With retailers cutting back on orders at the fastest rate in more than 40 years, UK startups face a difficult decision ahead of Christmas: how much stock should they risk buying?
Christmas should be an exciting time for a retail startup. It’s a chance to reach new customers, boost sales and, for some businesses, make enough money to see them through the quieter months of the year. But this Christmas is shaping up to be a tricky one.
New figures from the Confederation of British Industry (CBI) show that retailers cut orders from suppliers in September at the fastest rate since its survey began in 1983.
Retail sales also fell sharply, while online sales recorded their biggest annual decline in almost three years.
For startups selling everything from skincare and clothing to gifts and homeware, the figures raise an uncomfortable question. How much Christmas stock should they order when nobody quite knows how much people are going to spend?
Retailers Are Nervous About Christmas Spending
The CBI’s September survey suggests retailers have good reason to be cautious.
Its measure of retail sales volumes fell to -55%, down from -48% in August, while orders placed with suppliers dropped to a record-low balance of -62%. These figures represent the balance of businesses reporting increases and decreases, rather than actual percentage falls.
Retailers aren’t expecting things to improve overnight, either. The CBI’s forecasts suggest sales and orders will continue to fall in October.
For an established retailer with years of sales data, planning for Christmas is difficult enough. For a startup approaching its first or second festive season, it can be even harder.
A young ecommerce brand might have enjoyed steady sales throughout the summer, but that doesn’t necessarily tell its founders how many orders to expect in November and December.
And Christmas stock often needs to be ordered well before the first festive purchases come through.
Too Much Stock Could Leave Startups Out of Pocket
The temptation to stock up ahead of Christmas is understandable. Nobody wants to spend months attracting customers, only to run out of their bestselling products when orders finally take off. But getting carried away with festive orders can be expensive.
A startup selling Christmas gifts, for example, might order hundreds of extra products in anticipation of a busy December. If sales fall short, that business could enter January with unsold stock, storage bills and less money available for the next collection.
There are practical problems, too. Startups operating from small offices, shared workspaces or modest warehouse units may struggle to accommodate extra deliveries during the Christmas rush.
A spokesperson for SFI, a UK logistics and warehousing company, said:
“Christmas is a difficult balancing act for startups. You want enough stock to meet demand, especially if you’ve spent months building up your customer base. But ordering too much can leave you with products sitting in storage well into the new year.
“We often see growing businesses reach a point where their usual storage space isn’t enough for seasonal orders. The problem is that they might only need that extra space for six or eight weeks, rather than the whole year.”
For founders working with tight budgets, every pound spent on stock is money that can’t be used elsewhere in the business until those products sell.
Rising Costs Are Making the Decision Harder
Startups are also heading into the festive season with plenty of other costs to think about.
According to the Office for National Statistics (ONS), 29% of trading businesses reported that the prices of goods and services they bought had increased in August, while 28% said their turnover had fallen.
Supply-chain worries haven’t gone away, either. ONS figures published on 8 October found that 48% of businesses with 10 or more employees were concerned about at least one supply-chain issue over the coming year, up from 31% a year earlier.
That creates another headache for startups importing products or relying on suppliers overseas. Ordering stock early can help avoid delays, but it also means paying for products weeks before they generate any sales.
Wait too long, and there’s a chance those products won’t arrive in time for the Christmas shopping rush. For a young business trying to grow without overstretching its finances, neither option is particularly appealing.
Could Temporary Warehousing Help Startups Through Christmas?
With Black Friday approaching on 27 November, some startups may be looking at ways to handle extra stock without committing to permanent warehouse space.
Short-term warehousing allows businesses to store products for a few weeks or months, making it useful for ecommerce brands expecting a seasonal increase in deliveries.
It also means startups don’t necessarily need to move premises just because they’ve ordered more products for Christmas.
The SFI spokesperson added:
“A startup might manage perfectly well with its usual storage space for most of the year, then suddenly have several deliveries arriving ahead of Black Friday.
“Being able to bring in extra stock without taking on another warehouse lease can make a real difference, especially when you’re still working out how much demand to expect.”
The next few weeks will give retailers a better idea of whether shoppers are prepared to spend this Christmas.
For startup founders, the hope is that the festive season brings plenty of orders, without leaving them with a mountain of unsold stock when January arrives.
