Forecasting Basics For eCommerce Merchants

April 20, 2022
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The success of your eCommerce business depends on the ability to meet the demands of every customer. When you have what clients need, you’ll increase your sales and have a competitive advantage over your competitors. In fact, a 2019 survey showed that up to 39% of consumers ditched a store when they didn’t find what they wanted.

But how can you predict what your consumers want tomorrow, next week, in a month or years’ time? This is why forecasting demand is a critical part of your e-commerce business. With accurate demand forecasting, you’ll know what to sell, which items to buy from suppliers, the amount of capital you need for the following year, and more. Some established eCommerce businesses have adopted the integrated business planning solution by Shypyard to ensure they are always stocked and generate the best revenue. Read on for a full guide on demand forecasting for your e-commerce store.

What is Demand Forecasting and How Does It Work?

Forecasting demand is the process of predicting future customer demand. This can be for both new and recurring items in your store. Using historical data is one of the best ways to forecast demand. You can do a qualitative and quantitative analysis of the trends in your order management system and have an estimate of your future sales. This will help you make better inventory planning based on expected customer demands and sales trends.

Why Do You Need to Forecast Demand for Your eCommerce Business?

Here are some of the reasons why demand planning is crucial to your e-commerce business.

• Reduces inventory expenses

• Can minimize financial risks

• Boosts conversions and awareness

• You always have items that customers need

• Can help develop a smart pricing strategy

9 Benefits of Forecasting Demand

A reliable demand plan delivers the following benefits.

1. Save Time and Cost

By having real-time data on the items in stock and the expected demand, you will allocate resources efficiently and save you several hours of communications between different locations. The integrated business planning system by Shypyard offers a holistic view of all your processes in several locations. You also see the fast-moving items to help you make smart decisions.

2. Increase Sales

The built-in features on Shypyard’s integrated business planning platform allow you to derive vital insights into your ecommerce data. You get insights into the SKUs selling slower, expected demand, and more. This way, you have a clear idea of what to stock to satisfy demand and when and how to offer discounts to increase sales to other businesses or DTC.

3. Increase Customer Satisfaction

If you can have a full inventory with the products that consumers need, your business will have a good reputation that will keep customers coming back. A clear demand plan helps you to stay stocked and keep clients happy.

4. Minimize Dead Stock

Deadstock drags your bottom line because customers don’t buy these items. Forecasting demand helps you to have better inventory planning of the quantities you need for each product to minimize waste and increase profits.

5. Rationalize Cash Flow

By having a comparison of goods sold in specific periods and the cash flow at that time, you can know when to bring in new stock.

6. Identify Seasonal Trends

Like any other business, sales fluctuate throughout the year. With an accurate demand plan, you can apply the right tactics to maintain high sales volumes despite the fluctuations. For instance, you can easily predict when to offer a discount on specific items and categories to push your sales.

7. Evaluate Best Sellers

Data from your e-commerce can give you insights into why some products have a higher demand than others. This way, you develop a better demand plan to optimize your sales while also mitigating losses.

8. Develop Pricing Strategy

When you have a clear demand forecast, you can know when to lower or raise prices to remain competitive. For instance, when you increase prices for in-demand items when there is a low supply, you maximize your returns. On the other hand, you can offer discounts to increase demand.

9. Prepare Your Budget

Running your e-commerce business efficiently requires you to rely on data to make the right financial choices. This way, you can improve profit margins, cash flow, and operating costs.

How to Get Started With Demand Forecasting

By combining market knowledge and historical sales data, you can derive accurate ecommerce demand forecasting. For precise demand planning, you should get both qualitative and quantitative data.

Qualitative analysis focuses on elements like audience surveys, opinions from industry experts and market research. In quantitative forecasting, you put more focus on measurable data including website analytics and sales data to know the changes you should make in your inventory management.

4 Steps to Forecast Demand

For more accurate demand planning and inventory planning, make sure you implement these four steps.

1. Import data:

Start by importing both qualitative and quantitative data from different sources of your e-commerce business. This data can include inventory, sales, promotions, and marketing activities.

2. Create an initial forecast:

Do an analysis of your preliminary data to create the initial forecast. Aim to understand how the performance of individual products and categories relate to one another and individually. For instance, you can look at how the demand for one product affects the other.

3. Align your business decisions and product strategy:

To create an all-around forecast, you must apply business decisions, data insights, and product strategies. Therefore, you should make adjustments to your business plans and also keep in mind other factors such as marketing, pricing, supply chain capabilities, macro trends, business development, and margin profitability.

4. Make ongoing adjustments:

You have to keep forecasting at different intervals to know the current trends and develop proper inventory planning that suits each period through the year. At the close of every set period whether quarterly or yearly, take a step back, import data, and evaluate actuals against your forecast.

6 Methods to Forecast Consumer Demand

Here are a few methods you can implement for better demand planning.

Collective Opinion

Using the collective opinion method, sales teams give a report on customer demand and the sales performance from each region. You can also use the built-in features in inventory management platforms to gather and analyze sales data.


Online surveys targeting your target audience can give you valuable details about customers’ needs and new business opportunities. You can conduct online surveys through end-user surveys, sample surveys, or the complete enumeration survey method.

Expert Opinion

Getting advice from an industry expert is valuable to your ecommerce business. You can even hire an outside contractor to help with future predictions.


This method utilizes economic indicators to predict future trends. Lagging indicators reveal the impact of past events, leading indicators help to predict future events, while coincidental indicators measure current events such as the recent inventory turnover.

Statistical method

Statistical methods offer a cost-effective and reliable way of forecasting demand. Through trend projection, you predict future trends by analyzing historical data. On the other hand, regression analysis helps you analyze relationships between various variables such as email signups, sales, and conversions.

Market Experiment Method

You can carry out market experiments to give you insights into customer behavior. For instance, A/B testing on elements such as special offers, site features, and discounts can tell you what appeals to your audience.