Welcome to the Thrive in Fashion podcast where we explore the
role of the fashion buyer, the knowledge and skill sets
required for success and the impact of the role in your
retail business. In each episode you will learn
about industry best practise and how the buyer's role is evolving
in this ever changing, fast-paced industry.
And now here is your host, a fashion industry expert with
over 20 years of experience, Elizabeth McHale.
Welcome to this week's episode of the Thrive in Fashion
podcast. I'm Elizabeth McHale, and today
we are talking about forecasting.
Forecasting is one of the most practically useful skills in
fashion buying. It's another area that's not
formally trained. Most buyers move through their
early careers making decisions based on a mix of market feel,
previous season's performance and what their manager or
merchandiser tells them the plan is.
If I was to ask you, when you are deciding how much of a
product to buy, how many units across how many options, in what
size ratio, where does that number come from?
For most buyers, especially in the first few years of the role,
the honest answer involves some version of, well, what we did
last season, or what my merchandiser suggested, or what
felt right when I was looking at the market and a rough sense of
what the customer goes for. All of these are good and all
are starting points, but none are forecasting.
Forecasting is not the same as trend research, although trend
research feeds into it. It's not the same as reading a
sales plan, although that also feeds into it.
Forecasting is the discipline of taking what you know.
So that's taking information from your sales data,
information from your market research, from historical
performance, and then translating that into a plan
that drives your buying decisions with commercial logic
rather than just instinct alone. And the reason I'm talking about
it this week is because it also relates to the previous episodes
where I spoke about OTB planning and margin.
As I mentioned, forecasting is not trend prediction.
Trend prediction is about identifying what will be
aesthetically relevant, what direction products should go in,
what the customer will want to wear.
That is a creative and market intelligence exercise, and it is
genuinely important. But it is not forecasting.
Forecasting is about quantity and timing.
How much of something will sell, when will it sell, and at what
rate. So the two activities are
related, but they're not necessarily the same skill.
Forecasting is also not the sales plan your merchandiser
presents to you. The sales plan sets the
financial target. Your forecast or estimate is
your own view of how the products you were buying will
perform against that target, which lines will drive volume,
which will underperform, where you might need more depth and
where you can afford to go narrower.
Your forecast is your commercial perspective, informed by data
and most of the time made when looking at your OTB because in a
lot of cases your planning and budgets and targets are set well
in advance of your trading season.
It's only when you get into season that different things can
unravel and things can change. So your assumptions or your
forecasts are a really good way of tightening up on what the
figures are and ensuring that you're still controlling your
stock figure while achieving your budgeted sales.
Your forecast is your commercial perspective, which is informed
by data and the sales plan is the target that you're working
towards. In practical terms, a buyer who
is forecasting is asking questions like based on last
season's performance on this product type, what sell through
rate should I plan for? If I buy 500 units of this style
and my expected sell through at full price is 65%, what markdown
should I budget in for the remaining 35 and will that
impact my margin and if so, do I need to adjust the depth of my
buy to compensate? These are the type of questions
that you automatically ask when forecasting is a consistent
practise of asking the right commercial questions before any
commitment is made. Forecasting or assumptions are
also done in season, particularly when discussing
OTB, because a lot of the decisions that you made in
advance may not materialise as you expect.
Therefore, when you're trading in season, it's really important
to go back again and relook every time you're having an OTB
meeting but what your budget is and what your sales are.
And look at what assumptions you might apply given the new
information or the current context of trading patterns to
see how much that will impact either your spend or your
stockholding. One of the things that stops
buyers from forecasting or sharing their assumptions is the
belief that you need more data or better data.
But in most cases, that's not true.
You usually have more than enough data available.
It's about knowing how to use what is there.
So the first source is your own sales history, last season's
performance by product type, by category, by price, tier, sell
through rates, average selling prices, markdown depth.
All of this data tells you what your customer actually bought
when given the choice, not what you hoped they would buy.
It is the most direct signal that you have.
