Today, 80% of the U.S. population, or 268 million people, shop online. While this can be great for online businesses, consumer shopping activity can sometimes seem unpredictable.

If you want to foster more predictability in your ecommerce business, consider using demand forecasting. Doing so can help prevent inventory shortages and overstocking issues. The process can help you predict sales throughout the year while managing inventory and cash flow more effectively.

In this guide, we’ll tell you more about how demand forecasting can enhance ecommerce operations.

Understanding Demand Forecasting

Demand forecasting is the process of estimating how much a product will sell based on past data and ecommerce business activity. Most ecommerce businesses experience similar online sales and customer demand each year. By reviewing historical data, you’ll have a good chance of predicting what will happen in future months. 

Demand forecasting can take time and effort, but it can be well worth it. Forecasting seasonal demand can help you manage inventory effectively. It can help ensure your business has the right amount of products for the activity that you can expect in a particular week or month. This can help prevent you from running into inventory shortages and disappointing customers. 

How Demand Forecasting Enhances Ecommerce Operations

So what are the benefits of demand forecasting and how can it help your ecommerce business succeed? Here’s what you should know.

Improves Inventory Management

Demand forecasting helps you improve inventory management. It can help ensure that you always have the right stock on hand for the demand that you have for certain products.

Keeping too much stock can be costly but having too little can strain your relationships with customers. Demand forecasting allows you to keep the perfect amount of stock throughout various times of the year so that you don’t run into these problems.

Leads to Higher Profits

With demand forecasting, your business will make more money and will lose less on inventory issues. Demand forecasting helps reduce the cost of carrying inventory and make the most of the customers that you have. You’ll be able to sell products more effectively knowing when your customers want them the most.

In addition to this, you can change product pricing based on what you know about sales activity. This can help you ensure that you’re raising them or lowering them as needed based on the activity of your customers each year.

Boosts Cash Flow

Demand forecasting helps to improve cash flow and prevent issues that result from not having enough cash on hand. It can be tough to pay vendors and suppliers if your cash flow is low and this can lead to strained partnerships. 

With the help of demand forecasting, you’ll always know when you’ll need to buy more inventory. Alternatively, you’ll know when you should hold back and keep more cash in reserve instead. 

By managing inventory successfully, you’ll also always have cash available to pay bills. You’ll maintain better relationships with partners.

Streamlines Production

Through demand forecasting, your business can streamline product manufacturing and production.

You’ll be able to optimize your production schedule and tweak it based on customer behavior and whether products are in high or low demand. This can help your business make the most of its production team so that it isn’t using more resources than necessary.

Informs Marketing Decisions

A major advantage of knowing the demand for products is that it can also help you develop a more effective marketing strategy. You can align marketing pushes with seasonal trends and high demand for particular products. 

If you know a certain product is going to be desired by consumers at a certain part of the year, you may want to focus more of your marketing efforts on it at that time. By knowing what people will want throughout the year, you can reach them with marketing messages that truly connect with their needs and interests.

Builds Better Customer Relationships

Properly forecasting demand can also lead to better customer satisfaction. It can help you maintain better customer relationships.

With forecasting, you’ll be prepared to keep the ideal amount of stock, even during busy times. This will help you fulfill orders quickly and prevent you from needing to tell a customer that an item is out of stock or unavailable.

Since customers will be able to get their items when they need them, they’ll feel more satisfied with the service your business provides. This may make it more likely that they’ll purchase from your business again in the future.

Challenges to Accurate Demand Forecasting

These benefits may have you excited about the prospect of doing some demand forecasting in your business. However, be aware that the process isn’t easy.

There are some big challenges to demand forecasting and it can be difficult to get accurate data. In addition to this, demand forecasting doesn’t always work to predict the future behavior of customers. Trends can change from year to year.

Many things can influence the demand for products aside from seasonal habits and fluctuations. Social media activity and influencer marketing can affect product sales and can be misleading if not considered carefully. It’s also important to pay attention to the product life cycle as well. New products often have a different demand than products that have been available for a long time. 

You’ll need to consider the trends of customers over multiple years of historical data to get useful information. At the same time, you’ll also need to pay attention to other factors that could affect demand in a particular year. It’s important to handle the demand forecasting process correctly if you want to get accurate data that you can use to your advantage.

Making the Most of Demand Forecasting

If you want to enhance ecommerce operations, make sure that you understand the benefits of demand forecasting. Knowing more about your customers’ behavior can help you plan for seasonal fluctuations and reduce inventory and cash flow issues.

If you need help with ecommerce logistics, consider ACI Logistix. We’re the fastest-growing provider of parcel logistics services in the US and offer reliable small parcel logistics and distribution solutions.

Ready to learn more? Reach out to us today to learn more about how ACI Logistix can help your ecommerce business succeed.