Today, in conditions of fierce competition, everyone relies only on himself. Some people bet on seasonal business to take advantage of short-term upswings in buying activity and maximize profits. And someone, on the contrary, due to the seasonality factor, has significant problems with a drop in sales and the consequences of these declines.
What's happening?
Let's first figure out whether these are really seasonal fluctuations, or whether the drop in sales is not related to seasonality and the business strategy itself needs to be adjusted. To do this, it is necessary to analyze the company's sales over the past few years (experts believe that at least three years). If during this time the figures at the end of each year increase by 20% or more, and fluctuations (downs and ups) are typical only for certain periods (which coincide annually), we can talk about seasonality in sales. Of course, the decline in purchasing activity in certain periods of the year is familiar to every company. Strange as it may seem, sales of even everyday goods are uneven in different months. So, in the summer, when large cities are empty, sales of those goods and services that are in high demand throughout the year (for example, bakery products, personal hygiene products, hairdresser services, etc.) fall by 10-15%.
However, fluctuations within 10-20% of the average monthly sales volume are sometimes imperceptible and do not cause significant harm to the business. Especially provided that the company successfully carries out its activities and sales volume at the end of the year is steadily increasing. Such fluctuations are considered moderately seasonal and do not require major intervention, although they should not be ignored when planning. But what about those companies whose sales volumes can fall by 30% or more in certain months? For example, the sales schedule for 2006-2008 for a company selling shoe cosmetics and accessories (creams, paints, impregnations, deodorants for shoes, brushes and sponges, insoles, laces, etc.) is as follows (Fig. 1).
As can be seen from the graph, the activity of this company has a pronounced seasonal nature: the peak of sales, which falls on October-December, and a sharp drop to almost zero (April-August), are clearly distinguishable. Such fluctuations are repeated for three years in approximately the same months, which is explained by the seasonal nature of the business. And this phenomenon is easily explained, since the so-called weather factors are important for the sales of shoe cosmetics. Shoes need to be cleaned year-round, but if you can forget about it in the summer, then with the onset of the rainy season, slush and dirt, the question of the need to care for shoes is no longer worth it. Of course, the company's product range also includes goods, the demand for which is stable throughout the year. For example, insoles, laces, shoehorns and sponges are in demand all year round. But their implementation is approximately 15% of the total volume in monetary terms, which during the period of a sharp drop in sales does not bring sufficient profit. In addition to weather factors, there are many other reasons that cause seasonal fluctuations in demand. Let's look into this problem.
Who is guilty?
Seasons of the year and weather phenomena
Fluctuations in demand depending on the time of year are primarily related to changes in weather and climatic conditions. In the example that we considered above, the company offers a product (shoe cosmetics) on the market that is in demand mainly in the cold season. So, with the beginning of autumn, shoes and clothes of the autumn-winter assortment, leather goods, heaters, medicines for colds, etc. are actively sold out. etc.
Holidays (secular and religious) and other dates
Table 1 shows some examples of goods and services in demand on certain holidays and dates.
Habits, stereotypes
This group of factors includes such a phenomenon in the real estate market as an increase in demand for suburban real estate (summer cottages) in spring and summer and, accordingly, a fall in autumn and winter. Similar trends can be traced in the automotive market (especially in the used car market). This is due to the fact that motorists prefer to buy cars at the beginning of the summer season and before the holiday season. At the same time, the winter period is considered unfavorable for the operation of the car, since there are many negative factors (dirt, snow, salt, ice, an increase in the number of accidents).
Business activity
During the year, there are several periods of decline in business activity. For example, the second half of January, when such a decline is a consequence of the long New Year holidays. Many people note a drop in sales of certain groups of goods during the May holidays, which is associated with an abundance of weekends, country holidays, and the beginning of the summer season. The reduction in sales volumes is also typical for the summer months, when the period of holidays and vacations begins. Seasonality in sales has been identified, the causes and factors influencing the growth and decline in sales volumes have been analyzed, it remains to make a decision on how to proceed.
Correct or use for your own purposes?
It is believed that seasonal fluctuations in sales almost always have a negative impact on the company's activities. Is it so? Let's look at all the pros and cons of such phenomena.
