As we enter the second half of 2023, focus on the fourth quarter is beginning to intensify. 

To help provide clarity into what’s to come this festive season, we teamed up with Retail Week in the UK on an in-depth report on the latest consumer spending insights and the ways in which retailers can continue to drive sales during more economically challenging times. Real UK household disposable income fell by 2.5% in 2022 and is expected to fall by 2.6% this year, according to the Office for Budget Responsibility. As a result, households will continue to feel the squeeze this Christmas. 

However, data from the report shows that despite rising inflation rates, employment remains resilient and consumer confidence is slowly returning. This unique mix brings some optimism in this year’s forecast for Christmas, breathing new life into a general atmosphere of pragmatic caution. A few categories such as health & beauty and toys & games are expected to perform relatively well as consumers prioritise small luxuries and gift items. Big purchases, such as furniture and electricals, face a softer outlook, though spending may remain robust among the 12% of households who identify as financially immune in the current economic environment. 

Ultimately, the festive season is coming quickly, and inadequate planning — or misplaced priorities — will cost sales.

However, don’t launch into seasonal planning mode without addressing the three most common challenges brands and retailers face in the run up to Christmas:

  • Pricing and profitability
  • Marketing and advertising
  • Inventory management

Taking concentrated actions in these three areas now will yield results in the final weeks of the year. And we’re providing our recommendations, based on our decades of innovation in e-commerce, to help you get started. 

Pricing and Profitability

Preparing to meet the expectations of increasingly savvy and selective consumers is no small feat, especially this year when price sensitivity is likely to be high. Shoppers now regularly expect free shipping… and free returns. They want to feel as though they are getting a bargain, but also that they are purchasing a high-quality product. Unsatisfied or frustrated consumers who return products and/or leave poor reviews can generate a ripple effect on profitability.  

Rising return rates coupled with cautious consumer spending habits have begun chipping away at gains in all corners of e-commerce. Marketplace sellers especially are feeling the pinch. 

How can you reduce returns and protect profit margins? Simply slashing prices may not drive up sales to desired levels and will affect profitability. Developing keen pricing strategies based on intelligent data points can provide necessary balance in meeting pricing and profitability goals.

First, we recommend ensuring all your product detail pages have as much information as possible, including: 

  • Dimensions
  • Color description
  • Source materials 
  • Typical and suggested uses for the product
  • Clear images that present the product from all angles

Optimised content that consistently appears across all your selling channels builds confidence in your product before purchase and reduces the chances it’ll be sent back. In addition, setting up dynamic pricing strategies can maximise your profit margins while keeping you in compliance with any pricing agreements you have in place.

If you’re looking to drive growth through new channels, product or markets this Christmas striking the right balance in pricing and profitability is critical to success. How can you set a healthy pricing momentum when planning expansions? To preserve your efforts to maintain stable profit margins, we recommend that you:

  • Identify and focus on marketplaces with lower return rates
  • Consider a hybrid selling approach that includes both first party and third party
    • Look at costs associated with each selling model, such as listing, returns, logisitics and storage fees — these can add up quickly and affect profitability 

Marketing and Advertising

Consumers are inundated with ads and promotions in the lead up to Christmas. Although advertising is essential at this time of year, it’s incredibly difficult to stand out from the crowd based on traditional tactics alone. 

The key lies in finding ready-to-buy shoppers who are already searching for and interested in your products. A centralised approach to digital marketing can yield cross-channel insights into finding those consumers through paid search and shopping. And retail media, when strategically implemented, can yield tremendous benefits in meeting ROAS goals and boosting visibility and sales. 

How can you efficiently use retail media to your greatest advantage? We recommend focusing on five elements in your campaigns: 

  • Optimising content
  • Smart audience targeting
  • Segmenting your catalogue
  • Automating your campaign
  • Testing (and more testing!)

We’ve found the most successful retail media endeavours harvest keywords to strengthen search results, employ brand protection tactics, acquire new customers and, ultimately, conquer the competition. And managing retail media campaigns from one centralised platform that is monitoring marketplace listings, inventory levels and other digital marketing campaigns can amplify efficiency (for example, you avoid wasting ad spend on products that have gone out of stock).  

Inventory Management

New challenges are appearing for brands and retailers in inventory management. Storage costs keep rising, ongoing economic uncertainties and inflation-related pressures on consumers’ wallets have led to inventory challenges for many sellers. 

Tackling the first two challenges (pricing/profitability and marketing/advertising) head-on can provide some relief in the struggle to move products. In addition, we recommend developing: 

  • Techniques to avoid excess inventory (we have suggestions for brands and retailers)
  • Strong product selection strategies that, among other goals, ensure poorly performing products are removed
  • Automation and procedures that focus on synchronising and maintaining inventory levels across channels
  • Action plans to execute when excess inventory thresholds are crossed

Curious about what the experts are predicting for this year’s festive season? Take a look at The Christmas Forecast, a report developed by RetailWeek in partnership with Rithum, Rithum’s parent company, and other industry leaders. 

Download your free copy now — and get started on your Christmas planning!

Download the report>>>

And if you’re looking for professional support to sharpen your strategies before the busy festive season arrives, the experts at Rithum would love to help! Our Managed Services team works with brands and retailers to plan for seasonal variations and challenges, expand into new channels, streamline operations and provide advice and guidance on ensuring profitability . Contact us to learn more. 

2023 Festive Prep E-Commerce Guide

In this eBook, we look at the three most common challenges during the busy festive season and provide you with useful tips to ensure your Q4 is a success.