The Importance of Forecasting Sales & Planning Inventory Buys Using Real Time Data
The Science to the Art of Retail
Retailers often plan the future based oﬀ of the past, which can often mis-lead them to buy oﬀ of hope instead of strategy. This holds true now more than ever as 2020 proved to be a diﬃcult year with many curve balls. So, forecasting sales and planning inventory buys is more important now than ever.
Let’s talk science as it relates to the art of retail. I often get asked from prospective clients do I help with marketing and getting more people in to the store. What I find most interesting about this question is most people feel that more traﬃc and more eyes on the product translates in to more sales. This couldn’t be further from the truth.
If you have too much of one thing, and not enough of another based on measured customer demand right here right now, spending money on marketing can be a waste of available cash. To make your money work FOR you, first you must set up processes that manages your inventory and measures demand.
What does measuring demand mean and how do you implement this in to your business?
Inventory Management System
My suggestion is to always implement an inventory management system that tracks incoming purchase orders and sales, margin %, and sell through. All the good stuﬀ that helps you manage your inventory with actual data and not just emotion (that’s for the buying part!).
Breaking down your inventory in to mini-profit centers, or what I call classifications, which will allow you to pick up on trends happening in the short term and long term. Analyzing classification data before you analyze vendor performance, as trends lie in the classifications where vendors come and go. Not only that, but some vendors perform better in certain classes so looking at it first top level doesn’t always give you the correct picture of performance. High demand items come in and turn quickly with a high gross margin & a high cash margin. When slow selling items sit for too long, they start to collect dust and are no longer worth what we originally priced them at. Do not wait to mark the slow sellers down once their time is up. Waiting to sell an item at full price out of fear of reducing your gross margin is the quickest way to reduce your cash margin. And afterall, cash margin is the most important between the two. The faster you turn merchandise, the more profitable it is to you. Even with a necessary markdown.
Sales Forecast and Merchandising Plan
From there, building a sales forecast & merchandising plan that will build monthly open-to-buy budgets by classification (by location if you have more than one store) to keep the balance & flow of inventory in line with the measured demand. Incorporating your break-even analysis (that is updated quarterly) to ensure your top line revenue matches the minimum you need to do in sales to break-even.
Most retailers don’t get in to this business because of the science or the math – it’s one of the most overlooked essential pieces to your success that is often hard to incorporate and execute if you don’t know it’s available to you. I feel it is the missing piece to the puzzle for most independent retailers, and I can assure you, a wonderful tool that has a very high return on investment.
CARES Program blog contributed by:
Margo Kopman, owner of Project Retail Boutique Consulting Firm, is a veteran marketing speaker and workshop leader with over 200 successful events under his belt. Event organizers and attendees frequently comment on the nature of the practical, actionable “takeaway” value of his presentations.
Learn more about Margo’s seminars:, Financials / Breakeven / Cashflow (Retail), Sales Forecast / Merchandising Plan (Retail), and How to Best Use and Incorporate Client Data into Marketing/Promotional Plans and Customer Outreach (Retail) and how to access customized consulting through the Collin SBDC CARES Program.