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The hidden cost of Valentine’s Day (and Christmas, Easter…)

February 14, 2018

I was at Stonehenge over the weekend.

After a bracing (read freezing!) walk around the stones in Arctic conditions, we popped into the Visitor Centre shop.

There, only 72 hours before Valentine’s Day, were a couple of shelves of discounted Christmas goodies.

Taking up space that could have been used for bestsellers.

Christmas in February

That’s a difficult one, isn’t it? If you’re trying to move discounted stock quickly you need to display it prominently or at least put up some eye-catching signage.

But then you’re using up valuable real estate to try and sell something at a narrow profit, or even a loss. And meanwhile you have a possible bottleneck in your replenishment process.

That’s the double-edged sword with special events like Christmas, Easter and Valentine’s Day. They can generate a big upsurge in business but unsold stock has to be shifted as soon as possible and the most common way to do that is through markdowns.

Our local Co-op had dozens of mixed nuts in festive packaging which by the 1st of January were half price and three days later were 75% off.

These prices are ‘nuts’

Still, it took a few days before the shelves were cleared and ready for other products. Multiply that by hundreds of stores and you have quite a large opportunity cost loss.

The Christmas ‘hangover’ for major retailers can have real legs. Surprisingly, at the end of January I found a few bottles of Christmas plonk on the shelves of Marks & Spencer.

Mulled wine aging on the shelves

It’s not just the financial hit of markdowns that can be a concern. Products outstaying their welcome like this can hurt brand equity.

My own immediate reaction to seeing those bottles unsold 5 weeks after Christmas was to wonder what was wrong with the product. And so, as they were only offering a couple of pounds off, I wasn’t going to bite.

Christmas can be very hard to get right. For many retailers, optimizing their stock levels of everyday staples is a big headache, so with products that are timebound to a seasonal event, predictions can be even trickier.

Ideally, with Valentine’s, stores will be hoping to sell their last red rose and chocolate heart one minute before closing time on 14th February and have different products on the shelves by morning.

That ain’t gonna happen.

But we can get close. Close enough to make shareholders happy when the next quarterly results come out.

About the author

Martin Luxton is a writer and content strategist who specializes in explaining how technology affects business and everyday life.

Big Data and Predictive Analytics are here to stay and we have only just begun tapping into their enormous potential.

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