👋 Hola! Welcome to Out of Singapore. This is Shan and I write every Sunday on business and marketing. Last few weeks have been a living hell. Consumers have been buying more, and we stock out every 1-2 weeks. Then we need to buy and produce additional inventory to meet the higher demand. But because the sales have dropped you have less cash to buy. It’s a catch 22 situation and we are always chasing.
You could say - “Shouldn’t you buy your inventory 3-4 months in advance?” This is rather simple answer. We are 1.5 years old and we haven’t built high cash reserves. We became profitable recently and hence we are tight on cash every day. We don’t get banking support as yet due to our scale and banking records. This is a topic I would love to share more details on another day. Today, we are talking about the rush of Q4.
We will cover (sweet and simple)
Why is Q4 so big?
What makes Q4 is so challenging?
How Q4 presents a huge opportunity?
Let’s get started and finish quickly. It’s a Sunday and I would like to go on a peaceful evening stroll. The weather is great in Singapore today (still humid though).
#1 Why is Q4 so big?
Q4 is a season of festivities and consequently all sale periods are focused in this interval. It’s amazing how the entire world celebrates during the same period. Let’s look at festivities first.
Christmas - While it’s in Dec, celebrations begin as early as October in many places. Gifting starts early.
Deepawali (and Durga Puja) - Deepawali is now celebrated world over, while Durga Puja is more specific to eastern India. You can see some celebrations in Singapore as well.
New Year and year end holidays - Not specifically a religious festival, but everyone gears up to celebrate, travel and dress well for the year end and new year holidays.
Chinese New Year - Okay this is in Q1 (end of Jan 2025). But honestly January is so close. Businesses need 4-6 months to prepare for the peak.
National Days and Independence Days - Call it the colonial hangover, most countries have their national days from Aug to Dec. India, Singapore, Indonesia, Malaysia celebrate it August. China celebrates establishment of new Republic for the first 7 days in October. These National days are celebration events and consumers travel and shop.
Here are some of the peak sale events
Singles Day - Originating in China, now this is a global shopping phenomenon. It is the biggest shopping day for Singapore.
Black Friday and Cyber Monday - This is big for western markets. Big for Singapore as well.
10.10, 11.11 and 12.12 - Believe this concept was started by Lazada or Alibaba. This is now big in South East Asia. While double days (3.3, 4.4, 5.5, 8.8) are celebrated each month, the three days of October, November and December outperforms the whole year.
Big Billion Days and Prime Day - BBD is specific to India, started by Flipkart while Prime Day is run by Amazon across the entire world.
Fashion Season Sale - Fashion runs in 2 seasons and leftover inventory goes on sale every June-July and Dec-Jan.
The plethora of sale and promotional activities combined with the market demand during festivities means consumers are spending big almost every day. I remember as a kid, my parents would buy us new clothing during Durga Puja. This was without fail - every single year. Other families would buy a complete set of new clothes for everyone in Deepawali. While shopping for clothes is no longer once a year affair, but the spending pattern remains. Families go out of their way to shop (almost everything) during this period across all over the world.
#2 What makes Q4 challenging?
Q4 is big scale. Bigger than you have ever seen the whole year. Every process and system gets tested at 2-5x scale during Q4. A small problem can become a PR nightmare. Let’s look at some of these.
Demand is 2-5x higher - The buying intent is super high. Consumers are looking for deals and browsing all possible brands they see. They will visit the deepest corners of the website and explore unexplored pages. They will ask multiple questions and try to validate if the brand is good or a scam. More traffic, more customer questions, more operations, possibly more escalations, more irate consumers and more orders. You will find out problems with the website, and with processes during this period of the year. These problems have to be fixed asap, because traffic on the site is high and you want to prevent bad experience.
Huge Inventory needed - Demand is high and that means we need to buy more inventory to sell. Without inventory, we miss capturing the demand. You make money on what you sell, right? This inventory needs to be ready before October. But then July and August are also big seasons. Essentially you are buying huge amount of inventory in a period where your cash flows are still not so strong. The cash will actually come when you sell in October, Nov and Dec.
