Few things are more exciting than bringing new product lines into your inventory – it keeps your catalog fresh and is an important part of attracting customers for repeat purchases. That said, consumer demand hasn’t been that stable in the last couple of years; so in the run up to the 2022 holiday season, you might want to test whether your newest products are going to boost sales.
Short of consulting a crystal ball, it can be a mystery to figure out how customers will react to new products, or know how much to order without any prior sales history. So to give you some peace of mind before you commit to that first order, here are our key demand forecasting tips for new products.
1. Look at previous new product launches
Since your own previous sales figures are the most readily available data, consider what you have done regarding new product launches in the past. In general, have your previous new products sold quickly upon release – or does it take your customers weeks or months to warm up to a new product? Examine the month-over-month increase for previously launched products and use that as a guidelines, assuming similar launch resources are being invested into this new product.
Here’s a hypothetical example: you sell clothing, and previous product launches with sundresses, maxi skirts, and swimsuit coverups saw strong sales in the first six weeks; then a drop-off during the following months.
Applying that same pattern to your new product line of of beach-ready summer dresses, it’s fair to estimate there will be a drop in sales after six weeks.
2. Look at trends within the same category or brand as your new products
It’s likely you have products with similar attributes to your new line, such as same category, collection, brand or vendor. Take a look at how those items are selling to offer some insight into your new launch.
For example, Cora’s Candles show solid sales across all available scents. When considering Gingerbread as a new scent release, we can look at the sales velocity of other festive flavors, such as Christmas Tree and Spiced Cider, to approximate future sales for the Gingerbread candle.
Looking at other scents at Cora’s Candles, there’s a pattern of a strong sales increase in the second and third months after launch. Seeing this pattern in several other launched scents can offer some solid guidance into how the new Gingerbread candle might perform.
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3. Assess the history of option sets
Option sets refer to different colors, sizes or flavors of the same item. For example, when assessing t-shirt sales, you could look at the historical sales of different sizes (small, medium, large, etc.). How much of each size you usually sell can guide your initial order of a new t-shirt. If you sell 25% size small, 50% medium, and 25% large, use this same distribution when determining size proportions of the new style.
4. Merge the sales history of similar products
Merging sales history is a great option for when you have an old product being phased out to be replaced by a new product that is very similar.
A good workaround here is to link the sales history of the old product to the new product – so that even though you don’t have any sales history available, you still have a good idea of how it might sell.
An example: a food item that usually sells in a 2 oz. size is being replaced with one of a 2.1 oz. size. Here is a good opportunity to merge sales history so you can see how the 2.1 oz. will perform based on how the 2 oz. one sold. The change in size is not significant enough that we would expect a change in the rate of sales.
Watch the short video to see how Inventory Planner helps you easily forecast demand for a new product.