Retailers Struggling with Demand Forecasts: Report

Retail's heavy reliance on promotions, combined with fragmented demand and the lingering effect of the economy on consumers, are among the factors making it increasingly difficult for retailers to accurately forecast demand, according to a study released by Retail Systems Research.

ATLANTA — Retail's heavy reliance on promotions, combined with fragmented demand and the lingering effect of the economy on consumers, are among the factors making it increasingly difficult for retailers to accurately forecast demand, according to a study released Wednesday by Retail Systems Research.

The study, sponsored by Predictix, found that major challenges for retailers in demand forecasting created by consumer price sensitivity, which in turn is driven by aggressive competitive pricing, excessive promotions and price transparency enabled by mobile devices.

In addition, retailers find it increasingly difficult to understand cross-channel events that affect customer behavior and channel demand — challenges that are amplified by retailers' inability to reconcile differing forecasts and to easily update forecasts in-season. Even the best retailers continue to struggle with traditionally challenging forecasting problems, such as promotions, new product introductions and short lifecycle products, the report said.

"I was impressed by the spread of demand forecasts internally to retail organizations," said Nikki Baird, managing partner at RSR Research and co-author of the report. "But for the most part, our research shows that those forecasts exist within silos, and retailers are still trying to figure out how to get a single picture of demand."