The Competitive Advantage of a Forecast-driven Enterprise
Most retailers are acutely aware: November and December have nearly twice the revenue potential as any other month, and the momentum continues to grow. According to research from the National Retail Federation (NRF) Holiday Headquarters, more than 165 million people shopped either in-store or online during last year's Black Friday weekend and into Cyber Monday.
Studies report that 50% of shoppers say that limited-time sales and promotions convinced them to make a purchase and 77% have left a store on average four times during the holiday season when they couldn’t find what they were looking for. Delivering an effective holiday promotional strategy is key to driving traffic and accurate inventory availability is critical to converting that traffic to revenue. If your forecasts are not accurate, you are risking out of stocks, unhappy customers and long-term loyalty.
The fluidity and frequency of seasonal assortments and promotional events coupled with the high-stakes of peak season trading put even more pressure on forecast accuracy for multiple business units – from merchandising to marketing to supply chain.
As you prepare for your best season yet, here are some things to consider:
Seasonal Assortments: Retail is seasonal and the holiday high point aligns with the highest concentration of promotional activity. If the past can be any indication of the future, what sets promotions and seasonal demand apart? A highly accurate forecasting system decouples demand drivers with historical estimations of seasonal demand separate from causalities, to provide a foundation for optimizing accuracy over a suite of seasonal forecasting approaches that reflect everything from fast and slow movers to short and long lifecycle items.
Holiday Assortments: From seasonal goodies to holiday sweaters holiday assortments are prevalent across all retail verticals and many times include new items that don’t have a history to draw upon, whether it’s a hot toy (e.g., last year’s Hatchimal) or the latest gadget. In this scenario retailers need a forecasting system that can leverage attributes, evaluate similarities against past performers and provide robust forecasts that reflect smart starting points for initial base rate of demand and a holiday lifecycle curves.
Pricing and Promotions: Advertising, display units, endcaps, personal offers, discount--whatever your marketing team cooks up--you need to be able to accurately anticipate demand drivers in aggregate. For example, Oracle Retail’s Demand Forecasting Cloud Service (RDF) mines for similar occurrences in the past to understand the net effect of overlapping promotions in the future. What about new items with no promotional history? RDF performs pooled pricing and promotional effect estimation over similar performing item-locations (detected using unsupervised machine learning and critical attributes) to provide accurate promotional forecasts in the absence of promotional history.
Weather: According to research done by Planalytics, a leading provider of weather-based predictive analytics, 4.2% of overall apparel stores’ sales are weather-sensitive during November. Impacts can fluctuate by over 35% across locations for key categories. For example, the weather in November when compared to the prior year drove a +17% increase in demand for boots in 'chilly' Knoxville while having a -19% decrease in 'warm' Denver. How do you capitalize on the uncontrollable, particularly for categories that are highly weather-sensitive? In partnership with Planalytics, Oracle Retail has developed approaches in RDF to incorporate weather analytics throughout the forecasting process – from de-weatherizing historical demand to reflect true trends and seasonality to incorporating imminent weather events into forecasting and exception-driven processes for weather-sensitive categories.
Delivering on your holiday strategy depends on informed pricing and promotional decisions based on forecasting insights, efficiently coordinating those decisions throughout the supply chain and ultimately to sales execution:
The holiday season offers opportunity and the forecast-driven enterprise is key to unlocking that potential. RDF Cloud Service reflects the culmination of 15+ years leading the industry in demand forecasting with an integrated perspective across Oracle Retail’s enterprise portfolio and proven across 160+ retailers worldwide.