How To Use Seasonal Forecasting To develop Your Business (2024)

Many ecommerce owners view their sales surge at different times of the year. These surges tend to align with sure holidays or events, like Black Friday, Christmas, or Mother’s Day. While seasonal sales are a welcome addition to your lender settlement, it’s significant for you to be able to meet demand when it’s needed.

Basic seasonal demand forecasting helps you make strategic decisions, like whether you should upgrade your equipment, or when you should place your wholesale orders. Those are the kinds of calls you desire to be able to make for yourself, and a demand projection is one of the best ways to do it.

What is seasonal demand forecasting?

Seasonal demand forecasting is commonly used by ecommerce merchants to determine how many sales they can expect at different times of the year. Customer needs can transformation dramatically between seasons, and knowing how many units you’re likely to shift can ensure you have enough distribute and can manage your money flow. 

Why seasonal demand forecasting is significant

There are months when it feels like you’re swimming in money—and others where your lender account feels more like a desert with a lone tumbleweed blowing through it.

That’s because most businesses encounter seasonal peaks and troughs. A few months of the year fund your business for the others, and you probably spend your “off” months investing back into your business.

That’s why forecasting demand is critical—especially for seasonal businesses that depend on sales from one peak period.

Ensure all your costs are fully covered

Business is never straightforward, let’s get that straight—but it’s easier to wing it with your business finances if you earn $5,000 every month and have only $1,500 a month in costs.

But if you earn $50,000 two months of the year, and your monthly costs aren’t very stable, forecasting is critical. It’s one more thing that will assist you resist those treat-yourself moments in high-turnover months, and assist cover any shortfalls during the offseason.

Proactively invest in your business

If you could really use a recent laptop or upgraded equipment, a projection can assist you figure out when you’ll be able to afford those large purchases.

A projection can also assist you decide whether taking business capital to fund a purchase would be a excellent shift.

Get the stake apportionment you require without the complications

Through Shopify stake apportionment, you get the money you require to develop your business with just a few clicks. There is no lengthy application procedure and no document forms to fill out.

Set yourself up for achievement during the busy period

Stocking up ahead of the busy period is critical, which is why we recommend doing things like making sure you have enough shipping supplies ahead of a busy sales period, such as Black Friday and Cyber Monday. The importance of preparing for busy period periods is magnified when the busy period is your only period, so you’ll require to invest in inventory, supplies, and more before you require them.

receive fee with strategic selection-making 

Maybe this is the year you finally decide to spring for seasonal assist or receive additional business capital. Making those decisions is much easier when you have an concept of what your year looks like, what you’re committed to spending already, and how much you ponder you’re going to sell.

boost customer satisfaction

Don’t leave shoppers disappointed with “out of distribute” notices. Seasonal demand forecasting estimates how many units you’ll require for the busy period, which means there’s less chance of a distribute out. Cue happier customers that arrive back. 

Reduce uncertainty

Relying on seasonal sales is risky without a solid way. Seasonal forecasting not only avoids stockouts by ensuring you have enough inventory to satisfy demand, it also helps you prevent over-ordering ahead of major shopping holidays and reduce any excess inventory costs.

Challenges of ecommerce demand forecasting

It can be tricky trying to forecast seasonal variations. But after a few years in the game, you’ll commence to identify patterns in shopping behavior from your history sales data. This will arm you with a lot of the information you require to make strategic decisions, but there are still a few challenges that can complicate things. 

1. Supply chain delays 

There’s no predicting when a freak weather incident or staff shortages will hamper your supply chain. This can impact your demand forecasting because, obviously, you’re not psychic and unlikely to recognize if a shipping container is going to get stuck in the Suez Canal again or not.

2. Inaccurate data

Data is the bedrock of seasonal demand forecasting. Without it, you can’t receive history insights and assignment them onto your upcoming predictions. Even the best-kept data can let you down, whether due to human input error, internet downtime, or duplicates. 

3. Changing competition

Ecommerce is booming, which means there’s a fresh wave of competition to contend with every year. Any number of recent brands could swoop in out of nowhere and steal your customer base. You might have had an excellent holiday period last year because you had very little competition. But this year, things could be a totally different narrative, and there’s no concrete way to forecast that. 

4. Shipping costs

Shipping costs tend to shoot up during busy times of the year to meet demand. Trying to factor this in can be challenging when you can’t get specific information on costs and timings. 

5. Evolving customer preferences and trends 

customer preferences transformation with the seasons. What was a total hit last year might not be again this year, and vice versa. This can make it challenging to forecast what’s going to happen in the upcoming busy period.

How to construct a reliable seasonal demand projection

1. Set goals

Before you commence digging into your data and polishing your crystal ball, ponder about what you desire to achieve during the upcoming period. Use history sales figures and patterns to determine what’s feasible, and make sure your goals are intelligent:

• Specific
• Measurable 
• Achievable
• Relevant
• period-bound 

For example, “boost December holiday sales by 10% on last year” is a better objective than “boost holiday sales.” 

2. Collect data

Once you recognize what you’d like to achieve, it’s period to get your hands filthy with data. The more knowledge you have, the easier it is to make accurate predictions.

