Anyone who’s been in the e-commerce retail business for more than 10 minutes will know that Black Friday, Cyber Monday and Christmas are times of sales peak mania. But how you prepare, stock-wise, for these important holiday periods is way more nuanced than simply buying more of everything in the leadup to the rush.
By taking into account exactly what products you purchase, how much, and when, you can boost cash flow; able to make the most of customers’ buying enthusiasm by promoting your slow-moving products and ensuring you never go out of stock of your best-sellers.
This year, however, there’s a lot more to consider when it comes to smart stock purchasing and inventory planning for the holidays. Read on for our Ultimate Guide to Forecasting Sales Trends for Black Friday, Cyber Monday and Christmas.
Common Holiday Sales Challenges for Retailers to Forecast Sales Trends
In the run-up to this year’s holiday season, sales trends are more challenging for merchants to predict because of macro-economy shifts and a range of environmental factors.
- As we mostly leave the pandemic behind, two years of surging e-commerce activity is starting to die down. Sectors that boomed in 2021 might now be going through somewhat of a recessionary period, and that can be worrying for retailers to navigate.
- Many big-name retailers upped their game during the high-pressure pandemic years, so consumers now have increased expectations over delivery speed, availability and choice – or they’ll simply shop elsewhere.
- It’s more difficult this year to use regular forecasting methods, such as using historical sales data to predict future demand – as sales figures from the last couple of years were highly unusual and unlikely to repeat anytime soon.
- The cost-of-living crisis, among other factors such as high inflation, is contributing to a mass drop in consumer sales. Making the right inventory purchasing decisions, then, is more vital than ever in order to keep cash flow moving. The last thing retailers need is to be stuck with a ton of stock that they’re unable to shift.
- In addition, there are supply chain challenges. Longer lead times, shortage of warehouse space and skyrocketing container costs mean there’s added pressure on retailers to find affordable inventory purchases that arrive on time.
Phew! This may sound too stressful to manage – and there is a lot to balance – but there are steps you can take to ensure a firmer grasp over your sales forecasting, despite the multiple risk factors at play. Read on for our expert advice in inventory planning, so you can glide through this year’s holiday season making smart sales for your business.
How to Accurately Forecast Sales Trends for Black Friday, Cyber Monday and Christmas
1. Reevaluate the time period of historical sales you use to forecast future demand
Historical sales trends are fundamental to all types of sales forecasting, but they aren’t so reliable following two years of pandemic-fuelled craziness. It’s vital to set a realistic sales period in your forecasting before calculating the amount of stock you should order in – so if you usually reference the past two years, shorten your sales history to a more recent time period.
Inventory Planner allows you to easily set the time period for forecasting calculations, whether it’s the last 14 days or the last 10 months. This kind of flexibility is extremely helpful if you see interesting fluctuations closer to the holiday season.
2. Be perceptive to any shifts in sales trends as the holiday season approaches
Perhaps a certain product or category is seeing an unexpected spike, or a product that was previously selling like hot cakes is no longer generating interest. These movements can be useful indicators of sales demand to come – but guessing alone can be risky. After all, how do you know whether it’s a one-off spike or a sign of a burgeoning, longer-term trend?
Inventory Planner takes out the guesswork. You can determine the minimum time a sales pattern should be present in order to be confirmed as a trend (for instance, one consecutive month, two consecutive months). When a sales pattern is considered a valid trend it can then be counted in future predictions, so you’ll receive higher forecasting accuracy.
3. Purchase items in parallel with what you’re pushing in your holiday marketing
It may seem obvious, but communicate with your marketing and merchandizing teams (and any other relevant departments) to make sure the items you’ve chosen to purchase are being boosted elsewhere in the business. If your company’s marketing campaigns are focusing on a specific new product line, or perhaps an older legacy product that needs some renewed hype, you’d better order those items in!Here are some other considerations when choosing what to push through marketing:
- Buying trends from last year’s holiday season. Though the Covid era was an unusual time, there could still be some intriguing data around specific products. What items or categories sold well during the same time last year? Were the items lockdown specific, or is it likely they’ll sell well again this year?
- Trends from non-seasonal sales over the past year. Which of the year’s popular items could you incorporate into your holiday merchandising?
- New and seasonal items. Think about whether you’d like to push new products in your holiday marketing – or are there holiday-specific items you could make available to customers in the fourth quarter?
4. Use your most recent YoY sales data to predict comparative trends for the holiday season
The year so far gives retailers a lot to work with in terms of sales predictions, as you can use comparative YoY trends already seen and apply it to the upcoming holiday season. For instance, if your sales in May-July last year were down by 30% compared to the same period in the previous year, you could assume that your sales over the holiday season might have a similar decrease as well.Inventory Planner calculates this automatically for you. It compares this year’s trends to those of the same previous period, and applies these variations on your holiday season sales. So you don’t have to calculate it for each item or each product category.
Discover how Inventory Planner accurately predicts holiday season sales for your business.
5. Be aware of your new best-sellers – as well as low-in-demand products
To identify your last year’s top and flop sellers, ABC Analysis is a real game-changer. With this method, you can compare the last few months’ trends to see if customer demand has been shifting, and identify the products that contribute the most to your profits. The top 80% of revenue comes from A Class, the next 15% from B Class, and the final 5% from C Class. Here’s how to calculate your ABC Analysis.