Risk of freezing working capital
If annual sales volumes are highly dependent on external factors (such as weather), problems can be encountered even at a time when consumer demand is expected to peak. Thus, companies engaged in the production of insecticides (repellents and insecticides) produce products that are in demand unevenly throughout the year. The maximum demand for these products is observed in the summer. In the previous two years, due to weather events, these companies faced certain problems. Due to the abnormally warm and humid winter of 2006-2007, a huge number of mosquitoes and all kinds of midges appeared in the summer, which had a positive effect on sales. The winter of 2007-2008 was also warm, and many companies included this factor in their production volumes when planning. But in February, for one week, frosts were kept down to -25 ° C with an almost complete absence of snow, which led to the death of almost all mosquito and midge larvae. For this reason, in the summer of 2008 there were practically no mosquitoes, and a huge amount of unsold products remained in warehouses.
Increase in the cost of production due to the constant increase in costs
For example, due to the uneven demand for goods throughout the year, especially when fluctuations reach 100%, many companies face the problem of a lack of warehouse and office space during a period of increased demand. In such cases, it becomes necessary to search for additional square meters. It is not always possible to find free space in a convenient location, and this entails additional transportation costs and the cost of hiring additional employees. At the same time, if a company has enough warehouse and office space during the period of maximum consumer excitement, then during a drop in sales volumes, many of them may be idle, which also increases the company's costs. In addition, the cost of products that are in high demand only in certain months are superimposed on the cost of maintaining employees throughout the year!
Turnover and shortage of qualified employees
In order to cut costs, managers of many seasonal businesses either lay off part of the workforce for a quiet period, or initially hire workers only for the season, or reduce wages. But by the beginning of the season of growing consumer demand, companies often have problems with the selection of qualified personnel.
Maximum profit in minimum time
Thanks to high profitability, a short seasonal surge in consumer activity can earn enough to compensate for the period of downtime.
Carrying out repair work, re-equipment of production, adjustment of equipment
If periods of seasonal decline in sales do not last long, then in order not to stop or disrupt the company's activities during the "high" season, managers use this time to carry out planned repairs, relocations, put equipment in order, improve and re-equip production, etc. .
Development and launch of new products
It is also convenient to use the time of decline in consumer activity in order to develop and launch new products, which will subsequently replenish the company's assortment list and help increase sales.
Staff training, preparation for work in the season
Some businesses during a downturn in consumer demand pay great attention to staff development in order to prepare people for quality work during a period of growth in sales. So, these are just some of the phenomena associated with the seasonality of business, and the consequences caused by it. Let's think about what we can do.
What to do with it?
There are two ways to deal with seasonal fluctuations in sales volumes.
1. Sales promotion.
2. Cost minimization.
Let's consider each of them in detail.
How to stimulate sales
Discounts and sales
This method of stimulating consumer demand is quite simple to use and is used everywhere as one of the main and most accessible. It does not require special training and investment of additional funds, but it is not always equally effective for wholesale customers and retailers.
Using Seasonal Factors
This method is a kind of discount. It consists in the fact that the price of a product remains unchanged throughout the year, but when buying a product or service in certain months, an increasing or decreasing coefficient is applied. Thus, during a period of sales decline, consumers are stimulated by more favorable conditions, and also, thanks to various coefficients, the total profit of the enterprise is adjusted throughout the year (recessions are compensated by an increasing coefficient, and decreasing coefficients stimulate an increase in sales when demand falls). This method is used when selling airtime on TV channels and radio stations, from air and rail carriers, on the Internet, etc. For example, seasonal coefficients were used on the ORT (First) TV channel (see Table 2).
Stock
We are not talking about interesting promotional events, sweepstakes and other marketing moves. This method is similar to the first, but requires more careful preparation. One of the options for promotions is the formation of special sets of their products (or a package of services), which include several items of goods. This set usually includes non-seasonal or unpopular goods (one or more). At the same time, a more favorable price is formed for the set - in comparison with the one that the consumer would have to pay for all the goods separately. Such promotions are often practiced by sellers of household chemicals and "white" cosmetics.
