Between meeting the demands of consumers who intend to do a little splurging during the holidays and dealing with a customer drought early in the year, businesses regularly experience a seasonal fluctuation in demand. Most industries see a significant spike in demand during the holidays when most U.S consumers do most of their shopping. In fact, almost 40% of respondents in a McKinsey survey plan to splurge this holiday shopping season, with 45% planning to spend more than $100,000.
So how do ecommerce businesses take advantage of these prime shopping seasons? More importantly, how do they prepare for the seasonal changes in demand in regard to inventory and logistics? Read on to find out how to manage seasonal demand fluctuation.
What is seasonal demand?
Seasonal demand refers to the changes in consumer buying habits depending on the time of year. This may be related to changes in season (i.e., higher demand for snow boots during winter vs. higher demand for sunglasses during summer). It may also be related to holidays and occasions such as Christmas, Halloween, Thanksgiving, New Year, and so on. Fortunately for brands, this is one of the most predictable demand fluctuations, making it easier for them to plan ahead.
What causes seasonal demand fluctuation?
Consumer demand regularly fluctuates around various natural and man-made seasons as people’s needs and activities change. For example, the types of clothes people want to wear change with the season. There may also be season-specific activities (spring cleaning, peak season, going back to school, etc.) that influence the things that people buy.
Moreover, what brands do during specific seasons can also influence demand. For instance, there tends to be a spike in demand during seasons when brands ramp up their marketing activities and offer attractive discounts.
What are examples of seasonal products?
There are many products for which demand fluctuates based on seasonality. For example, you’d typically see a rise in demand for deck furniture, lawnmowers, and yard tools during spring because this is when most people get their spring cleaning done and prepare for the warmer season ahead.
During summer, sales for items like air conditioners, ice creams, surfboards, and swimwear will spike as people look for ways to beat the heat. Meanwhile, fall is when people start to prep for the upcoming holiday season, starting with Halloween, where the sale of costumes, Halloween décor, pumpkins, and candies will rise significantly. Additionally, as the temperature starts to drop, so will the demand for cooler clothing while the demand for warmer clothing slowly increases.
This will then be followed by Thanksgiving prep, with people stocking up on groceries (particularly turkey) and décor to prepare for family dinners. Right after Thanksgiving, you’ll likely see people lining up to get the best deals during Black Friday and Cyber Monday because that’s when brands offer their best deals of the year.
People will buy toys, electronics, apparel, and home furnishings, which tend to be on sale the most during this period. While many people are just looking to save on these items, others are buying them as gifts for the upcoming festivities such as Yule, Hanukkah, Kwanzaa, and Christmas. As the year draws to a close, people may buy fireworks to celebrate the new year.
The impact of seasonal demand on ecommerce
While demand fluctuations are often challenging to manage for businesses, they can also be a good thing if they’re predictable enough. Let’s take a closer look at how seasonal demand changes impact ecommerce.
The benefits of seasonal demand
For a well-prepared business, seasonal demand spikes can be the perfect opportunity to maximize sales. This is particularly true for the holiday season as this is when people do most of their shopping (the overall holiday spending in 2021 hitting $886.7 billion in the U.S).
Since these demand spikes are annually recurring, businesses can get ahead of them by planning their inventory procurement accordingly. By stocking up in time for the huge increase in orders, businesses can ensure that they have the inventory necessary to meet increased consumer demand.
Moreover, the predictable nature of these demand spikes also affords businesses the freedom to plan their marketing and sales strategies well ahead of time. They can stay prepared with seasonal marketing campaigns and discounts that will allow them to make the most of peak shopping seasons.
Seasonal demand fluctuation: Risks and challenges
With that said, seasonal demand fluctuations can also bring woe to businesses that are unprepared or don’t know how to prepare. For starters, they may miss out on valuable sales opportunities if they don’t have enough stock to meet increased consumer demand.
To make up for it, some businesses may do some last-minute stocking up, which significantly increases the risk of overstocking. By the time the extra stock arrives, demand might have started to slow down, which means they could end up with a significant amount of unsold inventory. Alternatively, even if they planned ahead, they could still end up overstocking if they didn’t make accurate predictions about how much inventory to restock.
An inventory planning solution that provides historical analysis and inventory forecasting can prevent these issues. The historical data will help make predictions about when and how much to restock, so businesses can reorder enough inventory in time for the increase in demand.
However, businesses also have to face the logistical challenges associated with seasonal demand spikes. They may not have enough workforce or resources to fulfill all the orders that come in during peak shopping seasons. Moreover, courier services also have a lower capacity since they also see an increased demand, which leaves many businesses scrambling to find alternative shipping solutions to deliver all their customer orders.
