Retail Labor Forecasting: Understanding Demand Drivers

July 18, 2023

by Malysa O’Connor

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Effective retail labor forecasting is a critical aspect of any successful retail operation. It involves leveraging sales data, economic factors, and market trends to predict customer demand and align staffing needs accordingly.

When done right, it allows for more accurate labor planning, ultimately enhancing both the bottom line and employee experience in your retail stores.

In this blog post, we will delve deeper into each of the demand drivers that influence retail labor forecasting. We’ll explore how promotional activities and marketing campaigns can impact customer traffic patterns and how competitor analysis can provide valuable insights for your own strategy.

We will also discuss the role of external factors such as weather or local events on consumer behavior. Lastly, we’ll touch upon the importance of considering different sales channels in an increasingly omnichannel retail industry.
In summary, we’ll cover demand drivers such as:

  • Historical Sales Data
  • Economic Factors
  • Market Trends and Consumer Behavior
  • Promotional Activities and Marketing Campaigns
  • Competitors
  • External Factors
  • Sales Channels and Omnichannel Integration

Plus, we’ll answer FAQs in relation to retail labor forecasting such as:

  • How is forecasting done in the retail industry?
  • What is the retail forecast for 2023?
  • What will retail look like in 2025?
  • What are the projections for retail growth?

Historical Sales Data

Retailers have long relied on analyzing historical sales data to understand patterns and trends. This crucial step in demand forecasting involves examining past performance, allowing businesses to identify seasonal variations, cyclical trends, and year-over-year growth.

For instance, a retailer might notice that sales of certain products spike during specific holidays or seasons. By recognizing these patterns through historical data analysis, they can better prepare for future demand by scheduling more shifts at that time and stocking up on popular items ahead of time.

The Role of Technology in Analyzing Historical Sales Data

In today’s digital age, technology is indispensable in analyzing sales data. Intelligently automated solutions like Legion’s retail workforce management software provide retailers with sophisticated tools for interpreting complex datasets. These modern WFM tools utilize artificial intelligence to quickly and accurately comb through large quantities of data. Advanced machine learning continuously improves and adapts the data to changing conditions.

Data-Driven Decision-Making: A Key Benefit

Analyzing historical statistics not only aids in predicting future demand but also supports strategic decision-making processes within the organization. For example, it can inform decisions about product assortment planning or store layout design based on what has proven successful.

Beyond Just Numbers: The Importance Of Contextual Understanding

Digging into past sales data is more than just crunching numbers; it’s also about understanding context. Retailers must consider various factors, such as market conditions at the time or any promotional activities that may have influenced past performance when using this method for retail labor forecasting.

Economic Factors

When it comes to retail demand forecasting, economic conditions play a pivotal role. These macroeconomic factors include elements such as GDP growth, employment rates, and consumer confidence. Understanding these aspects is crucial for retailers in accurately anticipate shifts in demand, d due to economic reasons that may require adjustments to labor forecasts.

GDP Growth

Gross Domestic Product (GDP) measures the overall economic activity within a country. When GDP growth is robust, consumers tend to spend more freely on essential and discretionary items. This increase in spending can lead to higher traffic, retail sales volumes and a greater need for staffing.

Employment Rates

Employment rates directly influence disposable income levels among consumers. Higher employment rates typically translate into increased consumer spending power positively impacting retail demand. Data from the Bureau of Labor Statistics shows a correlation between an increase in as consumer’s disposable income and an increase in jobs across the retail sector.

Consumer Confidence

Consumer confidence reflects how optimistic individuals are about their financial future—this sentiment significantly affects their willingness to make purchases. The Conference Board’s Consumer Confidence Index provides valuable insights into consumer attitudes toward current and future economic conditions.

In periods of economic expansion where all three factors are strong, we often see an uptick in consumer spending and retail traffic. However, during downturns or recessions, when these indicators weaken, consumers may cut back on discretionary purchases, impacting overall retail demand patterns.

Market Trends and Consumer Behavior

In today’s fast-paced retail landscape, keeping an eye on market trends and consumer behavior is essential for accurate demand forecasting. Changes in these areas can significantly impact demand patterns, making it crucial to stay informed.

Understanding Changing Consumer Preferences

Consumer preferences are constantly evolving. What was trending in the past may not be as sought-after now. The ongoing automated analysis of data can provide critical insights into shifting patterns of demand. Using AI-powered analytics tools as part of a WFM platform can help ensure retailers aren’t caught off guard and are able to quickly adjust their product offerings.

Evolving Demographics and Lifestyle Shifts

Demographic changes, such as aging populations or increasing urbanization, can greatly influence retail demand. Similarly, lifestyle shifts like increased health consciousness or sustainability concerns also play a significant role. These factors should be incorporated into any robust demand forecasting model.

Emerging Market Segments

New market segments often emerge due to technological advancements or societal changes. For instance, the rise of online shopping has created a whole new segment within retail. Keeping tabs on these emerging segments allows retailers to identify new demand drivers before competitors.

