In this article, learn about:
The basics of merchandising
The basics of supply planning
How suppliers can prepare for the holiday season
The holiday season is undoubtedly the busiest and most significant time period for suppliers. Sales volume rises, competition heightens, and holiday shoppers are in high demand. In 2024, holiday sales in November and December accounted for roughly 19% of total annual retail sales, according to the National Retail Federation (NRF). With those numbers expecting a 2.5-3.5% increase in 2025, managing holiday demand for major retailers like Amazon, Target, and Walmart is critical.
Because of this, suppliers must do more than simply ship products. They must not only consider how their products are being presented to shoppers (merchandising) but also how to successfully deliver their products on time and in the right place (supply planning). If these two areas don’t work together, it can not only mean unhappy customers, but it could also mean lost sales, fines, and leftover inventory that would not sell when the season is over.
What is Merchandising?
Merchandising is the process of showing products to customers in a way that captures their attention and increases sales. The thought process behind merchandising for retailers is deciding what items to sell, how to display them, and how to price or promote them.
In other words, the buyer or merchant team will be responsible for:
Assortment: Determining which products will be available in store and on shelf. During the holidays, retailers will typically expand their assortments to include seasonal flavors, limited-time packaging, and gift ready items.
Displays: Placing products in high traffic spots in order to capture shopper attention. Displays can include endcaps (at the end of an aisle), sidekicks (small displays attached to shelves), or pallets in the middle of the store.
Promotions: Providing temporary discounts may prompt shoppers to buy more. Promotion types may vary by retailer, but examples include rollbacks, bundles (like buy one get one free), or temporary discounts tied to events like Black Friday or Cyber Monday. Promotions are often negotiated months ahead of time and must be backed by sufficient inventory to handle spikes in sales.
Suppliers are still heavily involved in merchandising, as the retailer may expect them to:
Pitch new SKUs or seasonal variations.
Provide packaging that works for different types of seasonal displays. This could be pallet-ready packaging, endcap-ready, etc.
Fund or support promotions in the form of temporary price reductions, rollbacks, or ad campaigns.
Deliver the inventory that makes the merchandising plan possible.
While suppliers don’t own the final merchandising decision, they play a critical support role that they could ultimately benefit from in the end. For example, a buyer might decide, “This fall we’re adding your pumpkin spice flavor as an endcap item,” so the supplier must make sure the product is produced, packaged correctly, and shipped to the right DCs by the reset date.
While this means more backend work for the supplier, on the front end their product gets prime real estate in the Walmart store, meaning more visibility for their products and potentially more sales.
What is Supply Planning?
Supply planning is the process of making sure the products are available in the right place, at the right time, and in the right quantities. It essentially ensures that the merchandising plan is executed in store and online.
Key parts of supply planning include:
Forecasting
Forecasting is the process of predicting how much of each product will sell during a specific time period or season. Retailers often provide suppliers with forecast data such as past sales history, point of sale data, and market trends. For suppliers, building multiple forecast scenarios prepares them to not only stay flexible but also helps them potentially avoid both stockouts and overstocks.
Inventory Positioning
Inventory positioning is determining where products will be housed before going to the actual store. Most large retailers like Walmart do this through distribution centers (DC) or warehouses to ship goods to stores. To make sure inventories are arriving at the right store on time, suppliers should communicate with their retailers to understand cut off dates at the DC (the last day that an inventory can arrive before being shipped to a store).
Related Reading: What is a Walmart Distribution Center?
Transportation
When a supplier knows how much inventory they need to ship, and where they want to send it, the next question that arises is, "How are they going to get it there?" Planning for inventory movement from the supplier's warehouse or plant to the retailer's DC or stores is crucial during the holidays because demand spikes for products across all industries andaccess to trucking capacity is more limited.
In addition to limited capacity, another factor to consider in transportation planning during the holidays is weather delays and congestion at the ports. Suppliers should book transportation early and plan for backup carriers or 3PLs, as missing delivery windows often results in retailer fines.
Compliance
Even if a product successfully makes it all the way to a store shelf, it does not mean that the supplier is entirely in the clear. Many retailers measure suppliers through compliance scorecards that assess how and when shipments were delivered.
For example, Walmart uses OTIF (On Time In Full) which tracks whether shipments arrive on time and in the correct quantity. In addition to time and quantity standards, retailers will also assess the quality of the shipment. This could include packaging and labelling standards such as GS1 barcodes, carton labelling, or ASN accuracy.
If suppliers are not compliant with retailer standards, they risk deductions or chargeback fees, which are fees that retailers deduct from the amount owed to suppliers to offset the problem. These amounts can accumulate quickly during busy seasons like the holidays.
Best Practices for Suppliers Preparing for the Holiday Season
1. Plan Early
Retailers finalize their holiday assortments and promotions months ahead of time, sometimes in spring. Suppliers may wait too long to get the opportunity to pitch seasonal product or secure promotional slots. Suppliers should prep their holiday product assortments, pricing, and promotions as far ahead of schedule as possible—preferably before spring—to ensure that they can make their plans in sync with a retailer's planning calendar.
2. Use Scenario Forecasting
Forecasting holiday demand is never exact. A popular trend may kick off right before the holidays causing some items to sell faster than the forecast while others lag behind. To act on this, suppliers should create several demand forecasts (high, medium, and low demand) and have contingency plans for each scenario to be able to quickly react to changes that may arise in production, inventory, and shipments as sales trends shift.
3. Stay in Consistent Communication
Suppliers should continually communicate information to their buyers and replenishment managers, such as production capacity, inventory, and possible supply chain constraints. If they know about a potential delay early enough, they may have time to adjust promotions, shift orders, or approve backup options.
Proactive communication fosters trust in the relationship and provides transparency to reduce the risk of compliance fines. To facilitate the relationship, suppliers should establish regular check-ins and proactive updates so buyers can always have visibility around risks and solutions.
Related Reading: How To Communicate with Your Merchant Team
4. Build Safety Stock
Safety stock refers to the additional inventory that suppliers maintain in order to prepare for potential spikes in demand. This is particularly true for key SKUs or promotional items. Although the costs associated with carrying additional inventory will be incurred, they are typically less than the costs associated with penalties or missing holiday sales altogether. In order to follow through, suppliers should identify priority SKUs and set aside additional inventory buffers to ensure product availability during peak holiday weeks.
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