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January
sales: An innovative marketing strategy
Post-Christmas
sales in the US are a unique marketing gameplan. Retailers and manufacturers
have complex sales-forecast systems using a combination of statistical analysis,
heuristics and forecasting models bundled into software packages, writes
Mohan Babu
January in the US
is the time of the year when all the Christmas presents have been opened and
people heave a sigh of relief, having enjoyed another hectic holiday season.
After Christmas get-togethers, people fly back from their parents or relative’s
places and try to get back to their lives. Christmas is generally associated
with the tradition of gift giving and most people exchange numerous gifts and
goodies. Gifts are generally exchanged between relatives, friends, colleagues
and co-workers with much anticipation and relish. This year saw the continuation
of the tradition; even a slowing economy and the aftermath of September 11th did
little to dampen the spirit of the holiday season. If anything, people were more
resolved to let loose and enjoy themselves.
Most companies in
the US also got into the holiday spirit and hosted holiday parties and bashes.
Our company has an annual tradition of hosting a holiday dinner, which they
continued even this year. This was really refreshing, especially since most
other companies did away with theirs, citing ‘lack of budget’ as an excuse.
During Christmas,
although it is customary to exchange gifts, expensive gifts are generally
reserved for close friends and family. Gift giving, and more importantly
receiving, is a kind of contradiction for most Americans because they are
individualistic by nature, preferring to shop for their own goods and services.
Hence, even though there is an element of sentimentality attached to gifts
people receive, they do not balk at the prospect of taking the gifts back to the
shop and exchanging them for something that they “really” want. This is
especially true of gifts received from distant relatives who happen to give
expensive gifts because they could afford them.
Supermarkets also
facilitate exchange of unused gifts by making it really easy for consumers.
Interestingly, when you happen to go to a superstore during December, the
checkout person will automatically ask if you want a “gift exchange” receipt
along with the item, the same way they ask if you wanted the item to be
gift-wrapped. Most large stores in the US have a policy of giving refunds for
any merchandise purchased, provided one can show the original receipts. In case
of gifts, the giver may not be inclined to give the receipt with the gift, hence
the concept of gift exchange receipt. This way, marketers are able to create a
win-win situation for both the giver and receiver of gifts, in the process
generating goodwill.
The flip side of
all this gift giving, exchanges and returns is that it provides some consumers
an incredible buying opportunity. Since most of the “hot” products are created
especially for sale during Christmas time, immediately after the holidays, malls
and superstores become anxious about disposing unsold inventory as soon as
possible. This is especially true since the bulk of retail sales take place
between October and December and marketers do not want to be laden with unsold
inventory for months on end. In order to induce customers, “January Sales” are
generally held by slashing prices with deep discounts and offering “zero
percentage interest” rates. Savvy customers make sure that they do not spend all
their savings on holiday purchases and stash away a part of their slush funds
for just these kinds of sales. This year, the hot items on sale were DVD players
and Microsoft’s Xboxes produced in anticipation of the holiday season.
Christmas sales
are not the forte of marketing people alone. An interesting aspect of the sales
is complex sales-forecast systems used by retailers and manufacturers. These
systems use a combination of statistical analysis, heuristics and forecasting
models bundled into software packages. Marketing gurus analyse reams of data to
decide what will be hot and what not to stock on the shelves. For instance
WalMart, one of the largest supermarket chains in the world is also the owner of
the largest data-warehouse in the world. They are pioneering massive data mining
to transform their supplier relationships. With the complex systems at their
disposal, they capture point-of-sale transactions from over 2,900 stores in six
countries and continuously transmit this data to the massive 7.5 terabyte
Teradata data warehouse. WalMart allows more than 3,500 suppliers, to access
data on their products and perform data analyses. These suppliers use this data
to identify customer-buying patterns at the store display level. They use this
information to manage local store inventory and identify new merchandising
opportunities. Interestingly, even back in 1995, WalMart computers processed
over one million complex data queries. Advent of e-commerce technologies and XML
has made collaborative data sharing between retailers and suppliers a breeze.
As global trade
becomes more prevalent, we are going to see an increased reliance on the use of
sophisticated sales modelling and forecasting systems. Just as the supply chain
wave has made most companies aware of the efficiencies that can be achieved by
streamlining their production and supply chains, retail forecasting models are
going to come into prominence, help retailers and global marketers
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