The Role of Social Media Monitoring & Industry Reports

Social media platforms provide real-time insights into consumer opinions and trends while industry reports offer more comprehensive overviews of market developments. Use social media monitoring tools and subscribe to relevant industry publications to stay ahead of the curve when trying to understand shifting consumer behaviors.

Promotional Activities and Marketing Campaigns

In the cutthroat world of retail, promotional activities and marketing campaigns are essential for driving demand. Understanding how past promotions have impacted your business can significantly enhance future forecasting efforts.

For instance, if a previous Black Friday sale resulted in a 20% increase in revenue, you might anticipate similar results this year, assuming other factors remain constant.

Knowing this would allow you to adjust staffing levels accordingly, but it can take time to produce these insights. Modern workforce management software produces insights like this intelligently, without effort on your part.

Analyzing Past Promotions

Look at the data from previous promotional activities—which ones drove significant demand increases? What were the characteristics of these successful promotions?

Evaluating Marketing Campaign Effectiveness

Not all promotional efforts are alike; some may be more productive in garnering attention and leading to higher sales than others. Evaluating campaign effectiveness helps inform your forecast by quantifying the expected boost from upcoming campaigns.

Considering Seasonal Events

Certain times of year naturally drive increased customer traffic—think holiday shopping seasons or back-to-school time. Legion’s AI-powered Demand Forecasting solution automatically incorporate these surges into your forecasts.

Retailers who utilize AI to effectively analyze their promotional activities and marketing campaigns will be better equipped to manage labor resources efficiently. When using Legion WFM for retail labor forecasting, meeting customer demand while controlling costs is significantly easier.

External Factors

In the retail industry, external factors are significant demand drivers. These variables often fall outside a retailer’s control but are crucial to consider when forecasting labor needs and inventory management.

Weather Conditions

Weather patterns play a significant role in consumer behavior. For example, retailers selling seasonal products like clothing or outdoor equipment must factor in weather forecasts for accurate demand prediction.

A sudden cold snap could increase sales of winter wear, while an unusually warm winter might lead to lower-than-expected sales. If you’re understaffed during a rush, or overstaffed in a lull, your revenue will suffer. Proper retail labor forecasting avoids these pitfalls.

Natural Disasters

Natural disasters such as hurricanes, floods, or wildfires can drastically affect retail demand negatively and positively, depending on the situation. Retailers should have contingency plans ready for these unexpected events.

Sales Channels and Omnichannel Integration

With the rise of omnichannel retailing, retailers must consider each channels unique demand drivers. Integrating multiple sales channels, such as physical stores, websites, and mobile apps, enables customers to shop seamlessly.

Understanding customer preferences is vital. For example, some shoppers prefer online shopping for convenience, while others value tactile experiences and immediate gratification from in-store purchases. Retailers can use data analytics tools like the ones in our retail workforce management software to gain insights into these preferences and tailor their strategies accordingly.

Tracking metrics like conversion rates and average order values across all platforms is crucial for analyzing the performance of different sales channels. Retailers can identify which channels are performing well and where improvements are needed.

In essence, integrating omnichannel strategies into your retail operations enhances customer satisfaction and improves demand forecasting accuracy by considering multiple factors that drive purchase decisions on different platforms.

While these insights don’t directly impact retail labor forecasting, they are important parts of a strategy that comprehensively addresses demand drivers

Retail Labor Forecasting FAQs

How is forecasting done in the retail industry?

In the retail industry, forecasting is typically conducted using historical sales data, economic factors, market trends, and consumer behavior analysis.

Modern WFM systems like Legion can intelligently automate the demand forecasting process by synthesizing thousands of data points including historical data, ongoing operational data, while taking into account the impact of weather and local events to deliver better insights faster.

The better your retail labor forecasts are, the more you can allocate resources effectively and increase your bottom line.

What is the retail forecast for 2023?

NRF forecasts that retail sales during 2023 will grow between 4% and 6% over 2022 to between $5.13 trillion and $5.23 trillion. Last year’s annual retail sales grew 7% over 2021 and totaled $4.9 trillion. This growth rate is above the pre-pandemic, average annual retail sales growth of 3.6%.

What will retail look like in 2025?

Retail in 2025 will likely be characterized by increased omnichannel integration, personalized customer experiences driven by AI technology, and more sustainable practices, as predicted by Forbes.

What are the projections for retail growth?

Retail growth projections suggest an increase at a compound annual rate of approximately 4-6% globally over the next few years, based on reports from Statista.


Retail labor forecasting requires a comprehensive analysis of demand drivers一from sales data, economic factors, market trends, consumer behavior, promotions, competitors, external factors, and sales channels – to optimize productivity and minimize costs.

Considering all of these factors and making informed decisions about workforce needs is challenging for all retailers. Whether you’re an advanced retail giant or a growing retailer, there’s no better way to do this than using Legion WFM.

Reach out to our team for a demo today, and see how we can deliver results that drive growth, employee engagement, and customer satisfaction.