How does seasonality affect sales?
What does seasonality mean in sales?
The term seasonality is used to describe the predictable annual fluctuations in sales revenue based on the seasons.
Because in sales, the number of purchases made of products and services varies from month to month, even from day to day. We can strive towards a certain goal, but we simply cannot attain the same number of sales all year long. How many sales you make depends on a number of factors, including the industry, the type of product, the market at that given moment, the products’ availability, the demand, the seasons, etc. A list that goes on and on.
It is important to figure out what causes shifts in sales numbers for your company. Especially when those shifts can be linked to certain holidays and seasons. This way you can anticipate what is to come and prepare in advance, so that you can capitalise on your strong sales cycles and survive the slower ones.
What causes seasonality?
You may be looking for a ready-made answer to this question. But, unfortunately, this question isn’t simply answered with a summary of all the factors that influence sales. In addition to quite a few factors, such as the product or service itself, the category and niche, geographic location of your company, the industry; the (global) economical situation, the time of year and even the daily weather, there are also a lot of personal factors unique to each business or company.
For example, say you run a clothing store in Europe. During the winter season, the sales of sweaters, scarfs and gloves will skyrocket, whilst t-shirts and shorts will stay on the racks. During the warmer months, the numbers will shift radically. Making t-shirts and shorts your star players. If you have the exact same store in Australia, the seasonal patterns will be different.
Another example: you have a coffee shop in downtown. In winter, your house made coffees and hot specials will be popular. But in summer, people are looking for cool beverages. So you would have to provide a different menu with iced versions.
For every niche and category, there are different seasonality rules that apply. Say perfume, something that is much appreciated as a christmas gift, but less popular when the fragrance attracts wasps in summer. We could go on and on with these examples, but it is more important for you to know what causes the fluctuations in your sales numbers, so you will have to analyse your business.
Forecasting seasonality: how to manage the ups and downs?
Unfortunately, we cannot give you a personalised answer in this article (ofcourse, we can help you out during a talk). We can, however, provide you with some tips and indications to look for when searching for the cause of and logic in your sales dips and peaks!
First of all, we must advise you to not overanalyze the situation. Just think of small things that stand out from last year. Were there products or services that were more sought after during specific periods? Pay attention to the little things and make note of them.
Why is it important to forecast seasonality in sales?
Once you have figured out what boosts your sales and what makes it drop, you can anticipate the numbers for the following year. This will help you to:
¬ Stay prepared for the future
¬ Reduce inventory mistakes
¬ Avoid stockouts/ overstocks
¬ Get your sales timing right
¬ Keep your business on track towards (annual) succes