Quick Signals for Predicting Seasonality
Sales this Holiday season have been soft. Minimize excess inventory by looking at historical and future demand signals.
Is it just me or are there still plenty of email promos this year after BFCM? This year, I've noticed many brands grappling with soft sales and excess inventory, leading to a scramble to offload stock through additional promotions.
Excess or overstock inventory, resulting from overestimations of market demand, presents a challenge: it ties up capital, occupies storage space, and often leads to discounted sales, affecting the bottom line.
I’m not a demand planner or supply chain manager - but there are signals from the marketing and econ world that can help gauge when a business may need to ramp up or down inventory.
Digital signals
For new products that don’t have the benefit of years of sales data, the below can be helpful.
Google Trends: This one is actually my favorite due to how easy and instant it is. It's like a public sentiment thermometer. It shows what's hot and when - reflecting consumer interest over the entire time Google search has been a thing.
Search interest for “underwear” has ALWAYS peaked in December, every year, for the last 15 years. Zeroing in on the month of December specifically, we see that breakout terms are all color related and related to New Years. Intriguing.
A quick Google search reveals that there are actually traditions and superstitions for wearing specific colors on New Years.
Monitoring Competitor Investment in Advertising: Keeping an eye on your competitors can offer valuable insights. When they ramp up their marketing efforts, it's often a signal of peak season. A good move might be to peek at their Facebook Ad Library and see how many new ad variants they're investing in and running. There are tools out there like Foreplay that allow you to track a brands ads over time.
Understanding Use Cases: Understanding how and when customers use your product can shed light on its seasonal relevance. Look at the reddit, tiktok, and review chatter for either your own product or ones similar to yours. You can feed a text dump of reviews of similar products and functions to a chatbot and ask it to collect and summarize what people are using them for - indicating trends and drivers of demand.
Offline signals
Historical Sales Data: This is the most reliable indicator for products with a sales history. Trends and patterns from previous years are typically the best guide inventory decisions. If you have this, this is likely your #1 data source.
Disposable Personal Income (DPI): A macroeconomic indicator that reflects consumers' ability to spend. When DPI is high, consumers generally have more disposable income, potentially leading to increased spending. You can see here at the FRED that DPI went up largely from onset of COVID through 8/2021 - when we entered a trough that we started to recover from beginning of 2023. Note, DPI is a lagging metric - sort of useless at forecasting.
Consumer Confidence Index (CCI): A bit more predictive than DPI, CCI can indicate future consumer behavior. A rising CCI suggests increased consumer spending, which could mean ramping up inventory in anticipation.
CCI trend since August 2023 has been degrading - potentially indicative of weakened consumer confidence heading into BFCM.
All of the above are helpful directional signals to inform your marketing and inventory strategy - whether it’s planning for big promos, informing creative, or cutting back on production up the chain.