From The Co-Founders


Tips, Tactics & Strategic Insights and Commentary
from The ROI Co-Founders, Pat Johnson and Dick Outcalt
Outcalt & Johnson: Retail Strategists LLC; Retail Turnaround Experts

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Expecting judgment from computer forecasts? Really?
"How are sales?" is essentially the international greeting between retailers. 

And because of the seasonality of retail sales, most retailers will respond by explaining whether sales this month are up or down versus the same month last year, not just the previous month. 

All this is well and fine in a normal year. But, since 2020, retailers have not been experiencing anything close to normal. And boy, does that show up in the 6-month retail sales trend charts that The ROI posts each month.
  • In sector after sector, December, January & February sales versus the prior year are markedly different than the March-April-May results. In some cases, these are quite dramatic. 

Your results are likely to be consistent with these patterns.

So when it comes time to plan your sales and buying plans, you are unlikely, for example, to plan for double-digit sales increases every January and February. Instead, you will be prepared to "Apply your best judgment."

Who or what is most likely to be blind-sided by this? The machine-learning algorithms and the artificial intelligence tools that promise to forecast sales for retailers. (And by extension, those retailers – perhaps new to retailing – who accept those forecasts.)

You've seen them, right? The promises of the wisdom of the computer, the power of machine learning, artificial intelligence tools that are evaluating past results and projecting them forward. Their machine learning is based on pattern recognition, and we have had nothing but random patterns for the past two years. Might that explain the current bloating of excess inventory?

When it comes to projecting sales, which its crucial for managing and controlling inventory, there are several other factors to be considered, most of which are beyond the capabilities of the algorithms.   

  • Note "exceptions" (unusual weather; new competitor; special event; etc.)
  • Track transactions (# of customers) as well as total sales ($ volumes)
  • Factor in price changes
  • Then, apply your best judgment!

Obviously, the most important step is "applying your best judgment!" That you have in abundance.

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