What is Seasonal Product Demand?
Seasonal demand describes the changes in consumer behavior based on time. To manage expectations, one must anticipate what a customer will want, when they’ll want it, and at what volume.
Each of these variables can change throughout your customer’s lifecycle. Seasonality can be impacted by literal seasons (think swimsuits and parkas) and is often associated with Western holidays (think Black Friday).
But more often than not, seasonality is affected by a confluence of other, less conspicuous factors. Shifts caused by elections, tax deadlines, and even the life cycles of other products can affect your seasonal product demand.
While distinct for every industry, seasons tend to be highly forecastable and repetitive. A good rule of thumb is if it happened the last time, it will probably happen again.
How to manage and forecast seasonal demand
Seasonal demand is most critical when it comes to thinking about inventory. Most companies learn to stock products that will be in high seasonal demand well before the actual season hits.
Running out of inventory both decreases revenue and can negatively impact the customer’s perception of the brand (“What do you mean you ran out?!”). Ensuring that enough product is in stock is essential to not only surviving seasonal shifts, but also in taking advantage of higher customer demand.
Choose the right time to prepare.
It’s not just a question of bulking up before the big season — it’s about choosing the exact time to do so. Let’s say you’re looking to prepare for a big summer influx of sales. If you start preparing inventory in the winter, you might compromise a large amount of working capital, and have a worse Q1 than you expected. If you wait too late, of course, you might face a shortage in your warehouse.
Ultimately, the goal is to find a middle ground. That said, many businesses find it more amenable to prepare sooner rather than later. Unless your product has a short lifespan, prepping for a large anticipated sale tends to be easier than playing catch up.
Look at historical performance.
Don’t forget to analyze inventory performance and sales performance from the previous year. Visibility into the approach and results of Black Friday and Cyber Monday last year, for example, can highlight what worked well and areas of improvement.
Can you lean in and double down on last year’s successes? How can you learn from pricing, bundling, and other marketing decisions to improve this year? If you know your supplier struggled with demand last year, how can you get ahead of the problem this year?
Categorize your products appropriately.
A good habit to get into is identifying which products are especially susceptible to seasonality. Although doing so might take extra research or tracking, approaching your entire inventory with a more granular eye can help you in the long run.
Avoid making blanket decisions in which you increase or decrease your inventory across the board. Rather, categorize which products will likely be affected by seasonality and adjust production accordingly. Moving slowly and methodically through your categorization process will ensure you have the right products at the right times.
Follow broader market trends to help identify which products to focus on.
Your business is one-of-a-kind, but the seasonality within your category is probably not. Forecasting demand at the industry level can help you to identify seasons that might affect your business and adapt accordingly. Look through purchasing reports from recent years, and stay up-to-speed on your competitors. Even understanding which seasons your competitors are advertising can help inform which ones you need to be prepared for.
To help decide which products to focus on during the peak holiday season, again look to the broader landscape: see what products shoppers are talking about on social media, use Black Friday-specific trend reports, research gift guides published by the media, and examine competitor behavior. Knowing what products are overly represented during Black Friday sales can also spark ideas of how to stand out from the pack.
Keep your suppliers in the know.
Like much of any business, seasonal strategies affect a whole chain of command. As you anticipate new seasons and adapt your inventory accordingly, be sure to give suppliers plenty of notice. They will need extra time to accommodate your seasonality into their schedule. (What you thought would be an April project might actually be, say, a January one for your supplier. Never hesitate to communicate early).
Recognize that seasonal demand can change incrementally.
Markets are often very transient; they change over the years. So while you may always see increased sales in a certain time period, they might not always increase at the same rate. As you build out your plans for inventory and sales during seasonal periods, be sure to comb through your strategy with the same rigor you would for your normal plans.
Evaluate your consumer’s spending abilities and the health of the broader economy. The thrill of a holiday rarely supersedes broader market trends in consumer spending.
Ensure your cash flow continues before and after the season.
Companies that take advantage of seasonality can find themselves buoyed for the rest of the year. One way that companies can do that is by extending payments to vendors on the extra inventory that they purchase ahead of a seasonal spike.
Settle Working Capital’s flexible payment terms allow growing companies to pay vendors on an extended basis, which then allows companies to maximize their revenue during their busy seasons, and extend payments for that specific inventory for up to 120 days (for qualified businesses and based on approved terms).
Settle enables payers to efficiently pay their vendors during their ideal time frame. And when timing is everything — like during a big sales season such as Black Friday — it’s critical to have flexibility in funds. To see how much you may qualify for, check out our eligibility calculator.