Byron Jeacocks, regional general manager of Business Partners Limited, says the key to getting through the festive season for almost all entrepreneurs is preparation and planning, with a particular focus on staffing, cash flow, stock, promotions and maintenance. Generally, retailers have to plan for ramping up, and manufacturers for winding down, with service businesses falling in either camp depending on their particular market and location.
When it comes to staffing, typical manufacturers need to ensure that their staff take their leave over the festive season as the business shuts down. Because South African labour law allows the employer to determine the most appropriate time of the year for staff to take leave, it is mostly a straightforward process.
Bonus expectations among the staff need to be managed carefully, and Jeacocks cautions that absenteeism among manufacturing staff tends to be higher just after the holidays - a factor that prudent factory owners should take into consideration in their plans for the new year.
The staffing challenges of retailers and businesses that need to ramp up for the festive season are of a different order altogether. Often, the difference between a good and a bad year hinges on four or five weeks of sales, which in turn often depends upon the performance of the extra staff brought in.
Lack of adequate training of these seasonal workers is the most common and serious problem faced by businesses that peak during the festive season, says Jeacocks. Recruitment and training are best done carefully and well in advance.
Longer working hours over the festive season mean that transport home needs to be planned, and businesses in busy centres must have contingency plans in place for staff who get stuck in traffic and on public transport on their way to work.
From a cash flow perspective, the festive season is the most precarious time of the year for manufacturers who shut down for the holidays. No sales will be coming in, while leave and bonus payments must be paid out.
Hopefully the sales from October and November would have been adequate to tide the business over December and January, but Jeacocks warns that the knock-on effect of the December shut-down has a sneaky way of catching up on a business in March. The only answer is to do careful cash-flow forecasts that project at least six months into the future so that finance applications can be done well in advance.
Retailers tend to swim in cash when things go according to plan over the festive season. The challenge to retail entrepreneurs is to exercise discipline by recognising that it represents a significant chunk of the business’s income for the whole year and that it needs to be preserved in order to tide the business over the quiet months.
Manufacturers must try to move as much of their stock out of their warehouses as possible by shut-down while retailers try to get their hands on as much of the right kind of stock as possible for the festive season.
Generally, these complementary needs of manufacturers and retailers work well. Problems tend to arise for manufacturers with the logistics of getting increasing volumes of goods onto the retail shelves through increasingly congested traffic, especially around large shopping centres. Distribution planning needs to take into account these special conditions over the festive season.
Jeacocks tells of one ice cream manufacturer who went as far as putting down refrigerated containers in the receiving yard of a major supermarket in order to avoid delays and supply penalties. Retailers’ challenges when it comes to stocking up mainly centres around the logistics of keeping shelves full all the time, and at worst, running out of a popular item in the middle of the season. When that happens, it is usually way too late to order additional supplies. Planning for the festive season must therefore include early stock orders.
Another risk for retailers is the increase in “Christmas shopping” by shoplifters. Additional security measures need to be in place when the frenzy starts.
The promotional drive for manufacturers usually precede those of retailers by a month or two as they try to shed stock overruns after getting most of their orders in September and October.
For retailers nowadays, Black Friday in the last week of November marks the beginning of the great marketing cacophony that continues up right up to Christmas and often centres around weekly specials.
It is too early to say exactly what the impact is of Black Friday, which recently blew over from America, onto the local retail scene. Jeacock says it seems that it has done little to increase overall festive-season spending, but has rather spread it out a bit more. It probably does increase the costs of promotions as retailers have to advertise for two sales peaks instead of just the traditional pre-Christmas peak. One advantage is that shops can use the almost irrational Black Friday shopping frenzy to get rid of a lot of slow-moving stock.
For manufacturers the festive season is the ideal time to clean, service and maintain their plant and equipment, while any revamping for retailers must happen well before the festive season. The retail machine has arguably fewer moving parts than a factory, but when something breaks, it has to be fixed on the fly. The key is timeous, preventative maintenance and - as with all aspects of the festive season - careful planning.