With the holidays right around the corner, demand forecasting is the name of the game in the retail sector. Making up 20% of gross sales across the industry and as much as 30% total, ensuring that your business is in position to reap as much business from the holidays is important. But to do so takes more than just filling the stockroom with overstock, ensuring that you are efficiently taking advantage of stock requires an intimate knowledge of the community demographics on top of examining past sales data, something no spreadsheet or home brew system can offer.
Ensuring Your Systems are Working Efficiently
The big problem with most demand forecasting solutions, regardless of the season, is that they only look at historical data. While this can definitely give insight into roughly how business should be doing, and might help with scheduling and human resources, it’s no where near accurate enough to rely on for accurately predicting demand in the future.
By taking a look at a combination of different elements, demand forecasting software helps you improve efficiency by ordering based on what will sell, instead of ordering what may sell, leaving the remainder to sit in the stockroom. Inventory not on the sales floor isn’t working to increase profits, and is doing you and the company a disservice.
Why Historical Data is Inaccurate
Let’s take a moment to examine why historical data is inaccurate, making it a poor source to base purchase orders on.
In the 2013 holiday season, electronics stores were scrambling to keep-up with the demand for the Xbox One, the latest console gaming system. Many were selling rain checks for the system due to limited initial stock. Games for the system were selling extremely quickly, forcing the numbers up due to the newness of the gaming system, and the fact that the customers often wanted to be able to walk out with an item, rather than empty handed.
Examining that data leading-up to this holiday season would show that stores should stock heavily on games for the Xbox One, and in the system itself. However, while they will certainly sell their fair share, basing figures entirely on last years sales would mean most stores would wind-up with a significant overstock at the end of the season.
Don’t Fall Victim to History
While big differences such as the Xbox One situation we just talked about would likely be caught, it demonstrates the fallibility that historical data presents. Customers don’t base their purchases on last year. Times change, needs change, and demands change. Ensure that you’re there to predict those changes. Contact us to learn how our demand forecasting solutions can be implemented in your store quickly and at a fraction of the price of other solutions.