How Seasonal Businesses Can Protect and Optimise Their Gross Margins
Seasonal businesses — from holiday retailers to summer tourism operators — experience major swings in revenue throughout the year.
While peak seasons can deliver strong sales, slow periods often pressure margins and profitability.
In this article, we’ll cover strategies that help seasonal businesses protect, optimise, and stabilise their gross margins across the entire calendar year.
Why Gross Margin Management is Critical for Seasonal Businesses
Unlike year-round businesses, seasonal companies must make a year's worth of profit in just a few months.
This makes:
- Gross margin protection essential during busy times
- Gross margin preservation critical during slow times
Ignoring margin management risks burning cash reserves too quickly in off-peak seasons.
Key Challenges Facing Seasonal Businesses
- Volatile cost of goods sold (COGS) due to supply chain pressures.
- Over-reliance on discounts during slow periods.
- Staffing inefficiencies and seasonal hiring costs.
- Inventory mismanagement leading to markdowns and wastage.
Managing these challenges strategically helps safeguard margins.
7 Strategies to Protect and Optimise Gross Margins Year-Round
1. Forecast Costs and Revenues Accurately
Build realistic seasonal financial models. Predict COGS spikes during peak demand and factor them into your pricing and purchasing decisions.
2. Implement Tiered Pricing Strategies
During peak season:
- Premium pricing can maximise profits.
During off-season:
- Focus on maintaining value rather than racing to discount heavily.
Tip: Target loyal customers with off-season bundles or exclusive offers rather than widespread discounting.
3. Control COGS Through Supplier Negotiations
Work with suppliers to secure:
- Early-order discounts
- Volume-based deals
- Flexible payment terms for slow seasons
Lock in favourable rates before demand surges.
4. Streamline Seasonal Staffing
Optimise staffing models to:
- Hire flexible workers during peaks
- Cross-train staff to cover multiple roles
- Minimise downtime costs
Labour inefficiency is a major gross margin eroder in seasonal businesses.
5. Manage Inventory Carefully
Use historical sales data to:
- Avoid overstocking (leading to end-of-season fire sales)
- Avoid stockouts (leading to lost peak revenue)
Best Practice: Conduct inventory reviews monthly, not just quarterly, in seasonal businesses.
6. Focus on High-Margin Products or Services
During slower periods:
- Highlight premium products
- Introduce exclusive packages
- Offer value-add services (e.g., personalisation, aftercare)
Maintaining high average order value (AOV) helps support margins.
7. Spread Risk Across Seasons
Where possible:
- Diversify product offerings to different seasons.
- Expand into complementary products or services that stabilise year-round income.
Examples:
- A surf gear brand selling winter fitness gear.
- A ski lodge offering summer adventure packages.
Quick Seasonal Margin Protection Checklist
Final Thoughts
Seasonality doesn’t have to mean instability.
By forecasting accurately, controlling costs, optimising pricing, and protecting your high-margin offerings, you can turn seasonality into a competitive advantage — not a profitability risk.
Stay tuned: Next, we'll explore "How to Improve Your Gross Margin: 10 Practical Strategies for SMEs" — practical advice for every business, seasonal or not.
Strengthen your seasonal business strategy with these expert resources:
- Building Financial Resilience: Safeguarding Your Business in Tough Times — Learn how to build financial resilience to weather seasonal fluctuations.
- Understanding Gross Margin — Master the fundamentals of gross margin management for any business type.
- Gross Margin Benchmarks for 2025: What’s Normal in Your Industry? — Compare your seasonal margins to industry standards and set realistic targets.
