? For example, perhaps you can collect a deposit to minimize your risk. Alternatively, you could request final payment right before delivering the final product. Or, maybe you can convert credit terms to a layaway situation, similar to the standard retail practice.

The best way to speed up collections is to change your payment terms if at all possible.

Be proactive

To avoid a significant delay in payment, send your customers proactive email reminders before the payment is due. You may also want to consider calling anyone who hasn’t been timely with their payment in the past before their next due date. If a customer is late with a payment, respond quickly. 

If the customer pays by credit card, monitor credit card expiration dates, and send reminders to update the card before it expires.

Lastly, you’ll want to ensure that your business’s online support portal allows customers to easily update their credit card information at any time. Again, automating this process will save you a ton of time.

Payment failures and disputes

Inevitably, a customer’s payment will fail, whether it’s an automatic credit card payment, ACH withdrawal, or failed/bounced check. As a business owner, you need to have solid procedures for you or your employees to process these exceptions.

Before any of the above payment failures occurs, make sure your shopping cart, merchant account, or gateway processor is set up to notify you of the failure. When it happens, contact the customer right away to correct the situation. Assess any extra fees and flag the customer account if you want to place a hold on their account or restrict future payment or credit options available to them. 

You may also have customers that report disputes to their credit card company. There is always a tight deadline associated with these transactions, so be sure to respond timely and make sure you have all of the documentation you need at the time of sale if this comes up.

Develop solid collections processes

If the payment is late, start your collections routine. Send out friendly reminders at first, then get progressively aggressive as the payment grows later and later.

Follow-up steps are critical. Make sure your customer is getting your notifications, and give them a call before deciding to take legal steps with them.

Finally, if necessary, turn the payment over to a collections agency to impact the customer’s credit report and possibly collect your money.

We hope you do not have too much of this activity in your business. But if you do, being proactive is one of the best ways to reduce it. Check to see if you have all the processes described above in place to handle collections in your business so that your cash continues to flow.

If you’re continuously looking for ways to increase your profitability, then you’ll want to learn about direct and indirect costs. Breaking out your expenses into direct and indirect categories can help you arrive at the most profitable sales volume for your business.

Direct Expenses

Expenses that fall into the “direct cost” category relate directly to the items you sell. Below are a few examples: 

• If you owned a flower shop, the cost of the flowers would be a direct cost. So would the vases, ribbons, cards, and labor required to create your beautiful floral arrangements.
• If you’re a partner at a law firm, the labor, and any materials or supplies spent on serving a customer would be a direct cost.
• If you operated a pool construction company, the concrete, tiles, filter, pump, and labor costs to build the pool would be direct expenses.

Direct expenses will vary proportionally to the volume of items you sell. The more you sell, the higher your direct expenses. The less you sell, the lower your direct expenses.

In general, direct expenses should be recorded in Cost of Goods Sold. You can get your Gross Profit figure by calculating Sales less Cost of Goods Sold (or COGS). Gross Profit Margin is an essential percentage to know in your business. It is computed as follows: (Sales – COGS) / Sales.

Some small service companies might not bother to break out labor into direct or indirect on the Profit and Loss statement each month. Still, it can be helpful to periodically do so, especially when re-evaluating your pricing and profitability.

Direct expenses are important in making pricing decisions but so are indirect expenses.

Indirect Expenses

Indirect expenses are those you must incur to run your business but are not directly related to the items you sell. Here are some examples:

• Telephone
• Accounting software
• Rent & utilities for a brick-and-mortar store
• Insurance
• Administrative labor, such as a receptionist or supervisor
• Education and training
• Professional services, like your HR personnel or IT specialist
• Office supplies
• Business permits

Fixed and Variable Costs

Direct and indirect costs can each be further broken down into fixed and variable costs. For example, HR expenses, education, and training will increase as you sell more and hire more workers. That makes them variable costs.

Other indirect expenses (such as rent) will remain flat, or fixed, no matter your sales volume. 

Pricing Your Items

When calculating your sales prices, use your direct costs as a benchmark to ensure your profit margin is high enough to cover an allocation of your indirect expenses. In other words, sales price should always cover all direct costs plus a profit component, plus enough to cover indirect costs when considering your sales volume.

The lower your sales volume, the higher the price per item should be. Alternatively, higher sales volume gives you more room to spread out your indirect costs. That allows you to do one of two things: earn higher profits or lower your price to become more competitive.

If you have questions about direct and indirect costs or want help validating your pricing decisions, please feel free to reach out at any time.

While we all have to keep our monthly books up to date for tax and other compliance reporting purposes, your accounting efforts should never stop there. Your books hold a wealth of data that you can use to run your business better. Below, we outline five reports your business should never be without.

Budget-to-Actual Profit and Loss Statement

Hopefully, you’ve already seen how powerful the Profit and Loss Statement is. We can take it to a deeper level, though, by adding in budget comparison. With this upgrade, you can now plan your way toward the sales and profit figures you want. As a result, you’ll know every month whether you’re on track, ahead of the game, or need to hustle to close the gap next month.

Most accounting systems allow you to enter monthly budget numbers for your sales and expense accounts. Imagine that this is the financial equivalent of Google Maps, and your business is a cross-country journey. You will be able to see where there is construction and traffic so that you can adjust your route to one more favorable. You can also see where there are cool opportunities ahead and plan accordingly to take advantage of them. Remember: your numbers tell a story.

Actual-to-Prior-Year Profit and Loss Statement

An actual-to-prior-year P&L Statement is an easy report to generate, so long as you have at least two years’ worth of information in your accounting system. This report allows you to compare your business’s results for this year alongside last year’s. Are you ahead? Behind? Have new products and services? New employees? New expenses?

With this comparison, you can take action based on how you would like your business to perform this year versus last year. Unfortunately, while this report is readily available, few companies study it to glean the insights available. Make sure you’re one of them and spend some time analyzing the data in this report.

Sales by Item, Customer, or Division (or All Three)

Inside every business’s sales information is a treasure trove of possibility. Where do you see growth, and how can you capitalize on it? Conversely, where do you see a slowdown, and can you run a promotion to juice things up?

Choose the breakout – customer, item, division, or another – that is meaningful to your business type. Then, if possible, arrange for a searchable database so you can drill down into the detail even more. What trends do you see? What opportunities do you see?

Operations Reports   

To obtain more information about your profitability and get into the details of how your expenses match up with your sales, you need to review your operational accounting reports. The precise report will depend on your business type. For example, if you are in services, you’ll need payroll reports and timesheets; for retail, inventory reports; construction, job costing reports; and manufacturing, cost of goods sold.

Cash Reports

The last report that is essential for good business management is all about cash. There is more than one option here, and these reports can include Accounts Receivable Aging, Accounts Payable Aging, cash flow forecasting, and various cash flow reports.

If you grant customers credit, you’ll want to actively make sure that money is collected on time from customers. If customer balances get too old, action must be taken. Even if you don’t grant credit, transactions such as returns, expired credit cards, and bounced checks need special attention.

The same is true for amounts you owe to vendors with the Accounts Payable Aging report.

If you run tight with your cash balance, you may want to have a cash flow forecasting report on hand. This report gives you good warning as to when your bank balance may dip below your needs. You can then delay vendor payments or find an infusion of cash to cover the shortfall.

With these five categories of reports, you will have dozens of opportunities to run your business more proactively and improve your bottom-line results. If we can help you find or generate any of these reports, please reach out anytime.