The right advertising campaign
This method includes a well-designed advertising strategy for the year. Of course, it requires additional costs (advertising budget) and proper management of allocated funds. When distributing the advertising budget, it is advisable to adhere to the following scheme (see Fig. 2). The essence of this method is not only to stimulate sales of a particular product (service) and draw attention to it, but also to show new ways of using it, to create a need for it. So, for example, some manufacturers of household chemicals produce stain removers, the maximum demand for which falls on the warm season. In order to increase sales during the cold months, advertising for this product is based on the following: either you save money but risk your time (because washing clothes may show stains that you did not notice), or use our stain remover every time you wash and do not worry about stains (they may not be!), and spend the saved time on yourself or your family.
Favorable purchase conditions
This method differs from discounts and promotions in that products are sold at their regular price, but additional favorable conditions are offered to customers. For example, deferred payments, free delivery of goods, etc. can act as a bonus.
Creating an artificial scarcity
The method is effective but risky. It is found in those markets where there is little competition or this area is monopolized.
In practice, this method looks like this. At the end of the period of decline in sales, after the first small deliveries of goods (when mostly what is left after the seasonal peak is sold), the enterprise closes production due to refurbishment or for some other reason. The period of rising demand for the products of this enterprise begins. Since this is just the beginning, the batches are usually small and there is enough stock left for almost all regular customers. Then demand increases, but the goods are already in short supply, and new supplies are expected only after some time. Someone has the opportunity to wait, and someone begins to look for alternatives, but they are not always there. Thus, a queue of customers is built up, and when the goods nevertheless appear (even at a higher price), there is a real stir, as many tend to stock up for future use.
A similar situation arose in St. Petersburg at the end of 2008 with vitamin D. In the fall, pediatricians prescribe drugs containing this vitamin to all babies from the first month of life, since if it is deficient, a child can develop such a serious disease as rickets. By December, stocks of these drugs in pharmacy chains had dried up. Panic set in, parents were ready to go for vitamin D to the opposite end of the city. In mid-January, preparations containing vitamin D began to enter the pharmacy network, but at a new price that exceeded the old one by more than 100%. However, fearing a recurrence of such a situation, people buy these drugs in several packages even at such a high price.
The artificial scarcity method does not only work with retail customers. For example, in 2006, a large Russian enterprise producing high and low density polyethylene, polystyrene, dyes and other industrial raw materials was closed for refurbishment (according to management, after the opening, the company had to increase production capacity several times). It was planned to launch the plant by the beginning of the active sales season, but for some reason this deadline was shifted by several months. The plant produced raw materials for other industries, and in order not to risk, the supply departments began to look for alternative suppliers. But in order to switch suppliers, you must at least get samples from another manufacturer and try them out; only after that you can buy a batch of raw materials. Other suppliers, who did not expect a sharp increase in demand, could not cope with the needs that arose. The rise in prices and the struggle for supplies began. As a result, by the long-awaited opening of the plant, everyone was ready to buy raw materials in new volumes (in order to create a reserve for the next season) and at a new - increased - price.
Assortment adjustment
Still, the most effective method of dealing with seasonal fluctuations is to adjust the assortment, which can be done in several ways. The first is that new products are constantly being introduced into the product line, due to which the sales volume as a whole is growing. Another way is to include in the product portfolio goods, the maximum demand for which will fall on the period of the greatest decline in sales of other products. For example, almost all companies in the world that sell shoe cosmetics and accessories offer insect repellents for the summer season. And this is easily explained: they have opposite seasons of maximum consumer demand. However, it is most effective to adjust the assortment in such a way that the product portfolio includes categories of goods (services) with opposite seasonality and without pronounced factors affecting sales.
Reorientation to a different target audience
If it is not possible to change the proposed assortment, the method of reorientation to a different target audience is often used. This method is used by sellers of office supplies. Before the start of the school year, they focus on school supplies (meaning an assortment for students and students), and the rest of the time they focus on supplying offices. This method is also common in the restaurant and hotel business. After the end of the tourist season, hotels actively promote services for organizing conferences and other events (which involves the provision of special premises, catering, accommodation for participants, etc.). Many restaurants in the warm season try to organize additional open areas in order to attract new customers and thus compensate for the drop in sales in stationary areas. Unfortunately, sales promotion measures almost always require additional investment, so they are not available to all companies. But there is another way to deal with seasonal fluctuations - minimizing costs during a period of falling consumer demand.
