Six Ways AI Can Impact Retail Forecasting: Hype Vs. Reality
Demand forecasting, for all of its importance in business, has had a mixed run in retail. Even in fairly predictable categories in general merchandise, it’s far too easy for retailers to start the current year’s plan by loading in all the assumptions made from the year before, rather than starting clean with a new demand forecast. In fact, according to RSR Research’s benchmark, even though 68% of better-performing retailers (“Retail Winners”) and 53% of all other retailers believe that starting with a demand forecast as the basis for the next year’s plan is very valuable, only 49% of Winners and 29% of their peers actually do so today. Part of the reason why is because forecast error in retail is high, as high as 32% according to some estimates. And, the more sporadic or non-repeatable the demand is, the more forecast error occurs – thus, grocery retailers operating a replenishment strategy have a far easier time using a forecast than a fashion retailer introducing a high-fashion item that responds to a new trend. Read more at Forbes.
