Importance of Demand Forecasting in Retail
Gone are the days when there was one sales rep with all the knowledge about the shop and of each product shop has to offer. The sales rep had all information like when there will be a demand when to push sales when to give discounts or the promotional offers.
But in today’s data-centric world things have changed in terms of complexity, amount of data and analysis of these data such as buying patterns, location or preferences. Because of this ever-increasing consumer data, better prediction of demand was needed for products an individual as well as multi-chain store. Today a multi-chain store needs to manage its hundreds of stores, what are they selling, how many products are being sold as well as how they manage scale day after day and month after month.
So this is where demand forecasting comes into the picture. It gives your business the ability to use your historical data on consumer or market to help plan strategies for future trends. You can use this data to anticipate when the demand will be high or establishing a long-term model for business growth. Forecasting is a numerical estimate of future outcome based on historical data, performance, behavior, selected plan and other elements present in the retailer’s current environment.
Demand forecasting allows retailers to eliminate the dependency on instinct and intuition. 74 % of retailers rated demand forecasting technologies as very important to their success as compared to others.
A retailer with demand forecasting can meet customers needs immediately and cost-effectively irrespective of location or time. It can also help future sales promotions for each product in his provide to fulfill the demands.
A customer will research about a product online first, then will compare its price from mobile, tablet or device and eventually finish with the in-store purchase or online purchase. In today’s world where a customer can get anything a simple touch on his phone and get it shipped to his doorstep, a connection between retailer and buyer is important as it provides a variety of buying options for the customer and rich customer details for the retailer. The retail environment also creates the questions such as which merchandise should be stocked, what shapes, sizes and as well as or the outlet, when and where should products be displayed, what should be there pricing, either ordered or shipped and lastly what kind of promotions to run.
If you are looking for the answers to the above questions, Demand forecasting.
Here is a big question arises on how to create a meaningful forecast for a new product when there is no sales history or historical data? Simply overcome this by using reference of similar products that have a sales history as a premise for forecasting a new product. Here the forecasting could be based on the product attribute such as color, brand and size. Seasonal patterns can also be used as a baseline from same product groups for forecasting.
Demand forecasting can provide retailers a long way toward optimizing their merchandising life cycle simultaneously creating for the customers. It can help in understanding customer demand and buying experience and can also reveal future potential.