Harve Light: How to Forecast Inventory Demand for Your Retail Store – Vend
Harve Light was featured in Vend‘s article titled “How to Forecast Inventory Demand for Your Retail Store.”
When working with one large retailer, Harve Light, managing director at Conway MacKenzie, and team learned that a 10% increase in forecast accuracy could increase profitability by more than $10 million. And while not ALL retailers have the same opportunity, neglecting to forecast could be detrimental to your business. One study found that retailers lost $1.75 trillion to overstocks and out-of-stocks in a single year.
It also depends on the size and type of retailer, says Light. “Large retailers have entire industries that help them improve their forecasting methods. Small retailers use basic spreadsheets,” he says.
Examining causal relationships helps you forecast more accurately because you can predict and account for external factors that affect demand. Light likes to categorize these as complements and cannibalization. “When a retailer puts dress shirts on sale, they will likely experience some increase in the sale of t-shirts. These are complements,” he says. “When a retailer puts one brand of t-shirts on sale, the other brands carried will suffer a decline in sales. This is cannibalization.” Remember to account for everything that’s happening in your store (and online!)
“Today, there are also several scaled-down versions of tools that the large retailers use available to smaller retailers at more reasonable costs,” says Light. With technology being so accessible, there’s no reason not to take advantage of it.