How to prepare for the 2021 holiday shopping season
COVID-19 put a lot of people off planning; months of postponing then canceling everything from hair appointments to vacations can have that effect. However, now is not the time for retailers to put off planning for the 2021 holiday season. It will be here before you know it, and it will likely bring new hurdles.
There’s a good chance the 2021 holiday shopping season will be plagued by staffing challenges and supply chain disruptions. Rising costs could reduce profit margins. Another wave of COVID-19 could lead to another lockdown. We just don’t know.
To face a future full of such uncertainty, advance planning is essential. Taking the following steps can help you successfully navigate the holiday season, whatever it holds:
- Bolster your supply chain
- Build your staffing bench
- Improve the customer experience across sales channels
- Streamline sales tax collection and remittance
Bolster your supply chain
Though headlines no longer scream of panic buying and stockpiling toilet paper, as in the early days of the pandemic, supply chain challenges persist. According to the White House, “both the economy-wide and retail-sector inventory-to-sales ratio hit record lows in March.” Heightened demand combined with lower output is straining supply chains: Retailers had about 43 days of inventory on hand in January 2020, but just 33 days of inventory in June 2021.
Inventory shipped in from foreign shores is plagued by delays, as evidenced by the numerous cargo ships waiting to dock and unload at ports. Domestic supplies aren’t faring much better: A recent U.S. Census Small Business Pulse survey found that 36% of small businesses had experienced delays with domestic suppliers from May 31 to June 6.
There’s no one cause of the supply chain challenges; contributing factors include difficulty procuring raw materials, labor shortages, and severe weather. Throw in heightened demand and you’ve got a perfect storm.
Shortages could persist through the holidays, so it’s important to develop coping strategies now. Rosemary Coates, a global supply chain consultant, recommends “stretching for creative ideas and ways to respond to shortages.” For manufacturers, that could include printing your own parts with 3D printers, or reengineering products. She says, “Take big leaps when solving supply chain issues.” For retailers, experts encourage broadening and diversifying your supplier base.
Taking extraordinary measures to bolster inventory now will help ensure you’ll have it for the holidays.
Build your staffing bench
Many businesses that survived the darkest days of the pandemic now face staffing challenges. Although U.S. businesses have added approximately 540,000 jobs per month since the beginning of the year, help wanted signs are still a common sight. In April 2021 alone, there were a record 8.3 million job openings in the United States.
Restaurants are cutting back on hours as they struggle to fill shifts. At least three summer camps had to close days after welcoming campers because counselors didn’t show up as promised or simply walked off the job. Last year at this time, such a cavalier attitude toward employment would have been unthinkable. Today it is commonplace.
To attract and retain staff, businesses are offering greater flexibility, sign-on perks, and higher wages. Fostering connections and looking for nontraditional employees may help as well; the pandemic caused many people to reevaluate their lives and jobs, so be open to applicants with no prior experience. Boomers forced out of the workforce by the pandemic in 2020 may be willing to return for the right opportunity.
Improve the customer experience across sales channels
Supply chain and staffing challenges can lead to higher consumer prices. Yet to charge customers more, you’ll need to ensure their experiences are positive from the first time they browse to the moment they buy — and exchange or return, if necessary.
One way to do that is to streamline browsing across different channels. More than half of all customers typically engage with three to five channels before making a purchase. They may jump from an influencer’s Instagram post to an online marketplace or buy online then pick up in store. However, and wherever consumers browse and shop, they should encounter continuity. Give them clear and helpful information; answer their questions; recognize them; and store their information to ensure a seamless and speedy checkout.
Since different sales channels appeal to different customers, it’s no surprise businesses that successfully navigate multiple channels can generate 190% more revenue than single-channel sellers. But rather than take a scattershot approach and stretch yourself too thin, it’s best to focus energy on two or three channels with strong customer engagement. Additional channels can be added after the most profitable are running smoothly and getting the attention they need.
Streamline sales tax collection and remittance
Collecting and remitting sales tax as required across all sales channels is critical to the ongoing success of your business. And the first step in managing sales tax is to understand sales tax nexus — the connection that allows a state to impose a sales tax collection obligation on a business.
Physical presence creates sales tax nexus: If you have employees or even inventory in a state (including inventory housed in a marketplace facilitator warehouse), you likely need to register with the tax authority then collect and remit sales tax in that state.
However, physical presence is no longer requisite for sales tax. Ties to in-state affiliates will trigger nexus in many states. And today, it’s possible for a business with no affiliates or physical connection to a state to create nexus through sales alone (i.e., economic nexus). Every state with a general sales tax has an economic nexus law, though Missouri won’t enforce it until January 1, 2023.
Understanding sales tax nexus necessitates knowing each state’s nexus standards and economic nexus threshold (i.e., $100,000 in sales or 200 transactions), what comprises that threshold (e.g., exempt and/or taxable sales of goods or services), and how close your business is to reaching it. Some states require a business to register and start collecting sales tax as soon as the economic nexus threshold is crossed. This is something to keep in mind during the busy holiday season, when sales volume tends to spike.
It’s also essential to understand how selling across different channels can impact sales tax obligations. For example, although marketplace facilitators are generally required to collect and remit sales tax on behalf of third-party sellers, individual marketplace sellers may still be required to register and file returns in some states.
After determining nexus and registering, businesses must ensure point-of-sale systems apply the proper sales tax rate to each taxable transaction. Exempt sales must be validated, exemption and resale certificates collected and stored for future reference. Payments must be made and returns filed on time.
It’s a lot to manage while dealing with supply and staffing challenges and overseeing sales across multiple channels. Fortunately, advance planning can help. To learn more, check out Sales tax planning for holiday 2021: 5 steps to stay compliant.
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