We’re heading towards the all important final sales quarter and there’s one question on retailer’s and brand’s minds – how much stock to order for Christmas?

It can feel very abstract and difficult to quantify how much a small business might sell during the busiest periods of the retail year, however there are some starting points to ensure the process of nailing your stock levels is more focused, planned and ultimately results in successful Christmas sales and stock management.

1. Start with the Christmas hero products

Review your hero products, they are crucial for Christmas planning as they are the building blocks for a Christmas campaign, which means nailing your stock levels is an absolute must. Items in a range are a good choice as those are very giftable, suitable for the Christmas season – of course that doesn’t mean they have to be Christmas themed but of course can be.

Shop and brand bestsellers throughout the year are usually chosen as Christmas hero products by the big retailers and then become a focus for the festive season. Consider your hero products first and foremost – it’s what you should spend most of your time thinking about.

Looking back at the sales history of those hero products will be key – thinking about the 80/20 rule – 80% of sales are likely to be coming from 20% of products.

Feature these hero products on your website’s homepage, social media feeds and in email marketing campaigns – it’s worth considering some of your Christmas budget allocation for obtaining great images to showcase these products to really make them shine, and adjusting your stock levels to match.

2. Get clear on the Christmas sales plan

A sales plan for the last quarter of the year is obviously vital, it’s the largest selling period for your small business. Without a sales plan it’s very hard to get a sense of how much stock you should order in.

If you’re a newer small business, you will have to make assumptions about Christmas sales – for example will October be 50% up on an average sales month, November even higher and so on.

It makes sense to increase your product stock levels in line with these predicted increases from your Christmas sales plan.

The big retailers know well, sales plans are not about being 100% accurate but using some solid history and knowledge about sales figures to forecast this period – it will be different to the rest of the selling year.

It also gives you a goal to aim for and work hard to achieve whilst being able to check in with a structured plan throughout those 3 Christmas build-up months – pivoting and adjusting where necessary.

3. Which is worse – stock levels that are too high, or too low?

Too many or not enough: that is the question. This varies depending on the product. For each product item ordered, you should be asking this question.  If you stock an overtly Christmas-themed product, a Santa candle for example, you don’t want any of that stock leftover come the 26th of December.

Sitting on this type of product until the following year can impact cash flow, cause storage issues or worse if it’s a perishable item it goes to wastage – so maintaining a conservative stock level usually is the better choice.

At the other end of the spectrum a product that you sell well all year round, is likely to have a spike at Christmas but also may have long lead times – is the product you want to order generously, based on figures and assumptions.

In this case the worse thing to happen is to run out of stock and not have enough lead time to reorder. So in this case, it would make sense to increase your stock levels a little higher than you usually would.

So you do need to take calculated risks on how much stock to purchase for Christmas, but these decisions should be informed by sales history and patterns, alongside some informed assumptions. Good luck!