The need for every retailer to be absolutely rigorous about sales forecasting is paramount all year round. But never is it as vital to zoom in on the forecasting detail at a micro-level than in the lead up to any festive season.

With the Christmas/New Year festive season around the corner, now is the time to be examining, adapting and re-examining your numbers on a daily basis so you have the flexibility to respond nimbly to market changes.

Why do we need to track our numbers daily at this time of the year? Because Christmas (or any other festive day for that matter) falls on the same date, but not always on the same day each year.

You will find that the trading pattern in the lead up to Christmas changes depending on what day it falls. In the Middle East, whenever Christmas or Eid falls on a Friday or Saturday for instance, you would find that trading in the days prior (being a weekend) would be higher than when it falls on a weekend.

So, you will need to be smart and absolutely forensic about daily sales forecasts in the lead up to any major festive day as this number will determine staffing and inventory levels.

If sales forecasts are not rigorously planned and regularly monitored, holding a ‘sale’ event could be detrimental to the business. There are the extra wages that would need to be paid and the issue of unsold stock clogging the pipeline.

This is exacerbated during any festive season when extended trading hours and greater consumer spending creates the need for stronger and more frequent due diligence around stock and staffing levels.

Imagine if, like most retailers at this time of the year, you’ve got all hands on deck and you’re stocked to the hilt in product lines you believe will walk out the door, only to find that consumers no longer want that particular product and have eyes on another that your planning team had not accounted for.

But your main competitor is more on the ball. They have kept their budgeting process sufficiently fluid to ensure they have the ability to adapt all the vital levers as they need to.

As a result, they have the right number of the right items in stock to suit the current demand. All of a sudden you’re left with an oversupply of a product nobody wants and staff walking around with little to do at a time of year when your outgoing costs are at a premium.

In preparing their annual sales forecasts, too many retailers simply take last year’s sales figure, add an arbitrary percentage on top, and the result becomes this year’s sales target. Instead, your forecasting process must be based on a bottom-up, top-down approach.

Let me explain what I mean by using the example of the multi-store retail chain. Every store manager in the chain must be given the opportunity to feed into the sales forecasting process from the bottom up because they understand the patterns and anomalies happening in their store that a manager at the head office couldn’t possible know because they are not close to the action.

In parallel to the bottom-up approach, head office management should set a number based on their high-level analysis of the company. This becomes the top-down number.

The bottom-up and top-down numbers then come together to be merged following a ‘massaging process’, whereby anomalies between the two figures are closely analysed, discussed, debated and negotiated to produce the final sales budget figure.

This strategic bottom-up, top-down process must be repeated for all levers in the company’s Profit and Loss statement, including margins, markdowns, operating costs and salaries, in addition to sales.

Once a final sales budget figure is determined, it is important to remember that it is simply a guide. At the end of the day there is simply no sense in tracking against an arbitrary budget number that was established 12 months ago when the market is so volatile and demands constant readjustments to your purchases and other operating expenses.

The writer is Executive Director of Thought Leaders Middle East.