Demand forecasting is critical to any retail operation, which is why planners should refine and improve their inventory strategies on a continuous basis. That said, demand forecasting is a complex task and the right models and strategies will vary, depending on the retailer.

There are, however, a number of general tips that can help planners ensure that they always have the right products at the right time.

Check out the pointers below and see if you can apply them to your business.

1. Wrangle your internal data

Data is the backbone of your inventory management strategy. You can’t make good merchandising decisions (let alone predict demand) if you don’t have the right data to back you up.

When you’re planning your inventory, see to it that you have the following metrics and data points in place:

Historical inventory information vs. recent sales and inventory data.

Analyze current trends on a weekly or monthly basis. What are your fast-movers and what’s their sales velocity over time? When do sales start to taper off? Once you have that information, compare the numbers to historical inventory movements from the past one to three years.

Let’s say that for the last 3 years, you’ve been consistently sold out of crop tops during the fourth week of summer. That insight could influence your decision to order more crop tops this year, to ensure that you’re able to fulfill the demand for the rest of the season.

Pay attention to customer feedback or product searches.

If you gather customer feedback via surveys or reviews, be sure to factor in their input in your demand forecasting strategy. Are your customers looking for certain colors or sizes? What’s their feedback on your current assortment? The answers to these questions can help inform your merchandising decisions.

You should also consider what people are searching for when they’re in your store. Instruct your store managers to take note of any product or brand questions they get from shoppers. If customers are constantly looking for a particular item or style, then it may be worth including it in your product mix.

Do the same thing for your online store. Go through your web analytics or search history and see if you can spot any product search patterns. If the query “purple strap dress” comes up over and over again (and from different IP addresses), that could indicate a demand for that particular item.

Identify purchase or stockout patterns.

Inventory movements tend to follow models and trends. For example, a study funded by the Procter & Gamble Company found that out of stocks had a tendency to form patterns, such as day of the week.

Your in-store staff and retail merchandisers must proactively keep an eye out for such patterns. This can be done by regularly auditing your shelves and taking note of when products run out. Your team can also look at POS data to gain more insights into each store’s stockout patterns. Leveraging on an analytic software integrated with sales and stock data would do it for you, in a efficient and automated way.

Once you’ve identified them, find what’s causing the stockouts and take action. For example, if you typically run out of products towards the end of the week, then a possible remedy could be having an additional delivery day so you can replenish your shelves.

2. Don’t forget about external factors

Internal data can only take you so far. It’s equally important to determine how external factors affect your customers’ spending behavior. Here are some of the top external factors to consider in your demand forecasts:

Competitor intel.

Tracking the product movements and pricing changes of your competitors can offer plenty of insights into what’s going to sell and what isn’t. If a competing store is marking down items from a certain brand, then that could mean those products aren’t doing well in the market.

Looking at competitor data can also help you spot inventory gaps that other stores may have. Is there a particular trend in your industry that no other store seems to be paying attention to? Is there a customer need that no one is addressing? Try to identify these insights and then incorporate them into your stock planning efforts.

Consumer trends.

It’s important to keep an ear to the ground to identify emerging trends that you can capitalize on. Google Trends, a service that measures search interest for any given topic, is a great tool for keeping an eye on consumer trends.

For instance, when you run a search for the topic “fashion accessory,” Google not only displays a graphs showing user interest over time, but it also shows search interest by subregion. We can see, for example, that the topic of fashion accessories are particularly popular in the state of Oregon in the US.

Google Trends also displays popular topics related to your search. For the query «fashion accessories,» Google notes that user interest for topics such as «braid accessories» and «paparazzi accessories» have increased dramatically in the last 12 months.

Weather data.

Weather changes can heavily influence your customers’ purchase decisions. As Weather Unlocked points out:

When Sainsbury’s examined the link between weather and sales for a selection of product categories in the UK, they found that just a few degrees rise in temperatures in early spring will produce a 200% lift in BBQ sales.

However, in Scotland, a temperature of 20° C or 68° F will prompt BBQ sales to triple, whilst in London, the temperature has to be exactly 24° C or 75° F to induce the same result.

Needless to say, it’s important that to adopt an analytics solution that can surface weather insights that you can marry with your POS data. This will enable you to make more accurate predictions around demand.

3. Coordinate demand forecasting with your marketing and seasonal efforts.

Your forecasts need to reflect any marketing or advertising campaigns that you’re planning to conduct. The last thing you want is to run out of merchandise after a successful marketing push.

For this reason, it’s critical that you align your marketing team, merchandisers, and in-store staff when planning your inventory and promotions. If you’re intending to do a big promotional push in a specific category, for example, make sure that all your stakeholders are on the same page and are working towards the same KPIs.

The same goes for your seasonal promotions. Whether it’s Valentine’s Day, Mother’s Day, or Black Friday, see to it that your assortments can back up your sales and marketing campaigns.

4. Leverage technology.

If you’re still using spreadsheets in your demand forecasting, it’s time for an immediate upgrade. To compete in today’s fast-moving retail landscape, you need to arm yourself with stock control technology that has the following capabilities:


Solutions that run in the cloud are more secure and pave the way for easier collaboration between different departments or locations.

What’s more, cloud-based systems typically update information very frequently, which means that you can get up-to-the-minute insights into your sales and inventory. This gives you more agility in your decision-making, so you can react and make changes quickly, versus waiting days or weeks to take action.

AI / predictive analytics.

Raw data without proper analysis is useless. In addition to the right numbers, you need a solution that can derive insights and recommendations from your data. There are now more advanced retail analytics platforms on the market that can help you do this.

AnalyticAlways, for example, uses predictive technology to make stock and assortment suggestions for each of your stores. Our in-Season platform is one of the most complete in the market, since it accompanies the life cycle of the product since it is being gestated during the process of planning the collection, in Merchandise Planning, until its final sale.


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