Sales Forecasting (Edexcel A Level Business)

Consumer Trends

Seasonal variations

• Demand for certain goods is seasonal
  
  
• Events such as major religious festivals, holiday periods and annual events impact demand for a wide range of products
  
  • For E.g. sales of basic homewares increase when students start university each September

Fashion

• Fashion is often led by celebrities and their influence can have a relatively short-term impact on sales
  
  • E.g. When Hollywood legend Megan Fox appeared in September 2021 at a star-studded event in a Boohoo dress the company’s sales unexpectedly soared by over 400% during that month

Long term trends

• Consumer behaviour, attitudes and spending habits change over time
  
  • In recent years environmentally-conscious consumers have led to many businesses amending sales forecasts to reflect increased demand for green products
    
    • E.g. In late 2022 vehicle manufacturer Ford increased its sales forecasts for electric vehicles by almost 70% 

Economic Variables

Economic Growth

• During periods of economic growth, increased consumer incomes will lead to higher than forecast sales
  
• The opposite will occur during periods of economic slowdown and sales may be less than forecast

Inflation

• The general increase in prices over time reduces consumers’ spending power
  • Firms may revise their sales forecasts downwards during periods of rising inflation
    
  • Firms may revise their sales forecasts upwards during periods of falling inflation

Unemployment

• Increased levels of unemployment are often experienced during periods of recession and tend to be a key cause of reduced spending in the economy
  
  • Sales forecasts for lifestyle and luxury goods may reduce as consumers focus their spending on essentials

Interest Rates

• When interest rates rise borrowing becomes more expensive for consumers
• Businesses that sell products that consumers frequently buy on credit may therefore adjust their sales forecasts downwards
  • E.g. Property sales are set to drop to 1.01billion in 2023 from 1.27b in 2022 causing many estate agencies to adjust their sales forecasts downwards

Exchange Rates

• Where the value of UK sterling falls against other global currencies, overseas consumers will find British exports become relatively cheaper
  
  
• Businesses that sell products overseas or that cater for tourists visiting the UK may adjust their sales forecasts upwards to reflect the expected increase in demand from a cheaper £
  
  • E.g. Visit Britain expects the number of tourists entering Britain in 2023 will be 14% higher than in 2022

Actions of Competitors

• Sales forecasts should consider short-term actions of competitors such as sales promotions as well as longer-term strategies such as changes to product ranges and expansion plans
  
  
• Competitor actions are difficult to predict so the use of past data to predict future sales may be limited as a result
  
  • E.g. Marks and Spencer announced plans to open twenty new high street stores in 2023, partly in response to the closure of several key competitors including Debenhams