How to minimize costs
Organization of the seasonal mode of operation
This issue can be resolved in two ways: either hire employees for the season, or send employees on vacation strictly during the seasonal sales downturn. In the first case, there is a risk of a shortage of qualified specialists during the season. The seasonal mode of work is organized in an interesting way at one leather haberdashery enterprise. The products of this company are sold unevenly throughout the year, but the fluctuations do not last long (this was achieved due to the correct assortment policy). Thus, the enterprise has a certain vacation schedule: during the period of maximum demand for products, the sales department works, and production goes on vacation en masse, while during the maximum drop in demand, the sales department goes on vacation (only the necessary minimum of employees remains), and production is active. fills warehouses with new products for the next seasonal surge.
Refocusing the business while maintaining the overall focus
Many companies that install windows for the population during the season, during the period of reduced demand, are reoriented to glazing houses during construction. Another example: in the summer, when the demand for ski equipment is almost zero, companies involved in this build ski resorts.
Reducing the number of staff or wage levels
Contract manufacturing
In order to avoid rising costs due to downtime of equipment and premises during a seasonal drop in demand, contract manufacturing can be organized at our own facilities. So, an organization engaged in the production and sale of natural extracts in the cold season, harvested raw materials in the warm season, but the production facilities were idle. In order to cut costs, the company managed to conclude a contract for the use of its equipment for the production of certain types of household chemicals (because the customer company did not have enough of its own capacity).
Reduce advertising costs to a minimum!
For example, you can leave only maintaining the site and providing customers with printed advertising products on demand. Of course, there are many ways to influence the level of sales during the period of seasonal fluctuations, but when choosing them, it is necessary to take into account who these measures will be aimed at: what is suitable for wholesale counterparties may not be effective for retail consumers. Seasonal declines in sales are present in almost all industries. The most effective way to deal with them is to cleverly maneuver between stimulus measures and cost cuts. Each enterprise, based on its own experience over several years, develops its own algorithm of actions, which allows to significantly smooth out seasonal fluctuations and achieve maximum profitability.
Expert opinion
Yulia Novoselskaya, Head of Marketing Department, International Academy of Quality and Marketing
Seasonality is typical for many products. At the same time, it is important whether the product is really of a pronounced seasonal nature, or whether the demand for it can be maintained at the required level even during a recession.
A few years ago, while working at a parachute factory, we encountered a seasonal factor in the production of parachute systems for recreation on the water. Parasails were in demand only in spring and in the first months of summer. In conditions of high variable costs and rapid obsolescence, it was impractical to produce goods in stock. Justified seemed only seasonal reduction in production volumes. However, it was decided to enter new sales markets to neutralize the seasonality factor caused by weather conditions. After conducting marketing research and a set of preparatory measures, sales of parasails began in the UAE and on the Mediterranean coast. This decision turned out to be correct, because it allowed not only to neutralize seasonality, but also to improve the product, improving its quality characteristics. I suppose you should not immediately draw disappointing conclusions and focus only on minimizing costs during a seasonal sales downturn, sometimes you can argue with nature! And the experience of conducting sales promotion activities during a recession has shown that the launch of such programs should be treated with caution, carefully calculating all possible receipts and costs. When determining the effectiveness of sales promotion activities, it is important to avoid mistakes.
Seasonal goods are those goods that are intended for use in a certain season of the year (spring, autumn, summer or winter). Most often, such goods include clothing or footwear produced for certain climatic conditions (winter boots, fur products, sandals, etc.).
list of seasonal goods
Currently, any list of seasonal goods is not approved by the current legislation, therefore, in order to determine the seasonality of a product, one should first of all be guided by information about the product itself.
season start date
specific dates for the onset of a certain season are determined by the legislation of the constituent entity of the Russian Federation, for example, for the Moscow region, the following start dates for the seasons are set:
warranty period for seasonal goods
Seasonal goods have their own characteristics when calculating the warranty period, so the warranty period for such goods does not begin to run from the moment they are sold, but from the start of a certain season, and if they are purchased during the respective season, the warranty starts to run from the moment of purchase.
if Seasonal Items are purchased remotely
In the event that a seasonal product is purchased remotely, the warranty period for it begins to run from the moment the season begins, and if it is ordered during the season, from the day the product is delivered to the buyer.
The development of a sales plan, and the implementation of this plan, is an acute issue in the current economic situation. An incorrectly drawn up plan leads to direct losses - both in the case of excessive storage of goods in the warehouse, and indirect - in the event of a shortage of goods in the warehouse, which leads to lost profits, poor service, and even extra bonus payments to sales managers.