So for every new buying decision you make, you will generally
look to how a comparable product sold and how did it perform.
And the second source is your market context.
What is happening in the competitive landscape?
What are comparable retailers doing with similar product?
What price points are selling and what are stalling?
This does not need to be formal research, it's the ongoing
market awareness that good buyers develop as a habit.
But when it is used alongside sales data it adds an extra
dimension than just pure historical analysis.
History can tell you what happened, but market context
tells you whether the conditions that produce that result are
likely to repeat. The third source is your in
season trading data. Once a season is running, you
have live information about how product is performing relative
to plan, which styles are selling faster than you
forecasted and which are slower, where your size ratios may be
off, or which price points your customer is gravitating towards
or away from. In season data is really
valuable because it allows you to adjust as I mentioned
earlier, to chase into strong performance if your OTB allows
it, or to take early action on slow movers before markdown
pressure bills. Buyers who only look at data in
the context of a post seasonal review or a analysis are missing
half the picture. It's important to review
historical sales data, but it is equally important to re forecast
and relook at your in season data.
Using all of these sources together.
Historical performance, market context and in season trading is
what practical forecasting looks like.
It's not very complicated but it's more of a discipline of how
to use the information that you already have.
With AI integrating across so many parts of the business, we
are in danger of over analysing everything or having too much
information with which to make your buying decisions which can
lead to a lot of overwhelm. Try and keep it as simple as
possible, and if necessary go back to basics.
AI is an amazing tool for distilling large amount of
information, but as always, you need to be really specific about
what you're asking and what results you're expecting from
it. I should point out that your
instincts are also really useful when forecasting.
A good buyer's instinct comes from years of market exposure,
customer observation, and pattern recognition.
And it has, and it's really valuable.
The problem is not necessarily about having instincts.
The problem is using instinct only when data should be
leading, or using data only to confirm what your instinct has
already decided. Let me give you some examples
about instinct and data and where one doesn't necessarily
work without the other. The 1st is in range building, so
a buyer can be really excited about a trend direction and
builds a significant portion of the range around it and her
instincts are right about the direction but without having a
forecasting discipline. The buy depth on individual
styles is guided by enthusiasm rather than demand planning.
This means while the range may perform because of the styles
are on trend, but three of the seven styles never sell through
and the markdown cost erodes the margin that the trend was
supposed to deliver. Relying too much on buyer's
instinct without having a planning framework can cause
problems. Let me give you an example.
Say a buyer is really excited about a trend direction,
genuinely with commercial justification and builds a
significant proportion of the range around it.
The instincts are right about the direction, but without
having a plan, the buy depth on individual styles is mostly
guesswork and enthusiasm rather than demand planning.
And while the range performs well, three of the seven styles
never sell through and the markdown costs end up eating up
the margin that the trend was actually supposed to deliver.
Another situation can arise when you're placing a repeat order.
Say, for example, you have a really strong selling style and
you believe that there is definitely more opportunity in
repeating this particular style. Your instincts are often
correct. But if you don't have a
forecast, if you're not asking how much of that early sell
through is genuine ongoing demand versus an initial opening
burst, what the rate of sale looks like week by week, and
whether the delivery window on a repeat order is tight enough to
catch that selling period, The reorder could end up arriving
too late or in the wrong quantity.
And the opportunity is partially missed because, again, not that
the instinct was wrong, but because there was no structured
framework or forecasting data to support it.
And this is what I want you to take away from this episode.
Instinct tells you direction, but forecasting tells you the
quantity, the timing, and the risk.
You cannot have one without the other.
You need both. Forecasting is the practical
skill that makes everything else in buying work better.
It's how the OTB becomes a planning tool rather than a
limited number, it's how margin targets can be achieved during
the buying process. And it's how you can maximise
those instincts within a structured buying framework.
That's all for this week. Until next time.
Thank you for listening to today's episode.
If you enjoyed it, make sure to like, subscribe, follow and
share the show. Until next time.