Worse still, if you miss getting inventory ready in time, all the marketing dollars and plans go for a waste. Do note, chunk of these marketing investments are commitments and contracts already signed. If you miss getting inventory ready, you still to pay. Do you see how a company go bankrupt due to Q4?
(This is not a problem for digital products)Marketing cost is much higher - Every company is trying to make money during this period. Which means bids will go higher. So to get the same amount of reach you need to spend more. If you wish to scale and reach more audience, the cost becomes massively more. Last year, our CPM on Facebook ads almost doubled on 11.11, Black Friday and 12.12.
Articles in publications are snatched by brands. So publications don’t negotiate and do not agree to lower prices. Radio and TV spots are taken months in advance. Broadcasters also jack up prices during this period.
If you don’t spend during this period, you lose out to your competition. Once you lose out, it becomes a problem for the next one year.Operationally challenging - Last year, we got more than 100 orders in a single day and over the weekend ~300 orders piled up. This was sudden for us. Right now we trend at 50-70 average daily orders. This is will peak again. The fulfilment system broke down during the 9.9 peak. The peak for 10.10 and 11.11 will be 2-3 times higher. I can already see so many things breaking in operations - packaging, mis-packing, on-hold orders, out of stock inventory and worst of all, technical glitches in warehousing system or platforms such as Shopee and TikTok. This essentially means, we have to on top of everything on a daily basis and cannot lift our eyes off. Manual intervention will be crucial during this period.
Needs BIG cash infusion - To succeed during Q4, you need loads of cash. Real cash in the bank. Cash that you have not earned yet. This could be from investors, bank loans, or past cash savings. If you are not a big business doing 20 million+ annual revenue, this is massively challenging.
Cash is needed to purchase inventory and make finished goods, cash is needed to block marketing placements and spend before the peak days and cash is needed to have extra manpower. All this boils down to a huge cash problem.
Have I missed any points? Please reply in comments or write back to me. I would be keen to hear.
#3 A window of opportunity in Q4
Problems aside, we are in the business of building a business (tried but couldn’t make the sentence any better. yes we are in the “business'“ of building “business”). Building a business comes with unimaginable problems because people don’t give money so easy. But then this difficult time is a massive opportunity because spending friction is low. Demand is high and consumers are looking to spend. What does this mean for us?
Market sentiment is positive, and consumers are spending. It means more orders and more revenue.
It’s a great time to acquire new customers. You can reach more audience and prospective customers.
These peak months will uplift your average sales for next 12 months. Our new revenue benchmarks in Nov and Dec, actually stayed consistent and grew further in next few months.
Existing consumers would be happy to spend even more. They are familiar with products and trust the brand already. This helps drive more repeat purchase.
An great opportunity to wow customers. It could be a new product launch or packaging or experience.
During Q4 a brand go from an unknown small brand to globally famous and high revenue brand. It’s a game of execution during the perfect market sentiment of the year.
And all of this gives me sleepless nights because we are so behind in execution. 🥹
Thank you so much for reading again! If this was interesting, and made you think, please like and share this post.
If you have feedback about writing style, takeaways, or anything else about this blog, please feel to write to me. I am a work in progress, and all inputs help.
Sidenote - I am hiring for multiple positions. The positions are NOT meant for “I want to stick to my JD” type of people. These resources will work in the marketing team, planning and managing campaigns across DTC, marketplaces and different markets. The role will evolve. The smarter the person, the more responsibilities they will get. They will be rewarded for their hard work and incremental hikes or equity will happen throughout the year (not once a year). They will work directly with me, in completely flat structure. Again, this is not meant for people looking for “corporate titles”.
If you know someone, please ask them to drop a email with their resume and achievements of the most recent experience to shantanu@qurio.com.sg.
Sending this write up earlier today, since I really need some time off before the day starts tomorrow. The pending work is crushing me every day.
Jisoo, I also need this. So tired 😮💨
Logging off now. Bye and take rest!
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