In particular, look at:

• Sales data. How many products did you sell last year? Which products were your bestsellers? How much sales turnover did you make?
• Inventory data. Did you distribute out last year? How many products do you currently have in your inventory? 
• Customer data. Who are your best customers? How much does each customer typically spend in your store?
• Data on your competition. Who are your biggest competitors? How many sales did they make last year?

3. forecast upcoming demand

Your job is to make a reasonable prediction, not to nail the exact numbers you’ll be selling a year from now.

So how do you do that? There are a few ways to forecast upcoming demand. You can look at:

• Industry statistics. Is there a consistent growth rate in your industry, or have analysts predicted a specific growth rate for the next few years?
• Industry peers. Talk to other business owners. When do they typically view the most sales? How much do they sell in a year, roughly?
• Your own sales history. If you’ve been in business for a while, how much do your sales develop every year? How much did they develop last year, and how much did you sell last year?
• Signed deals. If you’ve got wholesale contracts already in place for next year, you recognize you’ll sell that much already, so it goes in your seasonal projection.

If you’re a recent online business, or if you schedule on launching recent products this year that have no historical data, use what you recognize about your business and your customer base to make a best guess. You’re the specialist on what you do, after all.

Now it’s period to get into the numbers.

Let’s talk products. Specifically, how many do you have? If you’re rocking fewer than five or 10 signature products, you can provide them each their own, divide seasonal forecasts. Once your products hit that double-digit mark, you’ll desire to throng them into product lines for a more manageable projection.

Set up each product or product line as a row in your spreadsheet under “Product Unit Sales.” This is where you’re going to input your projection of how many units you’ll sell of each product this coming year, and which month you’re going to sell them.

Download your own copy of the forecasting spreadsheet template. leave to File > Make a Copy to save one to your Google Drive account or to your desktop and keep your forecasts private.

Next, add in the prices you schedule to sell those products at each month. Maybe you schedule on raising your prices mid-year, or you propose so many sales in November that you recognize your average sale worth is lower. Add in those monthly prices now for each product line.

Scroll down a bit, and boom: you have a sales projection.

4. assess and adjust

Keep a close eye on your numbers as the period progresses. Seasonal demand forecasting isn’t a “set it and overlook it” activity. Instead, you should regularly check in to view whether you’re hitting the numbers you predicted or whether there are any friction points. 

The more you remain on top of your predictions versus what’s actually happening in your business, the easier it is to pivot to meet excess demand or address shock challenges—like a shipping container getting stuck in the Suez Canal. 

Best practices for improving your seasonal demand forecasting

recognize your seasonal sales trends

First and foremost, the best way to projection your sales is to recognize your historical sales, and what your peak period sales are usually like year over year. So, if you’ve been tracking your sales with a structure like QuickBooks Online, do a few reports to get a sense of your sales trends.

contrast your sales year over year, and note if there are any outliers—the spike or dip in sales unrelated to anything else. 

If feasible, generate a update that segments by customer type and looks at the sales and growth from each customer over the history year or few years. There’s a excellent chance you’ll have a couple more profitable—or more reliable—customers than others, and you can focus on keeping those relationships running smoothly.

commence forecasting early

The earlier you commence working on your forecasts, the more period you’ll have to schedule for your best-guess projection.

Use the templates above to forecast your seasonal inventory needs and maximize your money flow, so you’re prepared for every forecasting scenario you can aspiration up.

Keep distribute reserves on hand

Seasonal businesses are more likely than others to encounter inventory issues. That’s because inventory management is tough when your sales vary so much between seasons.

You can avoid this issue entirely by making sure you keep a little bit of inventory on hand in between seasons to tide you over until you can place your next order. Try to keep your minimum inventory at about 70% of your maximum inventory level for your busy period.

Get an inventory management software

Speaking of inventory planning and management, you’ll desire to get inventory management software to assist automate forecasting. 

These tools not only can track inventory levels for all the items you carry, but they also can be integrated with other tools like QuickBooks Online or your ecommerce platform, so your inventory levels are updated automatically and you can view if you’re about to run out of a product.

Shopify app Stocky is a great inventory management tool that helps you have better supply chain visibility and recognize what products you should order based on product act and seasonality.

Pay attention to your supply chain

Successful seasonal forecasts hinge on a slick supply chain. You require to recognize exactly what steps are involved and identify any friction points before they become an issue. To make this feasible, it’s significant that you constantly check in on each stage of the supply chain to make sure everything’s flowing as it should be. 

For example, if you discover there’s a bottleneck during the manufacturing stage, you can address it quickly before it affects other parts of the supply chain.

Forecasting seasonal demand for your store

Your projection isn’t set in stone, and one of the most useful things you can do is adjust the numbers as you get more information.

correct off the bat, you might realize that some of your non-fixed costs aren’t hitting at the correct period, and you might desire to shift them around.

Later on, as sales and orders commence to arrive in, you might realize you require to adjust your sales projection, and your corresponding costs to fulfill those orders.

You might even realize that, yes, you do require to secure some business capital, and you’ll have a excellent concept of how you’re going to use the money, since you’ve already set a apportionment.

And that’s all OK.

In truth, it’s great, and it’s the best part of having an annual projection in place for your seasonal business. Being able to adjust your schedule, instead of hoping for the best when things transformation, will assist you feel on top of your business finances all year round.