Crowdsourcing Forecasts in the Apparel Market

I recently came across a crowdsourcing model, which I believe has potential to disrupt traditional demand forecasting approaches in the apparel segment if widely adopted.  The case study involves a web-based company called Threadless.com, which is an online retailer of T-shirts targeted towards teenagers and Gen-Y consumers.  In other words, Threadless sells a fast-fashion, short lifecycle product to highly fickle youth demographic.  Yet despite these challenges, Threadless has enjoyed amazing success selling out of every T-shirt it has ever manufactured.  Perhaps more impressive is that Threadless has amongst the lowest product development costs of any retailer in the apparel sector.

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How Forward Buying and Diversion Complicate Demand Planning in Fast Moving Consumer Goods

The Fast Moving Consumer Goods (FMCG) segment spends a considerable amount of its marketing budget on trade promotions. It is not uncommon for FMCG brands to spend 15% of sales on promotions with retailers. Trade promotions are designed to generate uplift in sales for the brand owner. There are hundreds of different types of promotions. Many involve a discount to the end consumer. Examples include price discounts; manufacturer coupons; value packs; bonus packs and special events. Manufacturers also offer financial incentives to retailers to perform specialized in-store advertising and product placement on an end-cap or near a checkout. However, retailers and wholesalers of FMCG products also use the promotions as a strategy to maximize profits.

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Using Prediction Markets to Forecast Box Office Success

Over the past few weeks there has been battle between the Motion Pictures Association of America (MPAA) and several large financial exchanges.   The debate centers upon the proposed creation of a formal derivatives market to trade contracts based upon box office receipts for upcoming movies.   Cantor Fitzgerald and Veriana Networks are the proponents of the futures exchange which would allow participants to bet on how well a film will do when released in theatres.  The futures exchanges argue that the new trading venues would provide transparency to the entertainment industry along with a new form of risk management.  Distributors, which have concerns about a film’s potential success, could short the security on the market.  MPAA, which represents the movie studios, has concerns about market manipulation by studio employees with insider information.

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