90% of Retailers Ignoring Lost Sales When Forecasting Data

90% of Companies Ignoring Lost Sales in Retail Forecasting

One of the greatest benefits of digital technology is it gives businesses of all sizes insights into their operation which were previously available only to large enterprises. The 2018-19 Omni-channel Allocation and Replenishment in Fashion research study from Neogrid highlights what retailers can do with these insights.

According to the study, 90% of fashion retailers don’t include historical lost sales into their forecast calculations. While in the past this data point may have been overlooked, the integration of the supply chain with digital technology now makes it critically important to pay attention to this fact.

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For small businesses operating in the physical and digital world, understanding each metric of their omni-channel is essential to effectively managing inventory and forecast the future growth of the company. Using the different data points which are now available to retailers provides a competitive advantage.

In the press release for the report, Brian Hume, Founder and Managing Director at Martec International, expressed this very point while at the same time highlighting the low number of retailers who are not using this tool.

Hume said, “Factoring in lost-revenue KPI’s when planning allocations and replenishment, based on lost sales data from a previous season or similar product, can be a decisive competitive advantage. But only 10 percent actually incorporate it in their allocation method.”

The international study was carried out by Martec International, a retail consultancy and training company, for Neogrid. Merchandising and supply chain professionals from 40 companies across Europe participated in the study. These companies account for 23% of the total fashion market by sales.

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The Role of Lost Sales in Retail Forecasting

The fact 90% of retailers don’t use historical lost sales and allocation forecasting highlights a big problem. Making this 90% aware of this particular issue, is the challenge for companies in the industry. If these retailers are able to optimize their inventory and supply chain management, they will have a more accurate forecast of future sales.

Jay Moskowitz, president and COO, Neogrid, said there’s room for improvement, adding, “Demand-based replenishment will help retailers and manufacturers optimize inventories across all channels and minimize lost and post-season markdown sales.”

When it comes to restocking their inventory, 46% of retailers base it on demand. The dynamic and complex nature of the retail industry makes this process complicated, especially now with omin-channels.

Inventory optimization needs to focus on suppliers, warehouse, and e-commerce with automatic replenishment planning to ensure the availability of inventory at all times. With the right solution in place, retailers can reduce out of stock scenarios, increase turnover by improving availability, and lower inventory which is not moving.

Neogrid says forecasting is still essential, but in order to ensure the right products are in the right place at the right time, retailers need effective allocation and replenishment processes.

Image: Shutterstock

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Michael Guta Michael Guta is the Assistant Editor at Small Business Trends and currently manages its East African editorial team. Michael brings with him many years of content experience in the digital ecosystem covering a wide range of industries. He holds a B.S. in Information Communication Technology, with an emphasis in Technology Management.

One Reaction
  1. This is bad. Every cent must be counted for you don’t know where it is going.