The #Sales #forecast for #e-commerce, What is it and how do you calculate it?

The #Sales #forecast for #e-commerce, What is it and how do you calculate it?

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The popular wise saying is: “caution is better than tolerance.”

This is true in every aspect of life, but especially in retail where what is going to happen is fundamental to good corporate governance. In many cases, event prediction makes it possible to identify opportunities or minimize risks.

Therefore, in this article, we would like to talk about a concept that usually does not receive special attention in e-commerce (especially in the beginning). We are talking about sales forecasts.

You will see not only how this technique can help you sell more, but also how to avoid mistakes that cost you money.

Let’s Get Started

What is an Income Forecast?

We start with a definition to give us an idea.

An income forecast is an estimate and assessment of how a company takes into account future cash flows (19459005]

To put it simply, it means predicting future income and expenses to … [19659010] identify other business opportunities.

  • Avoid Risks or Problems

The sales forecast is a basic business concept not usually taken into account in online stores, but offers a competitive advantage if done with care

What’s the point of a sales forecast?

We’ve already determined the two main goals of a sales forecast, but we’re going to go into more detail now so you can see their true value.

1. Explore Opportunities

Imagine that you have an online store for children’s items.

When you search for trends in other countries, you will notice that there is a product that is already prominent in the United States. States, and also in some European countries, are gradually seen. This allows you to calculate that this product will reach your market in a few months.

Idea?

Use money now to find this product would be an example of a current promotion based on a future sales forecast.

Once you have the item, this way your website already has visitors, or even a list of subscribers who would like to buy.

2. Predicting Problems

As with any estimate, there is no guarantee that it will work as planned, but there are different ‘risk levels’.

A general example is to make sure you are on certain dates, such as Black Friday Christmas or the sale has enough stock. In this case, the sales forecast is simple. However, there are many more factors that we will take into account.

If your e-commerce already has data from previous years, the sales forecast goes hand in hand with this information.

For example, if you find out over a month that the conversion rate is much lower than in the same month of the previous year, you can determine the cause and take action. Maybe something is loading badly on the website, there is a problem with payment processing or your competition has started something.

In addition, the sales forecast can help you manage your online store in several ways: [19659010] Objective : Determining a sales volume to be achieved compared to the previous year points the way and motivates the daily life. The sales forecast makes it possible to define these goals.

  • If you are looking for an investment : Similar to the previous case with the toy, if you know that there will be such favorable conditions soon that an increase in sales is almost certain, you have may require financing to be prepared for inventory and resources. A good sales forecast is key to access to investors.
  • New hires : There are times when you need more employees and you should be able to predict this. Knowing exactly when these periods are will save you a lot of money and ensure that the workload doesn’t overwhelm you.
  • Budgeting : Efficient allocation of resources based on demand is an important task that would not be possible without planning future sales. Think of the mentioned examples.

A very positive aspect of the sales forecast is that it is not absolutely necessary that it be 100% accurate.

Deviations from the estimate are common, and as long as you don’t use a mortgage to sell a product that eventually turned into a disaster, it will help you make better decisions.

Factors to Consider When Predicting E-commerce Revenue

Let’s Take a Look At It Get started and work on a real e-commerce sales forecast. What should be taken into account? How long in advance do you need to plan?

The main distinction is made between internal factors, so-called internal factors and external factors that do not depend on us.

1. Internal

Sometimes we spend all day with Google Trends or what the competition does, although there is more internal than external work. Before looking at the external factors, make sure you have all of these internal factors under control:

  • Visits and Conversion Rate : These are two key figures that you absolutely must control. If you don’t know how, we recommend two articles, one on the conversion rate and another on Analytics.
  • Traffic Channels : What percentage of Traffic comes through organic search, social media, paid ads or referrals. Even if you have a newsletter the question arises: does it generate traffic and sales?
  • Products : Are you adding new functionality to your product? Perhaps more support staff is needed for the requests?
  • Promotions : A discount or other business strategy is expected to affect your cash flow . Read this article
  • Inventory : Your warehouse should be well stocked when high sales are expected. This is all the more important when working with products that are perishable or go out of style quickly. Read this article to find out how to manage your inventory.
  • Employees : Number of employees you work at peak times or during the pickling time
  • Internal guidelines : change in the right of return or any other point in the terms and conditions that affects the receipt and withdrawal of money. At this point, the article How to provide good customer service is helpful for you.
  • Your Time : If your business is highly dependent on you, consider your personal circumstances. School holidays or a trip may be the reason why it may take a little longer to respond to the customer or send articles.

