Holiday Retail Planning: Insights and Solutions for the 2024 Season

The holiday season is upon us, and 2024 promises to be a record-breaking year for retailers. According to the National Retail Federation (NRF), consumer spending during November and December is forecasted to reach an all-time high of up to $989 billion, marking a 2.5% to 3.5% growth compared to last year. With average spending per person climbing to $902, driven largely by gifts for family members, retailers are bracing for high demand across channels.

However, thriving during this busy season requires more than stocked shelves and discounts—it demands precise planning and advanced strategies to navigate complex supply chains and shifting consumer behaviors.

Early Shopping and Evolving Trends

NRF’s survey highlights that nearly half (45%) of holiday shoppers plan to browse and buy items before November, mirroring recent trends. Reasons such as spreading budgets, avoiding last-minute stress, and securing unbeatable deals are driving this behavior. Yet, despite an early start, most shoppers anticipate completing their purchases in December, underscoring the importance of maintaining optimal inventory levels throughout the season.

For retailers, the shorter shopping window—just 26 days between Thanksgiving and Christmas—intensifies the need for efficient allocation and replenishment. This becomes even more challenging as online sales, expected to increase by 8%-9%, dominate the landscape. With 57% of consumers planning online purchases, ensuring the right inventory in the right fulfillment centers and stores is paramount.

Overcoming Allocation Challenges

As consumer spending peaks, retailers must confront this question: how to allocate inventory effectively to meet demand and maximize profits? Traditional allocation systems, relying on rule-based approaches, often fail to adapt to the dynamic nature of consumer demand. These systems struggle to handle complexities such as slow-moving items or regional demand variations, leading to inventory imbalances.

For example, while gift cards and clothing remain top items on holiday wish lists, regional preferences or seasonal trends can create unexpected surges in demand for niche products. Retailers must balance the need to stock popular items while ensuring that slower-moving inventory is allocated to stores where it is more likely to sell.

Leveraging Advanced Allocation Strategies

In this environment, advanced allocation strategies powered by AI can make all the difference. Probabilistic demand forecasting, combined with granular insights at the store-SKU level, enables retailers to optimize inventory allocation dynamically. These systems calculate the expected benefit of every allocation decision, ensuring the right products are in the right stores at the right time.

During the 2023 holiday season, over 200 million people shopped both in stores and online, highlighting the massive opportunity for retailers. With AI-powered allocation systems, retailers can position inventory more effectively, reducing the risk of stockouts or overstocking. This granular approach minimizes lost sales and avoids unnecessary markdowns, enabling retailers to drive higher profitability during this critical period.