One of the problems that greatly affect the preparation of the plan is the seasonality of sales of some goods. Some products, such as running shoes, are more popular in summer than in winter. But heaters are sold better in the cold season. These items are seasonal.
The unstable macroeconomic situation also brings confusion, when inflation pushes prices up, and declining consumer demand forces sales to decrease in quantitative terms. In addition to negative factors, positive factors can also influence - both for the company as a whole - if the company is actively growing, and for specific commodity items - if you invest a lot in product marketing, then demand for them can grow faster than the company grows. All this introduces a corrective element into the forecasts, because it is no longer so unambiguously worth focusing on information about the sales history, without taking into account the real situation.
Therefore, when drawing up a sales plan, take into account the seasonal factor and trends in the company.
How do I calculate the seasonally adjusted plan?
What is the seasonal factor - "seasonality"? This is a planned and regular deviation of product sales from the average values. Seasonality is often calculated monthly for a calendar year relative to the previous calendar year for each product for which a sales plan is being built and for each outlet individually, and the final plan is compiled by consolidating the obtained values.
To calculate the coefficients, I recommend calculating in piece terms. If you calculate in monetary terms, then the number of influencing factors increases many times over, and this, in addition to increasing the volume of calculations, also greatly increases the chance of error.
Calculating annual seasonality ratios is quite simple - you need to take the average monthly sales at the end of the year (the sum of sales for the year divided by the quantity), and then, for each month, calculate the deviation of actual sales from the average annual.
(Consumption per month / Average annual consumption = Seasonal factor)
If we have a sales schedule developed something like this:
Then, according to the results of the calculation, you should get approximately the following table for the calculation (for 2010):
Seasonal coefficients:
But the task is not to calculate the coefficients as such, but to calculate the sales plan, according to the current actual sales values for the year. Let's assume that we analyze at the end of April 2011 and calculate the sales plan for May 2011:
And our table will look like this:
The task is to understand how much we should sell for May, taking into account current actual sales volumes and seasonality. To do this, we will bring each of the months of the current year to a single base, removing from them the seasonal coefficient that we know.
(Actual Monthly Consumption / Seasonal Factor = Oc Average Annual Consumption)
We get the following values:
Which means that if seasonal factors are taken into account, then the expected average monthly for the year is 246 pieces / month.
From this, knowing the expected average for the year and the seasonal coefficient in May (calculated in the previous step), we calculate how many sales are expected in the month of May, multiplying the expected average annual sales by the calculated seasonal coefficient: 246 * 1.44 = 354.4 units.
Thus, we continue to form a sales plan for each month until the end of the year, adjusting according to actual sales data.
Unfortunately, these concise calculations are not entirely correct ...
We took into account the influence of seasonal fluctuations, but did not calculate the influence of the general trend. If your demand falls (or grows) by 10% every month for objective reasons, then without taking into account these movements, your newly drawn up plan will become untenable, and, as we said above, will lead to losses.
How to assess the impact of a trend?
The result of its calculation looks like this (orange line):
The problem is that this method is difficult to use in Excel calculations. But you can try to use just linear functions by calculating the average monthly sales for the state "at the beginning of the year" and "at the end of the year" (seasonally adjusted), and assessing how it has changed over time. Or just take as a target value what you would like to target (“I am sure that sales volume should grow by 10%”).
Be that as it may, the result of the calculations is the monthly coefficients of the “slope” of the trend for each of the goods for each of the outlets for each month where you calculate the sales plan. The problem is that in a normal situation, within a year, this is not a straight line, but curves smoothly.
The resulting coefficients are used to adjust the average annual sales estimate, which, let me remind you, is the basis for our estimate of future sales.
Assuming that in the current economic realities, unit demand will fall by 10% by the end of the year, then the monthly adjustment factor should be approximately equal to 0.987. This means that by this coefficient we will change the estimated monthly average within the current year according to the trend coefficient for each month:
(Actual Monthly Consumption / Seasonal Coefficient * Trend Coefficient = Oc Average Annual Consumption)
And the calculation of the current values \u200b\u200bwill look like this:
We noticed that the result was 349.8 pieces. instead of the previously calculated 354.4 units? It seems that this is not very much, but if you have billions of revolutions, then such an error is worth a lot.