6. Optimize your average sales accuracy
Keep in mind times when you’ve been in stock and out of stock, and if possible, calculate your average sales using only in-stock days. This will make a huge difference in your forecasted demand, as stockouts can lead to underestimated forecasts. The goal is to find out: how much do customers want this item to be available
7. Consider the needs of each of your warehouses or locations
If you stock multiple warehouses or locations, consider each one rather than calculate your company’s aggregated inventory demand. Understand that each location has its own personality – and different things could be selling at varying levels of demand. Don’t sweat the extra paperwork, either – as Inventory Planner forecasts sales and gives inventory purchasing recommendations for each of your warehouses and locations.
8. Forecast for new products
You might have some exciting new products, but want to test their popularity before you push them over the holidays. Forecasting sales for new products is more challenging as there is no historical data, but there are still some techniques available to test the likelihood of consumer interest. You could use sales data from similar product categories, or use your previous new product launch experiences. Learn more tips for forecasting new products.
Try Inventory Planner to easily forecast demand for your new products
Avoid out-of-stock and overstock during the holiday season with efficient inventory planning
Once you’ve done your forecasting, the first step is ticked – you now know how much of each of your items will sell, which is key to inventory purchasing. The next stage is vital: understanding WHEN to buy inventory in order to avoid out-of-stock, or too much stock – as both sure-fire ways to throw precious revenue down the drain. The following steps will ensure you make the right decisions for your business when it comes to inventory purchasing.
1. To avoid late deliveries, check with your suppliers to see if lead times have changed
The supply chain crisis is a widespread issue – suppliers in many countries may be facing labor shortages or dealing with other limits on production (while checking in, be sure to ask how they’re coping with the crisis.) There’s no harm in asking them if they predict longer lead times over the holiday season. If so, you can adjust your buying dates to allow for delays.
2. Gauge whether your suppliers can lower their minimum order quantities
Vendors are likely struggling too and sometimes, a small order is better than no order (not always the case, but again, it’s worth asking). If there is any minimum order quantity requirement, add this detail into Inventory Planner – it will automatically apply next time you raise a purchase order.
3. Reconsider your desired ‘stock cover’ days
‘Stock cover’ refers to the number of days you want stock to last after its arrival in your warehouse. Unsold stock is a cash flow nightmare – it takes up space on your shelves and traps money that you can’t use elsewhere in your business. With the economy as it is and while things are changing quickly, focus on small, frequent orders to vendors rather than mass orders to avoid clogging up the warehouse with items you can’t shift.
4. Use a holiday season calendar
Whether you have an inventory planning tool or not, it’s essential that you keep an informative retail calendar packed with core dates. Be sure to mark the peaks of the holiday season – like Black Friday, Cyber Monday and Christmas – as well as recommended inventory purchasing dates for products that have lengthier lead times (eg. more than 30 days). By preparing well in advance, you can make sure your new stock will arrive in time for when holiday demand starts to pick up.
5. Be aware of cut off dates for shipping
We know that shipping times are slow right now – but they will only get slower during the holidays. Take note of the cut off dates for shipping this year so you aren’t caught short.
6. Prioritize your inventory purchasing
It’s a tough time for retailers right now, and you must prioritize your needs. If revenue is dropping and cash flow is tight, you need to make inventory purchasing decisions that will drive the most positive impact on cash flow for your business. What product lines will yield the highest profits? Which will attract the most new customers? These are all questions you should be asking yourself in order to drive as much revenue as possible for your business.
Sometimes it helps to know about potential losses when you’re making decisions. Inventory Planner automatically forecasts lost profit due to delayed replenishment, as well as how much you’ll gain if purchasing is done on time, with the right amount of stock ordered – giving you the clarity you need to make the best purchasing choices. Find out more about replenishment metrics to watch and how to calculate them.
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Use the holiday season to release cash from your overstocked items
Over the holidays, consumers are in the mood for a good sale – so it’s a great time to liquidate your slow-moving, overstocked products in order to release cash. Here’s how to get those items out of your warehouse.
1. Audit your current inventory
Ahead of the holidays, plan a full inventory audit (if you haven’t done it recently). With full visibility of what’s in your warehouse/s, you’ll know exactly how much you have of which items and whether you need to use discounts or promotions to get rid of it.
2. Know how much of your inventory is overstock
Basically, if you have more of an item than there is predicted sales demand over a specific period, then that item is overstocked. However, whether you put it on discounted sale/liquidate it immediately or not involves a few other factors – for instance, how much cash is tied up in each item. For more on this, read our article on overstock and how it traps your cash.
Inventory Planner is great in this scenario, as when it comes to making ‘discount decisions’ it does all the decision-making for you, based on intuitive metrics such as overstock costs or retail profit.
3. Create a promotional plan for Black Friday, Cyber Monday and Christmas
Finally, it’s time to put plans in place to get your customers excited. Once you know which overstocked items you want to liquidate and the quantity of each, you can bundle some of them together (buy one get one free, for instance) or discount their original cost. Be sure to base these prices on the minimum margin you need to cover all fees. You’ll be glad to have freed up the space in your warehouse, and your remaining inventory will be perfectly balanced, boosting your cash flow once more.
About Inventory Planner
Inventory Planner is a top-rated inventory forecasting and planning software for e-commerce and multichannel merchants. For more than a decade, we’ve helped over 2,300 businesses across the world to accurately forecast demand and purchase inventory – even in their most fluctuating periods. We don’t just offer software, but also provide our customers with expert forecasting strategy recommendations that are tailored to their businesses and goals.
Get in touch if you have any questions about this year’s holiday season forecasting or want to learn more about how your business can change with Inventory Planner.