In both cases, partnering with a third-party logistics company such as ShipBob can help. A 3PL’s experienced workforce can take care of the entire fulfillment process for you so you don’t have to struggle to manage it all on your own or hire seasonal employees. Moreover, their existing relationships with leading courier services will ensure that your delivery needs are met, even during peak shipping season.
How to get on top of seasonal demand
Accurate forecasting is the key to getting on top of seasonal demand. As mentioned earlier, seasonal demand spikes are somewhat predictable, which makes forecasting a little easier and a little more accurate. Moreover, brands also need to know what to do with the forecasting data that they have so they can plan appropriately.
How to forecast seasonal demand
First, take a look at your historical sales data to see how demand changes for different products throughout the year. This will help you figure out which of your products are seasonal. It will also allow you to identify the periods during which the demand for each product spikes (or drops).
Maybe you see a demand spike for sunglasses when summer approaches, or perhaps you quickly run out of stock for athletic wear as the new year begins because people are following up on their new fitness goals.
You can also estimate how much the demand changes compared to regular periods. However, take this information with a grain of salt because markets are volatile and can surprise you when you least expect it. In other words, don’t just order 2,000 extra units because you sold 2,000 more units the previous year.
How to compete during seasonal demand fluctuation
So now that you know which products are seasonal and when your peak sales seasons are, it’s time to figure out how you can take further action. Here are a few tips to help you stay competitive during seasonal fluctuations in demand.
- Collect and analyze your demand forecasting and compare it against historical sales. Use it to determine how accurate your predictions were in comparison to actual demand. This is a great way to fine-tune your forecasting and ensure that you can make more accurate predictions ahead of seasonal demand spikes.
- Keep an open line of communication with your suppliers. You should be able to easily place inventory reorders and get a prior warning if they’re unable to meet your increased demand so you have ample time to look for backup solutions.
- Keep a close eye on inventory levels so you know how much you have left in stock, how much you’ll need to reorder, and when you’ll need to reorder. This allows for timely inventory replenishments while also allowing you to adjust your order volume accordingly.
- Whatever you do, resist the temptation to overstock. Overstocking can be expensive and can be detrimental to your company’s bottom line. You don’t want to end up with a pile of unsold goods that you can no longer sell while they sit in your warehouse, racking up storage costs. Instead, consider ordering less but more frequently so you can remain flexible and adjust according to changes in demand.
- Consider adopting a 3PL solution to keep your demand management process ticking along. Instead of investing in new resources and workforce just to manage your seasonal needs, you can outsource your entire fulfillment process to the experts. Moreover, 3PL solutions also offer robust inventory planning and management software that you can use to collect and analyze your data for improved forecasting accuracy.
Stay one step ahead of seasonal demand with ShipBob
Accurate demand forecasting is the key to staying on top of seasonal demand fluctuations. With ShipBob’s proprietary software, you can get accurate demand predictions based on historical sales data and consumer buying behavior. This allows you to plan your inventory reorders more accurately so you don’t accidentally run out of stock or end up overstocking.
It lets you track performance at the SKU-level, which means you can pinpoint which items will see a spike in demand during specific seasons. That way, you can narrow down your inventory planning for specific items.
Moreover, the inventory management software keeps track of your inventory levels in real-time. It analyzes the information to predict how long the stock will last and when you’ll need to place inventory reorders. The automatic reorder point notifications also ensure that you’re never late with your reorders.
One of the best parts is that ShipBob offers a full-service fulfillment solution, so you can trust them with the entire process of storing and managing your inventory as well as fulfilling your orders. Additionally, if you notify ShipBob about upcoming increases in order volume, the team will be able to efficiently manage seasonal demand spikes without you having to scramble for last-minute solutions.
Get started with ShipBob
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Seasonal demand FAQs
Here are answers to the top questions about seasonal demand.
What is the meaning of seasonality?
Seasonality refers to the changes in consumer demand based on natural or man-made seasons.
What are popular seasonal products?
Halloween decorations and costumes, Christmas decorations, fireworks, outerwear, snow boots, sundresses, yard tools, and deck furniture are just a few examples of popular seasonal products.
What are quick tips to manage seasonal demand?
Forecasting demand and managing inventory replenishment accordingly is crucial to managing seasonal demand.
What businesses and industries are seasonal?
Landscaping businesses, fireworks sales, ice cream shops, and ski shops are just a few examples of seasonal businesses and industries.