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You may groan when you see Christmas gifts in the shops in October, but some directors couldn’t be happier – many firms make most of their profit at Christmas. Richard North, of Wow! Stuff tells Nick Golding what goes into creating a bumper festive season for his business. This article appeared in Connections, from HSBC.
You may groan when you see Christmas gifts in the shops in October, but some directors couldn’t be happier – many firms make most of their profit at Christmas. Richard North of Wow! Stuff tells Nick Golding what goes into creating a bumper festive season for his business. This article appeared in Connections, from HSBC.
The festive period is pay-off time for many companies. After working tirelessly all year to get everything in place for the short-lived but hectic Christmas window, they are more than pleased to see it arrive.
The trading cycle for seasonal firms is extreme and the risks and pressures are stark. Orders and delivery – and therefore payment – can be months apart; success each year is reliant on accurate, long-range forecasting of sales in just one portion of the year.
Each year passes with scant revenue for many months, so careful management of last year’s profit is absolutely critical. There is little margin for error in the timing of marketing and sales drives or investment in stock and production. Staff levels can fluctuate wildly.
It’s not a business for the fainthearted. "We have to bring about 400 people in each Christmas to demonstrate the products we are selling," explains Wow! Stuff managing director and Business Thinking Midlands regional winner, Richard North.
"These are trained through our ‘Demonstration Academy’. We have about 50 people full-time all year, and that rises considerably as our products go live from 1 October."
Getting the Christmas window right
A Wolverhampton-based inventor of innovative toys and gadgets, Wow! Stuff sells into retailers across the UK and internationally. Experience has enabled the firm to get the Christmas sales cycle down to a fine art – even to the extent of actually selling their products on their customers’ behalf.
The in-store demonstrators start working on 1 October. "But before the selling season actually starts, we build a bespoke customised programme that involves putting video screens and point of sale displays into our retailers’ stores," North continues.
"We send in our merchandisers and work alongside our retailers on promotions and advertising. This means we need to work with a variety of departments within their organisation."
This complex operation involves monitoring demonstrators closely and using their sales records as targets for the following year. This, in turn, informs decisions about their own stock purchasing. Everything turns on an accurate sales forecast delivered months ahead of the selling season.
So, selling at Christmas is, in fact, a year-round job. "We start planning eight or nine months before the Christmas period even starts," North reveals. "Although we’re a cyclical business, our work doesn’t happen at Christmas. For example, all our cash is going out in May and June time and it won’t really come back in to the business until four or five months later."
Avoiding a cashflow crisis
The gap between investment and revenue is probably the toughest challenge for seasonal firms to deal with – if trade is crammed into the end of the year, then so too is profit. Good cashflow management throughout the year is critical, which means maintaining a strong relationship with the bank.
In fact, North stresses, without a bank that understands the needs and trading cycles of a Christmas-reliant business, that business will find it very hard to survive.
"The relationship we have with our bank has become, for want of another word, intimate," he admits. "They know my business and background intimately, and I know my bank manager very well. We share so much information, and that means they can make a decision quickly. As a fast-growing company, if you haven’t got a bank relationship you haven’t got a business.’’
This article first appeared in the HSBC Bank Connections e-newsletter. Copyright (c) HSBC Bank Plc 2010. All rights reserved.
HSBC Knowledge Centre http://www.knowledge.hsbc.co.uk/ and also to Wow! Stuff http://www.wowstuff.co.uk/.