What's in this article:
Black Friday, Cyber Monday, and the holiday season are sales peak frenzy periods. Between Black Friday and Christmas, around 13 percent of all retail sales in the United States happen. On Black Friday in 2021, 155 million individuals shopped in the United States, and Black Friday internet sales in 2021 were $8.9 billion. Out of this, mobile phones facilitated 43% of Black Friday purchases. According to projections by the National Retail Federation, the industry's largest trade association, retail sales in 2022 for the combined November-December shopping months will increase between 6% and 8% compared to the 2021 holiday season, reaching up to $960.4 billion.
But 2022 Black Friday brought multiple supply chain-related issues, keeping the companies busy and spending higher for the stocks they wanted. In contrast, some ordered too much too early and were left with a higher inventory for liquidation. Nonetheless, there is much more to supply chain preparation for these key holiday seasons than just buying additional stock in advance. Effective supply chain planning can help by pushing slow-moving products and avoiding stockouts of best-sellers. With a careful analysis of what to buy, how much, and when, businesses may improve cash flow by capitalizing on customers' purchasing fervor.
Due to several macroeconomic, geopolitical, and environmental variables, retailers needed more effort to predict holiday sales trends in 2022 but with little success. Here are the top 4 areas of concern for the companies in 2022.
Two years of surging e-commerce activity began to recede as the pandemic lessened. The industries that suddenly grew in 2021 may now be undergoing a downturn, which can be difficult for planners to forecast and plan. Since the sales levels in the previous two years were very unusual and unlikely to repeat, it is more challenging to use typical forecasting methods, such as utilizing historical sales data to estimate future demand in 2023.
Several major retailers stepped up their supply chain game during the epidemic's high-pressure months. As a result, customers now have higher expectations from businesses for delivery timeliness, product availability, and variety; otherwise, they switch quickly and shop elsewhere.
Other factors, such as excessive inflation and layoffs, contribute to a precipitous decrease in consumer demand. The last thing that the business needs are stacks of unsold inventory. It is now more crucial than ever to make the most optimum forecasting, planning, and inventory strategy to maintain a positive cash flow for the company.
There are also prevalent supply chain issues like long lead times, scarcity of storage space, and soaring fuel and shipping costs that pressure retailers.
Despite the numerous risk factors, companies can improve their sales forecasting, minimize cost impacts and strategically plan the inventories even though this may appear too challenging to manage.
The holiday season is in full swing, and businesses are busy wooing their customers between Black Friday and Christmas. But for supply chain planners, the focus should now shift to take the learnings of 2022 for improved 2023 holiday season planning. To accurately forecast Black Friday sales, there are several areas that businesses should focus on. We'll focus on six critical areas of practical demand planning for 2023.
Historical sales patterns are essential for all types of sales forecasting, but they are less reliable during the two years of pandemic-induced turmoil. Before determining the quantity of inventory to purchase, you must include a realistic sales timeframe in your projections. If you frequently refer to the previous two years, you should reduce your sales history to a more recent period, like the last 14 days or three months, to see the difference in the trend. This can help to predict changes during the holiday season.
A product or category may be seeing an unexpected boost in demand, or a product that once sold like hotcakes may have lost its attractiveness. These fluctuations can be significant predictors of future sales demand, but depending exclusively on speculation could be risky. How do you determine whether an event is a one-time occurrence or a sign of a rising, longer-term trend?
Modern forecasting tools like Ikigai eliminate doubt. AI and ML-based algorithms can confirm a sales pattern as a trend. When a sales pattern is determined to be a real trend, it can be integrated into future forecasts, resulting in more accurate estimates.
ABC Analysis is easy to use but highly effective for finding the best- and worst-selling products from the previous year. Using this method, you may discover whether customer demand has changed over the past few months and identify the products that contribute the most to your revenue. A Class generates eighty percent of revenue, B Class fifteen percent, and C Class five percent.
Determine in-stock and out-of-stock occurrences, and calculate your average daily sales using only in-stock days. This will substantially affect your demand projections, as stockouts might lead to underestimating demand. The purpose is to determine the right level of customer demand for this product by eliminating the impact of supply issues.
Evaluate sales and inventory levels for each warehouse and location. Remember that each region has its character and that the demand for different products may fluctuate. If you stock many warehouses or sites, examine each separately rather than determining the company's total inventory demand.
You want to determine your new products' popularity before the holiday shopping season. Due to the lack of historical data, it is more difficult to predict the sales of a new product, although there are methods available to analyze the likelihood of consumer interest. Use sales data from comparable product categories or your past product launch experience.
Once you've accomplished your forecasting, you've completed the first step; you now know how much of your products will be sold, which is necessary for purchasing inventory. The second key element is understanding when to acquire products to avoid running out of stock or having too much on hand, which are proven ways to flush valuable revenue down the drain. These six steps will ensure you make the best decisions when purchasing goods for your business.
Ask them how they are managing the circumstances. There is no downside to asking if they anticipate longer lead times over the holiday season. If so, you may adjust your purchase dates to account for delays.
Sometimes a little order is preferable to none. Check with your suppliers if they can reduce the minimum order quantities (MOQs) and their associated cost impacts. Check if it is favorable to reduce MOQ even at a higher cost to avoid inventory obsolescence.
"Stock cover" refers to the days you intend for your inventory to last after it arrives at your warehouse. Focus on short, frequent orders to suppliers rather than bulk purchases to avoid stocking the warehouse with unmovable goods, given the current economic climate and rapid change. Unsold inventory is a cash flow problem since it occupies shelf space and ties up monies that cannot be used elsewhere.
Whether or not you have an inventory planning tool, you must maintain a retail calendar with important dates. Mark the holiday season's peaks, including Black Friday, Cyber Monday, and Christmas, along with the recommended inventory ordering dates for products with longer lead times (e.g., more than 30 days). By planning this way, you can ensure that your new product arrives before seasonal demand increases.
We know that shipping durations are lengthy but worsen throughout the holiday season. Take note of this year's shipment deadlines while managing the calendar to stay on top.
The current retail climate is challenging, so you must prioritize your needs. If revenue is down and cash flow is tight, you must make inventory purchasing decisions that positively impact your company's cash flow. Which product lines will yield the highest profits? Which will bring in the newest customers? All these are questions you should ask yourself if you want your business to make the most revenue feasible.
The holidays are a perfect time to offload your slow-moving, overstocked inventory to generate income, as consumers are in the mood for deals.
Plan an exhaustive inventory audit before the holidays. You will know exactly how much of each item you have and whether or not you need to use discounts or promotions to move it.
An item is overstocked when there is more than the anticipated sales demand for a given period. However, the decision to sell it at a discount or soon depends on several other factors, including the amount of capital locked up in each item.
Ikigai Ikigai's operational BI platform transforms the way businesses make tactical decisions. Business-user-friendly UI/UX enables anyone to infuse and prepare data and run robust AI-powered analyses to achieve their business goals.
Ikigai combines data analytics, visualizations, and automation with its proprietary technologies, such as aiMatch and aiCasting time series forecasting, and translates them into more precise decision-making data. Let's connect for a quick chat.