Why do my sales drop every January?
Short answer
For most consumer businesses a January fall is seasonal and expected: December is inflated by gift buying and promotions, customers have just spent heavily, and post-holiday returns reduce December revenue after the fact. The way to tell whether yours is normal is to compare January against the same January a year earlier, never against December. If this January is up on last January, the business is growing and the month-on-month drop means nothing. If it is down year on year, the seasonality is hiding a real decline.
Compare year on year, never month on month
January against December compares the quietest month with the busiest. The fall it shows is arithmetic about the calendar, not information about your business.
January against the previous January holds seasonality constant, which is the only way to see whether anything actually changed.
Why the drop is often bigger than it looks
- December revenue includes gift purchases from people who will not buy again for a year.
- Discounting in December inflates order counts while depressing average order value, so the two months differ in shape as well as size.
- Refunds from December land in January but are usually attributed back to the original purchase date, quietly reducing December after you have already read it.
- Paid acquisition is more expensive in December, so some businesses deliberately buy less traffic in January.
What to check if year on year is also down
- Split the fall into traffic, conversion rate and order value across the two Januaries. Only one of them will be the cause.
- Check whether the mix of channels changed. A campaign that ran last January and not this one shows up as a traffic fall in one channel.
- Check whether a price changed. Falling order value with steady orders is a pricing story, not a demand story.
You need a year of history for this to work
Year-on-year comparison requires last year, which a business in its first year does not have. There is no way around that with data alone.
Until you have it, treat January cautiously: assume some of the fall is seasonal, look for step changes on specific dates rather than the overall level, and avoid making structural decisions on a single quiet month.