To improve the quality of work with seasonality, it is necessary to recalculate the annual seasonal coefficients for the previous year, relative to the identified trends. But if you do not want to make a large amount of calculations, even such a small specification for the current year is already capable of qualitatively improving planning.
It is important that these calculations are carried out and adjusted regularly, according to actual data, in order to obtain the most adequate sales plan and understand how you will provide and control it.
In real work, professionals usually use more complex approaches. The calculation is carried out not by months, but by weeks, or even by days. More factors influence the target values. And the forecast model goes beyond the usual average calculations. But the approach presented above is something that any planner can apply to himself, even without special tools.
If it is too laborious to do it manually, and if you have 10 outlets and 15,000 products, then welcome to us. Our supply management solution Mycroft Assistant automatically collects sales data, analyzes the current state of sales, independently calculates the optimal work model and influencing coefficients. And based on the data obtained, it generates a sales forecast for each of the goods at each of the outlets. And based on these forecasts, it issues recommendations on the need to replenish stocks so that you rationally provide this sales plan. So, if you want to optimize the work of the company, but do not know how best to do it - welcome to us.
Seasonality in business is a regular change in demand for certain types of goods and services associated with the change of seasons.
How does seasonality manifest itself?
If purchasing activity in relation to a product is observed only at some point in time, they speak of hard seasonality. A prime example is Christmas decorations. They are willingly sold out only on New Year's Eve.
There are goods or services that are in demand for a longer period. This category includes, for example, the tourism business. There are also products that are in demand in any month or season of the year. These are the necessary food, medicines, household appliances.
What influences seasonality
The level of consumer interest in goods depends on various factors. These include:
- Seasons. With the onset of the next season, there is a change in weather conditions, which plays a significant role in fluctuations in demand. There are business sectors that are most susceptible to a decrease or increase in purchasing activity depending on the season. This is, for example, the sale of street lighting equipment. It is more successful in winter. Soft drinks, on the other hand, sell out faster in summer. And the need for various kinds of heaters appears with the onset of autumn cold weather. Then the demand for such equipment increases.
- Holidays and significant periods. For example, on the eve of March 8, you can count on a more successful sale of jewelry and perfumes. In the flower business at this time, too, there is a peak in sales. On May 1, gifts are usually not given. But the demand for picnic products is increasing, because many people prefer to spend these days in nature. Briefcases and school supplies are in great demand at the end of the summer. Great Lent is a time when people buy less meat, and before Easter, consumers stock up on eggs.
- Allocation of budget funds. Orders put forward by state-owned enterprises are associated with large volumes of work. However, budgetary funds are allocated after certain periods. Typically, the unit is a quarter. Therefore, payment for projects, which is carried out using budgetary funds, is made in most cases at the end of the quarter.
How to smooth out the seasonality factor
If you do your business "out of season", the company is trying to at least reduce costs. Sometimes drastic measures are taken. For example, employees are leaving. However, you can apply other methods to help you stay afloat during this period and even make a profit.
An effective measure is diversification. In other words, efforts are directed to expanding the range. If the business is based on the production and sale of knitted sweaters, it will be more successful in the cold season. In the summer, you can make openwork napkins, tablecloths, soft toys. The demand for these things does not depend on the season.
Another method that allows you to keep your business at the right level is discounts on goods that are not relevant in the current season. A classic example is the sale of clothing and footwear. Fur coats not bought in winter can be sold cheaper in spring and summer. At the same time, profits will decrease by some share, but in this way you can get rid of old products and replenish your assortment with new models.
All sorts of promotions are carried out with off-season goods. It is often sold "in load" to what is now in demand. You can also attract a buyer by providing free services in case of purchasing out-of-season products. For example, helping with the delivery or installation of equipment.
Many companies have a loyalty program that offers benefits to loyal customers. Common options are a discount card and the provision of discounts based on the total purchase price.
Seasonality can play a positive role in doing business or, on the contrary, reduce sales. However, in many cases there are opportunities to get around it and turn things around in your favor.
At present, in a tough competitive market, each entrepreneur relies only on his own resources and capabilities. Hoping to earn maximum profit, many businessmen rely on seasonal sales. And this is quite justified, because, as marketing statistics show, sales volume is directly related to a short-term rise or fall in consumer activity. This fluctuation in consumer interest is commonly referred to as seasonality.
