Retail forecasting can be tricky if you don’t know how to do forecasting or you don’t have the technology to track your retail data. Fortunately, we have some amazing software and tools to help you accurately track your POS data. With POS data on hand, you’ll be able to create retail forecast for your business.
Business owners and managers make use of this data to optimize retail delivery of products to their customers. Forecasting in retail involves utilizing collected data to predict future events and consumer behavior. While the data and market research can vary by the types of products a retailer sells, retail forecasting methods and formulas are the same no matter what type of product you’re selling.
Retail forecasting methods allow you to anticipate future buying actions of your customers by evaluating your past revenue and consumer behavior. We do this by analyzing the previous months data (Month Over Month) or years (Year Over Year) to find patterns and develop forecasts for the appropriate upcoming periods.
For seasonal trends, data is adjusted accordingly and a plan for ordering and stocking products would likely follow such an analysis. Once all orders are fulfilled, an assessment of the results is compared with previous forecasts, the process is repeated over and over again.
Why Use Retail Forecasting?
In retail management, forecasting serves to predict and meet the demands of consumers in retail establishments while controlling pricing and inventory. You already know how vital inventory management is to your company. What happens when we have too much inventory on hand? We have overhead cost and you already know this too, that cost can add up fast! Holding excess inventory adds to overhead costs for your business, this is why we rely on forecasting so we can avoid that exact scenario.
When forecasting helps the retailer to meet the demands of the customer by understanding consumer purchase patterns better, it allows you to be more efficient using your display shelves, as well as using your inventory space. If you’re outsourcing fulfillment or using a warehouse, you may not have that problem. However, if you have retail space and store your inventory on-site, forecasting can help you keep your inventory at optimal levels.
Retail Forecast Methods
When you’re creating retail forecasts, analysts will consider a number of different factors, such as the product price, marketing and promotions to develop and plan for projected consumer reactions at the point of sale.
There’s a number of different methods for identifying and understanding past trends in retail sales, these involve incorporating economic indicators into your data. What would that refer too?
- Available disposable income
- Unemployment rates
- The rate of inflation
- Levels of household debt
- Value of all goods and services
In addition, current, recent and projected near-future activity in the stock market is taken into consideration to gauge consumer confidence in the economy.
Benefits Of Forecasting
There’s a number of positive benefits that retail forecasting gives your company.
- Long-Term Profits – Accurate retail forecasts can help retail business owners and management to maximize profits over the long term.
- Price Adjustments – Forecasting allows you to make price adjustments to correspond with the current level of consumer spending patterns.
- Inventory Management – Maintaining and controlling a sufficient but moderate inventory that meets the need without being excessive also adds to long-term profits in the retail industry.
- Future Demand – Retail forecasting can help you predict rises in demand and trends.
- Marketing – There’s many ways you can use your past data to benefit the marketing and promotions you’re running now.
In retail, there’s always a lot of moving pieces. Forecast can help you see the future, it can help you make better decisions and it can drive the growth of your company. If you’re not using your POS data and retail data to make better informed decisions, it’s never too late to start.
*Accelerated Analytics publishes resources like this to provide insights to different analytical metrics, data points and formulas. Please be aware, we’re not claiming that our POS reporting will offer this example or any other metric, data point or formula. To learn exactly what our reporting covers, please feel free to schedule a demo or give us a call. Thanks for understanding.
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