The National Retail Federation estimates people will spend $465 billion this holiday season and that 26% of that will go toward decorations, candy, food, flowers and other seasonal trimmings. Businesses who deal in such items must devise ways to make the short period of profit last all year. Some Christmas businesses branch out into related products, while others organize pop-up shops that help extend their business into new areas during the holidays. Another strategy is to offer services connected to the product, like a lighting store that decorates homes, or a tree-growing operation that offers delivery. For more on this continue reading the following article from TheStreet.
‘Tis the season to be busy, especially for some holiday-centric businesses.
It’s not hard to see how an entrepreneur can profit from the holiday season. According to the National Retail Federation, holiday shoppers plan to spend more than $465 billion this year — an average of $705 per person. Approximately 26% of that is going toward decorations, greeting cards, candy, food and flowers, the NRF says.
But a business that relies mainly on the four-week period between Thanksgiving and Christmas begs the question: How do sustain a business for the other 11 months of the year?
There are several ways to handle being a seasonal business. Owners can embrace it by planning cash flow and operations around the busy season. Companies can diversify into a business that provides revenue during the offseason. A third avenue is to just extend the product line overall so that the business leans away from being so, well, seasonal.
We spoke with four businesses on how they deal with owning Christmas business.
Redwood City, Calif.
Balsam Hill founder and CEO Thomas Harman launched his online artificial tree company in 2006. Harman married into a family that sold artificial trees to people with allergies, but "my in-laws had this incredibly pathetic looking artificial tree," he says.
Harman wanted to offer trees that looked more realistic and started Balsam Hill to offer artificial trees that looked as lifelike as possible.
Balsam Hill’s primary business is selling artificial Christmas trees, but it also sells wreaths, garlands, potted plants and other faux greenery. Harman’s products have been seen on popular talk shows including Oprah, Rachael Ray and Ellen.
Early on Harman decided to embrace the seasonality of the product and plan ahead, careful to manage cash flow and operations. "The reality is most people now get their Christmas tree Thanksgiving weekend or the weekend after, so it’s a 10-day season," he says.
Balsam Hill might ship thousands of trees during the peak season and one a day in the offseason. Balsam Hill contracts with a third party for its warehousing so "I’m not paying overhead to have warehouse space that I don’t need in February," Harman says. He also staffs up and down in customer service as needed.
Other issues that come into play for a seasonal business is access to capital — specifically, having access to it during the offseason.
"Finding capital from traditional sources is extremely difficult for a highly seasonable business because it takes a partner who really understands what you’re doing. Traditional lending does not view an Internet business as an asset," he says. "My suspicion is if we were a chain of 50 retail stores it would be a little bit easier access."
Harman says that in the beginning the company did do pop-up shops during the Christmas season but decided they were not the best use of resources. Now it does business solely online and through home shopping networks such as QVC.
"As much as I’d like to diversify, I think we’re able to serve our customers by focusing on selling the best artificial trees," Harman says.
Christmas Lights Etc.
Wholesale and retail Christmas light distributors
Christmas Lights Etc. is a specialty distributor for Christmas lights: white lights, colored lights, LED lights, rope lights, mini-lights — they either have it or can get it. The company primarily sells its products (which includes some decorations and Christmas trees) online and to wholesale customers, but during the peak season it keeps a showroom open for retail customers.
The company’s wide product offering is what sustains it in the offseason, says Mike Streb, director of sales and marketing. Christmas Lights Etc. wants to be one-stop shopping for decorators, installers and designers.
Streb says the company has shipped a giant tree to New York City for one of Donald Trump’s buildings and provided a Christmas Tree for the Macy’s(M) Thanksgiving Day parade.
The company is still 70% retail and 30% wholesale, but wholesale is the faster-growing segment, Streb says. The advantage there is that customers are more likely to place orders (and deposits) early in the year.
Many commercial businesses such as restaurants also use holiday lights all year round. Lights are a popular decoration for weddings, which pick up in the spring and summer. The company has also been asked to find pink-only holiday lights for a Breast Cancer Awareness event.
"You would be amazed how the business is sustained year-round just because of lights," he says.
Christmas tree farm and homemade wreaths
Laurel Springs, N.C.
Darryl and Cynthia Butler own a Christmas tree farm in the mountains of North Carolina, which keeps them busy throughout most of the year.
While January and February are slow, in March the farm starts preparing for the next Christmas season.
"It’s a full-time job just to maintain the trees," Darryl Butler says.
Butler says he mainly sells the trees wholesale to out-of-state stores, tree lots, nurseries and other places that sell Christmas trees. He set up a Christmas tree wreath Web site for extra income.
Owning a Christmas tree farm is highly competitive and, given the economy, a tough business these days.
"There’s probably hundreds of Christmas tree growers in my area," he says. "I’ve been an entrepreneur all my life. I’ve always been able to make money. [The business] is just very competitive."
Butler says he’s primarily living off assets he made in his previous businesses. (The Butlers have a third business started back in the ’80s in which they sell bracelet charms, but for the most part it’s been wound down, he says.)
"I’d like to try to expand on my online box wreath business, but there is not much room for growth. In this kind of economy, I’m happy to just get my bills paid every year," he says.
Christmas Decor/The Decor Group
Commercial and residential holiday lighting and decorating
Christmas Decor specializes in exterior holiday decorating for homes and businesses. The company was founded in 1986 after owner Blake Smith wanted to supplement his profitable yet seasonal landscaping business (and hopefully create year-round jobs for his workers).
Smith began getting requests to put up Christmas lights and even complete displays. While it was initially a way for Smith to offset overhead and equipment costs for his landscaping business, the service became increasingly profitable and a way to pick up landscaping clients.
"He found out pretty quickly that it was a service that was in high demand and something people were willing to pay good money for," says Brandon Stephens, vice president of marketing.
Twenty-five years later, the company has franchises in 350 markets doing residential and commercial holiday decorating and plans to open in another 100 markets by pitching the company as a profitable "seasonal add-on for entrepreneurs … looking to earn extra cash during the holiday season."
While the typical franchisees are landscapers, electricians and firefighters, Stephens says they are increasingly finding that franchisees want Christmas Decor as a standalone business.
"Our franchisees run the gamut, everything from a two-man operation that will do 50 to 60 [displays] in the winter to companies that will do 2,000 and $2.5 million [in sales]. Our typical franchisee does $150,000 in annual sales," Stephens says.
Still the season is short — mainly the final quarter of the year — and weather is always an unknown. Franchisees spend the early part of the quarter signing up and renewing customers, many of whom are repeats from years before. Displays usually go up as early as October through Thanksgiving and are dismantled through February.
The company continues to expand. It’s most recent venture is Nite Time Decor, which provides outdoor lighting services to homes and businesses.
This article was republished with permission from TheStreet.