How to become a peerless seafood prognosticator

Accurately predicting seafood demand is essential if retailers are to have the optimal amounts of inventory on hand to best service customers while reducing or eliminating out-of-stocks and product waste.

Yet leveraging an effective forecasting system does not come easy. The most productive processes can vary in accordance with the varieties of seafood under consideration, such as fresh or frozen, along with the number and types of species, analysts said.

“Correctly forecasting shopper activity is critical to increasing sales and profits,” said Chuck Anderson, partner and vice president of sales and operations at Certified Quality Foods, a Dallas-based analyzer of seafood quality, and the former vice president of seafood procurement for Quincy, Mass.-based Ahold USA and the former category manager for seafood at San Antonio-based H-E-B.  “It is one of the most important aspects for keeping products fresh, driving purchasing, and maintaining profitability.”

Precise ordering requires tools that update what is in stock and what is on sale, as well as current costs, he said, noting that while some large operators with self-service fresh and frozen seafood rely primarily on vendor-managed inventory systems, those methodologies are not right for all operators.

“Vendor-managed systems usually do not provide insights into the quality on hand or projected incoming quality, which is a big problem for stores with extensive fresh wild-caught products,” Anderson said. “The systems typically work well with limited varieties of mostly farm-raised seafood in extended shelf-life packaging. Keeping accurate daily, weekly, seasonal, and annual historical data is essential.”

Incorrect forecasting can result in the merchandising of inferior quality seafood and high shrink, he said. “Underforecasting demand also leads to lost sales when products are out of stock,” Anderson said. “Selling older fish and having out of stocks impact customer satisfaction and the retailer’s reputation.” 

A major challenge is keeping abreast of changing shopper purchasing patterns as customer demand fluctuates in accordance with the time of day, day of the week, day of the month, and weather, he said.

“As warmer weather hits, demand for grilling products increase and demand for baking products decrease,” he said. “January sees an increase in fresh fish sales as customers seek low-calorie, healthier seafood options.”

The holidays also drive seafood purchasing, with Lent and Christmas Eve generating greater fish sales in many communities, Anderson said, adding that family gathering holidays create demand for ready-to-cook and ready-to-eat selections, such as shrimp, party trays, dips, and spreads. “As seasons change, product displays, quality, and prices are constantly changing,” he said.

It is vital that forecasting systems focus on the specific activity at each retail location as stores typically differ by shopper demographics, sales patterns, and trends, Anderson said.

Operators also need to understand how promotions for a specific fresh fish can impact demand for other selections, he said.

“A hot sale on salmon fillets can drive incremental sales of salmon, but it can also decimate sales of tilapia, other salmon varieties, and other fillets,” Anderson said. “Tracking all cannibalizations of related fresh fish and reducing those quantities accurately is almost impossible.”

In addition, effective forecasting requires operators to predict activity during seafood events, which can include promotions and in-store demonstrations, he said. “Tracking historical sales and shrink data for sale and non-sale products around seafood events is critical for future event success,” Anderson said.

The best results will come after the seafood manager undergoes intense forecasting training and garners experience, he said. Managers also must have access to detailed ordering guides that provide cost and promotional status, along with historical data for sales, shrink, holiday impacts, promotions, weather, and quality, Anderson said.

“Predicting shopper demand is only part of the equation,” he said. “A destination full-service seafood operation will have wide varieties of wild-caught, short shelf-life products. Knowing the quality of this stock and estimating the quality of fish on order is critical for effective inventory management.” 

A distribution center, supplier, or buyer can often provide quality information, Anderson said. “This can be time-consuming work, but it is constructive,” he said. “For instance, when ocean perch fillet sizes are running large, and the quality is very fresh, a store might sell through a ten-pound box in a few hours, but when the fillets are small and not as fresh, it may take three days to sell five pounds.”

Retailers will further benefit by adopting an everyday low-price strategy for most fresh fish items, Anderson said. “These are the highest shrink category,” he said. “If quality and prices are consistent, the corporate buyer and store-level seafood managers get into a rhythm of how much to order and sell through each day.”