It might be difficult to start thinking about discounting seasonal merchandise as the shopping season just heats up, but thoughtful planning now can result in improved cash flow later. Controlled timing and strategically planned clearance events are essential to maximizing your profitability. Knowing how to execute a few fundamental retail strategies can help you shed unwanted merchandise weight as you work towards creating a leaner inventory.

Early Discounts Can Add Black

Many merchants are finding they can add more black to the ledgers by offering modest discounts prior to Christmas. Four Your Paws Only is one example. Like most small businesses, they have a pretty good idea about a week before Santa’s arrival as to how much holiday inventory they will sell. Their strategy is to discount certain items by 15 percent in the week leading up to the big day. Since shoppers are more likely to make those purchases based on sales incentives, the company significantly reduces its leftover inventory, while earning improved profits from earlier discounts.

By early December, many shoppers will have already sent out their greeting cards. Discounting holiday cards earlier in the month and strategically positioning them next to wrapping paper or the cash registers is a particularly effective way to optimize cash flow with controlled timing. This approach can work for other products, as well. Ornaments, calendars, seasonal food and clothing—virtually anything that is holiday-specific or time-limited—should be seriously considered as fair game.

Tried and True

Inventory that is leftover after the holidays can be discounted in groups. For example, Target promptly discounts all of its holiday candy by 30 percent, clothing by 70 percent, and seasonal items (e.g., gift wrap) by 75-90 percent. Pottery Barn, Lowe’s and Home Depot reduce their holiday décor by 40-75 percent.

Some retailers take a more blunt approach, applying a straight discount across all seasonal items. Retailers like Jo-Ann Fabric, however, add a little spice to mix. When it comes to thinning out stale holiday inventory, Jo-Ann’s is extremely effective in carving up its discounts, creating an enticing bargain. For instance, rather than simply advertising 80 percent off regular prices, the retailer announces 70 percent off plus an additional 30 percent. Of course, this does not mean 100 percent off; the 30 percent is off of the discounted price. Structuring a clearance in this manner, though, is much more alluring than cutting to the chase, which amounts to an 80 percent discount.

Similarly, offering shoppers a two-for-one deal creates a different perception than blandly advertising 50 percent off. Buy-one-get-one-free sounds much different to a customer’s ears than a ho-hum advertisement of half-off. Additionally, you can motivate holiday shoppers to return to your store after the lights come down by including coupons with December sales that activated in January. Offering a 10-20 percent discount on future purchases encourages return customers during a typically slow time of year.

Online Ignition

Whether you sell online or not, having an appealing website presence is a threshold requirement for all retailers—including the small merchant. At a minimum, shoppers will consult your website for products, prices and store hours. Polishing up your site to make it shine with holiday promotions and coupons they use for in-store purchases is expected.

Taking advantage of this straightforward opportunity can create the kind of buzz that drives internet traffic to your cash register. Maximize your earnings by offering extra discounts if a visitor registers online with an email address. This will enable you to create a list of customers who you can connect with through email promotions during the holidays and throughout the year.

For example, you might want to consider sending “thank you” emails to your customers that spotlight an exclusive offer. Rewarding current—and potential—customers with incentives to visit your store in January for a limited deal is another excellent way to encourage higher post-holiday sales, and help you reduce some bulk from leftover seasonal items.

Keep It Going

Creating buzz with post-holiday clearances does not need to end with a silent January. Differentiating yourself from the competition is an open-ended opportunity. Rather than reinstating full-price immediately after the holidays, you might think about having a winter sale. This offers you the chance to keep the magic of winter alive and bright as tree lights begin to dim. Providing irresistible bargains on seasonal merchandise, while offering modest discounts on spring products, can take the chill out of a cold register—even in January.