The Christmas Marketing Season Begins.

Next week Thanksgiving will mark the beginning of the Christmas sales season in the US, as the Day of the Dead long weekend has already done in Mexico. 2007 has been a soft year so far for retail sales, so this Christmas will be make or break for many brands and of course the retail stores over the gift giving season, which lasts from Christmas to Reyes Magos (the Three Kings of Epiphany) on the 6^th. of January

In Mexico Christmas is cause for marketing and retail optimism, due to the legally mandated “aguinaldo” / Christmas bonus (normally a minimum of two weeks salary for formally contracted employees) that significantly boosts disposable income and consumer spending. Additional credit and financing plans can extend the boost into the New Year. Cause for initial optimism also comes from successful sales blitzes and additional orders obtained on a sale or return basis. Stores tend to over stock when protected by such agreements. With the “push” part of the process in place the “pull” part begins. Advertising and promotional campaigns are launched, to stimulate sales and marketing managers can take off to enjoy their Christmas vacations in good spirits.

Early sales indicators quickly point to hit products, especially in electronics. Last year was a bonanza for flat screen TVs, 2003 was a record year for DVD players and 2006 was the year of the iPod. This year it could the Wii, Xbox, iPhone or Blackberry that tops the list. Toys are harder to predict. The leading manufacturers (Mattel, Fisher Price etc.) have developed sophisticated forecasting, advertising scheduling and channel management systems and usually manage to close out the season fully sold on their key product lines.

Many companies are not so fortunate and face the reckoning that comes, in late January and February, with the dreaded “devoluciones” / return of unsold goods. In some cases returns from the larger retailers can represent large volumes of unsold inventory that has to be resold at deep discounts to wholesalers and secondary channels, reducing margins and profits. It is not uncommon to come across products, with Christmas greetings on the package, in small corner stores (changarros) or being sold by street vendors, up until Easter.

A few years ago I worked on a project for a local company that sells Apache children’s tricycles. The Apache is a fine product with a well deserved reputation for quality and durability. However, the product always takes a beating on the sales floor and small plastic parts get broken, leading to very high return levels that seriously affect profits. The solution was relatively simple: recruit and train “floor mechanics” to operate in major stores over the Christmas season, to replace damaged parts. Results were impressive: net sales increased, returns were reduced dramatically, ensuring a profitable year. This is one example of how simple attention to detail is sometimes the best strategy to avoid after Christmas hangovers.