I have a love-hate relationship with the holiday season. For the first 12 years of my career, I worked for an internet company and December was vacation season. It seemed that there were more people on PTO the last two weeks of December than were in the office. I looked forward to visiting family, holiday parties, and enjoying some downtime.

However, all of that changed when I bought my first e-commerce business in the summer of 2005. Having never worked retail during the holidays, I was thrilled when I saw orders starting to increase in the middle of November. However, that excitement was short-lived. By the first week of December, I was working 90-hour weeks, just trying to keep my head above water. Some of you may remember this old UPS commercial which does a pretty good job summing up what I was feeling.

After barely surviving that first Christmas I vowed to myself that the next year would be better. When the 2006 holiday season rolled around I thought I was prepared, but I wasn't. I was back to working anytime I wasn't sleeping. Just like the movie Ground Hog Day, for the next few years, I told myself, and my wife, that the next year would be better, only to re-live the same holiday season again and again.

Eventually, I concluded that visiting family, holiday parties, and vacations in December were things of the past. When I finally admitted that to my wife, she told me she had known that for several years. I always was slower to catch on than she was.

Fast forward 13 years, having just sold my first company, I was trying to figure out what I would do next. After exploring several options my wife and I decided we wanted to start a gifting company. We were used to a busy holiday season and we figured the gifting company would be more of the same.

Little did we know. We went into our first real holiday season thinking it would be similar to our first retail e-commerce venture. Sure, we would see a nice jump during the holidays so we hired extra staff and loaded up on product, as least as much as any startup can. By the Saturday after Thanksgiving, we realized that this business was nothing like our previous business. Instead of doing 15% to 20% of our annual business in the holiday season, we did more than 25% that first year and it would have been much higher had we not run out of just about everything by the second week in December.

Having learned my lesson, the next year I planned for sales to double but in reality, they were up by 500% from the previous year. Again we struggled to keep up and had to turn business away because we couldn't get enough product from our suppliers.

At this point, you might be thinking to yourself "Why am I reading this article about preparing for the holiday season when obviously this guy can't figure it out?" Well, they say that you learn more from your mistakes than you do from your successes. If that is the case I think I have now earned a Ph.D. in planning for the holiday rush.

Hopefully, you can learn something from all the mistakes I made so you don't have to make them yourself.

Product is the first of my three Ps, not necessarily because it is the most important, but because it has the longest lead time. While we try to purchase as much product as possible from local suppliers and small artisan companies, most of our gift packaging and some of our gift items come from outside the US. But even the product we purchase from suppliers here in the US is still very dependent on materials and packaging from sources outside the US. Before we jump into our current purchasing plans for 2022, it might be worthwhile to share with you some of the challenges we have experienced getting product the past few years.

A quick summary of our struggles to get product the last few years

Normally, when we order product from China or other countries outside the US, we plan for 30 to 60 days of production time and then four to six weeks for the container to travel across the Pacific, clear customs, and make it to our warehouse. However, the past two and a half years have been anything but normal. COVID-related supply chain issues have caused even the best-laid plans to be thrown out the window.

Early on in the pandemic, as everyone went home to hide, and the financial markets crashed, and most in-person businesses, shuttered their doors, companies were so unsure of the future they cut back on ordering product. Even with some lockdowns in China, it was still fairly easy to order product, and shipping costs and times were normal. However, when companies and the overall economy started to open back up and consumers started to spend all of the money the government had thrown at them during the pandemic, companies were caught flat-footed and product shortages became the norm. In an effort to catch up, companies order extra products and with some lockdowns still in place in China, manufacturers could not keep up. On top of that, shipping companies, which had been operating at less than normal capacity, were now overwhelmed and could not keep up. It became very difficult to get a container and space on a container ship. On top of that, a 40' container, which used to cost about $4,500 to ship from China to LA, all of a sudden cost $25,000, and instead of taking three to four weeks from China to the west coast, the container now sat at anchor off the coast of California for weeks or even months because the ports could not handle all of the incoming containers.

How was a small gifting company supposed to navigate the extra months of delays and the 500% increase in shipping costs? We were scrambling to find substitute products every day. The only solace in our plight was all the articles I read about the retail giants Amazon, Walmart, Target, and others having the same issues. I guess misery does love company.

By the early summer of 2022, we started to see positive signs with our shipping. Port congestion on the west coast started to alleviate and our containers started arriving much sooner than we had planned. Shipping costs had dropped to below $18,000 per container, which was still very high compared to normal rates, but a welcome relief from the $25,000 we were paying only a few months ago.

After we caught our breath from the 2021 holiday season, we sat down to run some analysis on what we had in stock, what we ran out of, what sold better than anticipated, and what moved slower.

Based on that information we put together our purchasing plan for the items that have the longest lead times. Forecasting for some growth in 2022, we came up with a list of items we need to order. In a perfect world, we would have ordered everything we needed in early 2022 so we didn't have to worry about delays, port congestion, etc. However, as a small company, both cash flow and warehouse space are limited. We knew we would have an increase in sales around Valentine's Day, Mother's Day, and Father's day, so we made sure we would have enough products and packaging for those holidays, as well as our normal day-to-day birthday gifts, get well gifts, thank you gifts, corporate event gifts, etc. We then placed the rest of our orders so that the product would arrive towards the end of summer.

