Retail demand forecasting: A guide for brands of all sizes

Demand forecasting is a critical component of retail success. Whether you’re a small business or an established brand, understanding how to predict and manage demand effectively will help you maintain strong relationships with retailers, optimize inventory and ultimately drive growth. At its core, demand forecasting is about aligning supply with consumer purchasing behavior. Understanding when, how and in what quantity consumers buy is essential. The more accurately a brand can predict this, the better they can meet demand efficiently, minimizing waste and maximizing sales. 

So, what’s a brand to do? Keontay Jackson, Senior Divisional of Merchandise Planning, Beauty at Target, shares the following considerations for brands when looking at retail demand forecasting:  

• Understand consumer behavior: Analyzing consumer purchasing habits helps create a reliable forecast. This includes identifying trends, seasonal fluctuations and external factors that impact demand. 

• Build a data-driven approach: Brands should gather and analyze historical sales data, customer behavior insights and external market factors to create more accurate predictions. 

• Develop stage gate checkpoints: Communication between brands and retailers should include regular check-ins to adjust forecasts based on real‑time sales data and unexpected shifts in demand. 

• Consider preparing for viral demand: Social media can drive unexpected surges in demand. If you’re approaching marketing the right way, you should prepare for virality at any moment. Brands must have contingency plans and safety stock to meet sudden increases in consumer interest. 

There are different approaches when forecasting for new versus existing products. For a new product, forecasting relies on category insights, consumer testing and market trends to estimate demand. If the product is similar to others in a category, retailers use historical sales data from comparable items to predict sales. 

For established brands, forecasting models are built based on prior performance, factoring in growth trends, promotions and any shifts in consumer preferences. So how can emerging brands engage with retailers on forecasting? Keontay offers these tips:  

• Discuss safety stock strategies: Small businesses should understand how retailers plan for safety stock and align their production accordingly to avoid stockouts or overproduction. 

• Ask the right questions: Brands should inquire about productivity benchmarks, weeks of supply standards and what short-term strategies retailers use to manage demand spikes. 

• Maintain forecast accuracy: Having clear, data-backed sales expectations helps retailers and brands work together effectively. Unrealistic projections can lead to either inventory shortages or excess stock, both of which can be costly. 

• Start with simple forecasting tools: An Excel spreadsheet can be a powerful starting point for organizing demand data before investing in more sophisticated forecasting tools. 

Some key factors that influence forecasting accuracy include: 

• Virality: As shared, social media and influencer-driven demand can cause rapid sales spikes. (A good thing when you’re prepared for it; a possible headache if not!) 

• Marketing efforts: Traditional and digital marketing impact consumer awareness and buying behavior. 

• Economic conditions: Recessions, pandemics, or other macroeconomic events can cause significant shifts in consumer demand. 

Keontay says that retailers and brands should always follow the ABCP rule — Always Be Continuously Planning. Success in forecasting requires contingency plans to adapt to both demand surges and slow periods. By tracking demand patterns, adjusting strategies in real time and maintaining open communication with retail partners, brands can improve their forecasting accuracy and overall business performance. 

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