Harnessing spiky demand to grow global DTC brands

Volatility in demand is a major challenge

‘Spiky demand’ is one of the biggest challenges DTC (direct to consumer) brands are experiencing. Day-to-day, sales for different products can massively fluctuate from their expected baseline, sometimes up to 100 times more than predicted. Sally highlighted that, for Coty, there were various reasons for this volatility, but promotional activity, such as a new product launch, markdown activity or influencer activity, is the biggest driver. 

When demand spikes unexpectedly, it can result in unwanted stockouts, leftover inventory that needs to be liquidated and difficulty allocating inventory effectively. It also wreaks havoc in fulfillment and distribution centers. 

This has a knock on impact on how demand teams work. So much time is spent simply organizing the mass of data created from the spike that it’s near impossible for the teams to then have time to analyze it to make quick, data-driven decisions in response to demand change. 

Spreadsheets can’t do it all

Typically, demand planning teams spend a lot of time deep in spreadsheets trying to amend their forecasts, often based on gut instinct. While some attention is given to planned activity, most forecasting is based on a review of historical sales and often at an aggregated level, meaning for an entire category or sub-category of products rather than by individual SKU.

For businesses like Coty, with multiple brands and many products, it’s impossible to produce accurate forecasts for every product all the time. ‘Best sellers’ and ‘slow movers’ take most of the focus, so there’s little time for the products in between, ultimately impacting the bottom line. In her experience, Sally sees spiky demand impact longer-term strategy, too. 

The data exists, it’s all about how you leverage it 

Data savvy businesses, like Coty, are employing AI. Instead of viewing data in arrears, they’re using applications to deliver more complex “what if” scenarios that support decision making. Even in the most volatile situations, forecasts can be optimized, so what was once unpredictable and unmanageable, now brings these businesses competitive advantages.

Peak provides Coty’s DTC brands with an AI-driven demand forecast at a daily, weekly and monthly level that feeds their demand and supply planning teams. The teams access the forecast on the Peak platform using a dashboard that allows them to ‘slice and dice’ the forecast to dig into the data. 

Comparing Peak’s forecast to Coty’s legacy forecast, Coty has seen a 52% improvement in forecast accuracy. This has resulted in a more efficient fulfillment service, which is critical to meeting customer expectations and increasing the likelihood of repeat purchases. In addition, Peak and Coty are collaborating on using the forecast’s capability to conduct scenario planning for promotions. This should mean blanket discounting gets kicked to the curb and revenue targets are hit.

Sally now finds that the demand planning teams have more time for longer-term thinking. 

It was such a pleasure to share the stage with Sally at eTail. We’re looking forward to continuing the Coty x Peak journey!