Fingers crossed, by early autumn we should have all the packaging and long lead time items in stock and ready for the holiday season. At the same time, we are checking with our suppliers on our short lead time items to make sure their lead times have not increased. By the end of September, we will make our final holiday forecast, based on our run rate this year versus last year as well as other variables. We then will place our holiday orders for the short lead time items that will have a shelf life at least through January 2023.

In October of 2021, Amazon announced it would hire 150,000 seasonal holiday workers, which was 50% more than the year before. That is a huge number and I am sure a massive challenge for their recruiting team. However, at the end of 2021, Amazon had 1.2 million employees in the US, so the 150,000 was only a 15% increase.

At Shadow Beeze we have a small "year-around" staff that includes both in-person and remote workers. During the weeks leading up to Valentine's Day, Mother's Day, and Father's Day, we will use some temporary help as well as divert staff from their normal responsibilities to help prepare, pack and ship gifts. However, in preparation for the holiday season rush, we will triple or quadruple the size of our company with seasonal help. On an absolute basis, the numbers may not be that high, but on a percentage basis, they are. Imagine the challenges Amazon might face if they needed to add three million seasonal workers.

The first challenge is finding the right people, especially in this job market. We prefer not to use temporary agencies, but instead to find people on our own. Our first source is family and friends. We love to bring on people who have helped in previous years because they require minimal training but that is not always possible. In past years we have brought on college kids with flexible schedules, stay-at-home moms whose kids are in school, individuals with summer seasonal jobs like lawn care or landscaping, and people with other part-time or full-time jobs wanting a little extra holiday money.

Because the holiday season is so short, only 4-weeks, we stress the importance of being available the whole season. We also structure their compensation with a per-hour multiplier, paid at the end of December, for any hours worked. For example, their base pay might be $15 per hour but if they stay through the whole holiday season and don't have any unplanned absences we will pay an extra $4 to $5 per hour worked.

In addition to the seasonal help, all of our normal staff, including myself and my wife, will spend the holiday season packing and shipping gifts in addition to our normal responsibilities. I can't remember the number of times I have worked 36 hours shifts during the holiday season, spending the night in the warehouse running engraving machines to personalize gifts for our customers.

Our third P is tied to our second P. With all of the seasonal help we bring on, they must be trained correctly. That training normally starts at the end of October or early November. In addition to having our seasonal employees help with orders shipping out before Thanksgiving, we also have them help with anything we can prepare in advance of the holidays.

Since almost all of our gifts include personalized or custom items, we can't build the gifts until they are ordered. However, there are several other things we can do in advance to speed things up during the holiday season. Some examples include:

Assemble Gift Boxes: while most of our gift packaging is pre-assembled (i.e., wooden crates, seagrass baskets, premium diamond boxes) our standard gift packaging is a colored corrugate box that is shipped and stored flat. To prepare for the holidays, we will assemble mountains of these boxes so we don't have to take the extra 30 to 45 seconds it takes to assemble one during the busy season.

Build Kits: even though most of our gifts include personalized items, there are many items in the gifts which are not personalized. For our best sellers, we pre-assemble kits of non-personalized items to save time during the holidays. That way if someone orders our "Ooh Spa La" gift, for example, we will only have to worry about personalizing the tumbler and gift box. Instead of having to then pick the other 8 to 10 items, we can just grab a kit that was built in advance, saving a few minutes and helping to ensure picking accuracy.

Inventory Counts and Restocking: Conducting inventory counts helps in two ways. First, we make sure that our inventory is correct so we don't sell more of an item that we have in stock, a very negative experience for our customers. Another benefit is that our seasonal help becomes familiar with our products, including where they are located in their pick-bins and where we have back-stock in the warehouse.

While some of the things we do to prepare for the holiday may only save 30 seconds per order, when you multiply that by all of the gifts we will ship in December, it can make make a big difference.

Like millions of people around the country, every year I join a group of family and friends to compete in a March Madness competition. As someone who does not follow NCAA basketball that closely, you probably would not be surprised to learn that my brackets always look very similar to the experts at ESPN. Some years I get lucky and have a great tournament, and I have even won it all before. Other years I am bringing up the rear of the pack.

Now, you may be asking yourself what March Madness has to do with holiday gifting. Good question. Let me explain. In the initial round of the tournament, everyone is going to have some wins and losses. When you are looking at your ranking after the first round you will see that everyone is pretty close together. However, as you advance into the next few rounds, the losses have a greater impact, especially if the team you have picked to win it all is eliminated. Several times I have been in the lead heading into the Elite 8 round or the Final 4 round, by picking most of the teams there, even though the team I picked to win it all has been eliminated. Even though I was in the lead, it became statistically impossible for me to win. Regardless of how many wins you get in the early rounds, it is almost impossible to win in a group of any size if you don't get wins in the last two rounds, with the Championship round being the most important.

The gifting business is a lot like that. During the first 11 months of the year, you are going to have a lot of wins and some losses. You might feel pretty good about all the wins you have racked up, but if you don't win that final game, the holiday season, you lose. It is not possible to get enough early wins to make up for a losing holiday season.

Hopefully, you found this peak into a gifting business worth your while and maybe you even picked up a tidbit that might help your business. I would love to hear your thoughts, ideas, and feedback in the comments below.