Now we come to what is not directly dependent on your company.

2. External factors

These can be opportunities or threats; at least we want to have both in the picture.

  • Competition : View your competitors’ movements, advertising campaigns, new launches, promotions and discounts, and you can even track with common keywords. With a tool like Crawlo you can keep the e-commerce of your competitors on your radar.
  • Times of High Demand : However, everyone knows when the retail glory days are, but there may be other peaks in your niche. Some examples are school supplies in September or costumes in February and for Halloween.
  • Legislative Changes : When it came to data protection changes, many online stores had to spend money on a lawyer who made the changes. Take your hand. Such changes are announced months in advance, so be quick.
  • Trends : modes that surprise you out of the blue while your competitors deserve a golden nose. A good manager should think and pioneer out of the box, even if he risks making a mistake. Here you will find an article about finding profitable products as well as an article with the best-selling products on the internet. It shouldn’t fail because we don’t give you ideas. 😉

Now that you know what factors to manage, let’s find the best time to do it.

When should you make a sales forecast?

Forecasts and targets are most commonly adjusted with the financial year .

On the one hand we have to set the annual targets with the corresponding sales forecast and on the other hand we have to split them into quarters.

In certain sectors it is necessary to make daily forecasts; this is a classic model of gastronomy that is also used in online stores.

You should avoid that predictions are based on emotions . After receiving an email with a big sale or good news related to your e-commerce, you will be more optimistic. In contrast, you will inevitably experience commercial fatigue for a short period of time or when the news is missing.

A sales forecast on this point will be affected.

The technical part of the implementation must be performed according to certain criteria. Common sense is always necessary, but the fewer aspects we leave to chance, the better. These are the different ways to make a sales forecast.

Methods of Creating Sales Forecasts

Depending on how long your e-commerce has been running and what sources your sales are made on, you can use three different methods to make this forecast:

  • Sales development of your competitors
  • Your own sales development
  • Using statistical data about the channels to be used [19659012] Which is best for your situation? For this you need to read how they all work and analyze them yourself.

1. Sales development of your competitors

You have just started with e-commerce and you have no sales development yourself. The classic way to make a decision is to see how your competition is doing. Let’s see how it works.

First, you should get the accounting information from these companies . This is usually private information, but websites such as Axesor or einforma allow you to view it.

You can use your billing information and market share to estimate what you will earn

You cannot tell whether they are selling a product or not unless you do a thorough analysis of each company. But in general, knowing sales and market share will help you figure out how much you can make.

2. Your own sales development

This is the simplest and most classic system. If your online store has been active for months (at least a quarter) or years, you have valuable information to work with.

You only need to use two variables to calculate future sales:

  1. Percentage growth (or decrease)
  2. Seasonal

During peak times (eg Christmas) not as much is sold as in the middle of a “bad “month as August.

Based on your previous sales and their season calculate the Income you will have in the coming year . This way you have some estimated data you can work with.

3. Using statistics

If you don’t have data or don’t want to trust yourself, you can use the statistics of the different sales channels.

What do we mean by this?

For example, if you know the following information: [19659085] Suppose you build part of your sales on email marketing.

You know that 21% of emails are opened and 7% of those who open them trust Click links. After that you also know that 10% of these people eventually make a purchase.

So if you send an email to different databases with 100,000 users, you know that about 147 people will buy from you.

And since you also know that your average revenue per customer is $ 50, you can estimate that your email marketing revenues will be about $ 7,350.

Leave nothing to chance

Be forward-looking, use common sense and technical methods to estimate expected sales.

We say goodbye by using a proverb and adapting it to the environment: “ Future-oriented e-commerce counts as two “.;)

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