Demand Forecasting in the Apparel Industry: 4 Challenges & Solutions

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In the apparel business, there’s no such thing as a crystal ball.

But demand forecasting gives you the next best thing.

Making educated guesses about how customers will behave in the future is crucial for any business. This is particularly true for fashion and apparel retailers, as it is key for overall apparel inventory management. Huge inventories, trends that change quickly, and unpredictable consumer preferences make it all but impossible for apparel retailers to perfect demand forecasting. However, if you work in the apparel industry, there are a few things you can do to improve the accuracy of your predictions.

Consumer Habits Are Hard to Predict

Consumer behavior is always difficult to measure and predict, but because of how quickly fashion trends come and go, it’s even more difficult in the apparel industry. Every product is “new” and essentially has no sales history. Last season’s popular products that are similar may not be as viable this year. Incorrectly predicting customers’ habits can create problems for your apparel supply chain by leaving you with excess stock that can’t be sold.

Here’s the solution. Collect as much data surrounding products’ sales histories as you can. Collect by item, by week, and by location; additionally, consider creating multiple forecasts and be sure to track their accuracy. The more data you have, the better the predictions you’ll be able to make. CRM software can make it easier to manage relationships with customers and obtain accurate consumer data and help in organizing this data to more accurately predict future demand.

Consumer Preferences Are Volatile

In addition to quickly changing fashion trends, customers’ demands for certain styles or products can change virtually overnight. These preferences are influenced heavily by uncontrollable external factors, such as the media, the economy, and even the weather.

You cannot predict when something will suddenly go out of style or become the next trendy item, no matter how good your forecasting is. Continue to collect as much data as you can, and pay attention to your business’ marketing strategies to see how they respond to and capitalize upon these external opportunities. Inform yourself about the political, economic, and social/cultural environments you operate in. That way you’ll stay one step ahead of fickle markets.

Products and Fashion Trends Have Short Life Cycles

As we already said, fast-changing fashion trends result in products having much shorter life cycles than products in other industries and effective product lifecycle management is crucial in the apparel industry. This makes it difficult to gather enough sales history and data for forecasting before the product is obsolete or out of style. It also doesn’t leave you much room for error.

Once again, the solution comes down to collecting as much data as possible so you can determine what specific attributes or characteristics of your products sold well. If your customers seem to prefer anything — such as a certain fabric, color, price point, or neckline — you may be able to replicate its success in a future product.

Forecasts Are Difficult to Automate

Forecasts have too many contributing factors to automate. They require human interpretation and judgment calls. Unfortunately, this leaves room for error. Predictions tend to be influenced by whoever has the loudest argument. 

Using a reliable apparel inventory management solution, you can make multiple forecasts, and pay attention to which forecasts are the most accurate. Give those models more weight over time. Always adjust and update your forecasts when you have real sales data for that product. An apparel sales order management solution can assist in forecasting by tracking profits and royalties from multiple channels at once.

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