Seasonality is a periodic change in the demand for a product, depending on certain factors, usually the time of year. However, seasonality is not always tied to any single factor. The presence of seasonality can be said only in the case when the maximum peak and decline in sales of the product is observed for 2-3 years in a row, and the difference in the cost of the product at the peak and decline in sales is 30-40%. Usually, the cycle of seasonality is 12 months, although significant demand fluctuations can occur both within one week and one day. However, such fluctuations in consumer demand are not usually considered seasonal, since no additional measures are required to equalize demand. It is enough for an entrepreneur to understand these features of the market and take them into account in business planning.
Types of seasonality
As a rule, there are two types of seasonality:
- production;
- consumer.
Demand for seasonal goods depends on natural (climatic) factors. Classic examples of production seasonality:
- cultivation and sale of fruits, vegetables and berries;
- earthmoving activities;
- landscaping work on household plots.
However, it is worth noting that the production seasonality related to the cultivation of crops is smoothed out due to the development and improvement of technologies for processing, storing and harvesting products, as a result of which the entrepreneur has a unique opportunity to sell his goods throughout the year.
Consumer seasonality is directly related to the following important factors:
- Season.
As you know, significant fluctuations in consumer demand are associated with seasonal changes in climatic conditions. For example, in the spring people begin to prepare for the summer season and the demand for summer clothes reaches a fairly high level. In addition, in the spring, many people consume the maximum amount of foods rich in vitamins: juices, fruits (mainly citrus fruits), vegetables. Also at this time, various construction and agricultural equipment is in great demand. - Holiday period.
Everyone knows that the time of gifts comes closer to the New Year holidays. On most trading floors, the maximum peak of sales is recorded in the first winter month. As a rule, the most profitable market at this time is the market for gifts, Christmas tree decorations, various drinks, food products, clothing, cosmetics and household appliances. The Easter holiday has a particularly serious impact on food sales. During the Easter period, various social events, such as weddings and corporate parties, are significantly reduced. Accordingly, the demand for wedding services is significantly reduced, the sale of meat and alcoholic products is decreasing. Accordingly, the level of sales of eggs, fish, cottage cheese, vegetables and many types of grain products is increasing. The next peak of sales falls on the last winter and first spring months. It is in February and March that the main male and female holidays are celebrated: February 23 and March 8, respectively. If consumers start buying gifts for the New Year at the end of November, then the demand for gifts for men and women begins to increase 2-3 weeks before the holiday date. - Other significant dates
Another period of large sales falls on the end of August - the beginning of September, i.e. by the start of the school year. The maximum peak of sales occurs in the last days of August. At this time, the greatest demand is for such school products as: notebooks, pens, pencils, textbooks, rulers, satchels and other school and stationery, as well as clothes and shoes. - Business activity.
General business activity is one of the most important factors that can significantly affect the level of sales. Business activity is not only the ratio of vacationers and people working in a certain period, but also the general atmosphere and mood that stimulates people to work or rest. Marketers note 3 periods of decline in business activity during the year. Such periods are: — the end of December; - mid-January; - summer months. Of the above, the period of the New Year and Christmas holidays is considered the largest decline, when most people have 10 days off. Quite seriously, the volume of sales is affected by the "May holidays". Despite the fact that there are only two days off during this period (May 1 and 9), however, quite a significant decline in sales is regularly observed in all markets. In addition, a large percentage of consumers go on vacation at this time of the year. Also, low business activity is recorded from March to April and from October to November. - Influence of budgetary possibilities.
As a rule, many state-owned companies have a rather rigid budgeting framework. The main task of budgeting is the competent systematic organization of work activities. However, as practice shows, this results in a situation where at the end of the year (quarter) the clients of these companies need to “master” the budget and they spend a lot of money on purchases. Often, thanks to such customers, most trading companies experience a peak in sales. But even here there is a “but”: there is a big decline in the first quarter of the year, because during this period the new budget has not yet been approved and, as a result, funding has been closed.
For entrepreneurs, it is no secret that dealing with seasonality problems is very difficult. This task requires additional financial injections, which many companies cannot afford. Such measures can only be taken by a self-confident entrepreneur who has a well-thought-out business plan and has enough funds to resolve this issue.
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