Before Vendor Programs, You Need a Forecast

When I bought my store, I had no idea how to plan inventory. I learned the hard way. That's why I'm writing this.

Inventory planning is complex. As you're reading, if you start to feel in over your head—that's ok. It's something I help retailers work through all the time. There's a link at the bottom. Together we can build tools that make this make sense.

Read on.

Preseason is here. Your vendors are calling. They want to know: How much are you pre-booking? Most retailers answer by doing this: Take last year's numbers. Add a growth percentage. Done. But when you do that, you're not really forecasting. You're taking an optimistic guess and building it on what you ordered last year, not on what you actually sold. And it's why so many retailers end the season with inventory they can't move, margins that don't work, and a vendor relationship that feels one-sided. Before you open a single vendor program guide, before you commit to an allocation, before you talk to a rep, you need a real forecast. Built from your own data. Honest about what actually happened in your business.

The Problem: Last Year Plus Growth Doesn't Work

Here's what's happening: Your rep is basing your prebook on what you bought last year, not on what was actually sold in your store. They're working from your order history, not your sales data. That's a fundamental mismatch. Think about it this way. If you over-ordered last year and your rep expects you to grow 10%, the problem gets exponentially worse. You're adding 10% to an already inflated baseline. The risk of having too much inventory at the wrong time increases dramatically. But there's a bigger issue underneath: You're likely prebooking into a market that's been shrinking for a decade. People for Bikes tracks this. Unit sales of bicycles in the U.S. have declined steadily for 10 years. Revenue stayed flat only because prices went up. Consumers are buying fewer bikes, but paying more per bike. That's called premiumization. It means the average price per bike has increased even though the total number of bikes sold has decreased. So you end up compounding two problems at once: adding 10% to last year's inflated order, while prebooking based on unit volume that no longer reflects your market. You're chasing a baseline that keeps moving. That's why so many retailers end the season with inventory they can't move, margins that don't work, and a vendor relationship that feels one-sided. Ever wonder why vendors have so much excess inventory that they're desperately trying to get rid of? Same problems, different channel.

What a Real Forecast Looks Like

A real forecast starts with your data. Not industry trends. Not vendor guidance. Your actual sales. Pull the last 12 months of bike sales, cost of goods sold (COGS) and units by category for each month. Use this to spot trends of change over the 12 months. Use units to identify averages. This matters because revenue can hide the fact that you're selling fewer bikes at higher prices. For extra credit do this for the last 3 years to spot trends over time. Then ask these questions: What were my inventory turns the last 12 months? Look at each category. What turned the most? What turned the least? If anything turned less than one time and had low volume, you need to consider dropping that category or merging it with another category. You're tying up cash on product that doesn't move. To calculate inventory turns, use this formula: Inventory Turnover = Cost of Goods Sold (COGS) / Average Inventory at Cost Example: You sold $60,000 worth of hardtails at cost (COGS) last year and your average inventory at cost was $20,000. $60,000 / $20,000 = 3.0 turns If you don't have access to this data—your COGS, your average inventory at cost by category—that's a red flag. You need this information organized in your POS to create a profitable plan for the future. What are the trends and what are customers asking for? People for Bikes identified e-bikes as a growing category. What else is growing in your market? What has the potential to grow? Is there a new MTB park being planned? Is there a new youth program? That's the data that matters for your forecast. Can I improve it and what can I realistically improve it to? Going from 1.0x to 3.0x is a completely different pace and it will be hard to make that jump. Think about baby steps. Maybe aim to improve half a turn a year. That's ambitious but achievable. Now build forward. Category by category. By season. Based on what actually happened not on what you hoped would happen. That's your forecast. That's your real prebook number. For extra credit do this for the previous 3 years to see even bigger trends over time.

The Formula: How Much Inventory Do You Actually Need

Here's what most retailers get wrong: They think they need the same amount of inventory sitting on their shelf all year long. This works if your sales are similar each month. It doesn't work for most of the country. If you keep the same stock in January as you do in July, you'll be overstocked in winter and severely understocked in summer. That's backward. The concept is simple: Your inventory needs to expand and contract with your sales. In peak months, you carry more. In slow months, you carry less. Your stock level should track your demand, not sit flat. Here's how this works. Inventory turns tell you how many times you sell through your entire stock in a year. If you turn 4 times annually, that translates to roughly 3 months of supply you should have on hand at any given time. In a slow month, that's less stock. In a peak month, that's more stock. The math adjusts automatically based on what you're about to sell. The key: You must look forward. Most retailers stock based on what they just sold. If March was slow, they stock for a slow month. Then April hits and they run out. You need to know what you're about to sell in the upcoming months and stock for that—not for what happened last month. This is where the work gets real. The concept makes sense. But executing it takes effort. You need your data organized. You need to calculate month by month what you actually need. You need to adjust as reality shifts. You need to know your seasonal percentages, your COGS, your current inventory on hand. Then you need to figure out how much to order each month to hit your targets. It's not impossible. But it's not automatic either. Most retailers don't have this process built into how they work.

Two Caveats You Need to Remember

Bike inventory doesn't arrive on your floor ready to sell. You need to assemble it. You need to prep it. Plan for 30 to 60 days of lead time. If you need $50,000 of inventory assembled and available for sale in May, you need that shipped to you in March. Factor that into your prebook calendar. Also: Separate special orders from your prebook calculation. Special orders may count toward your total dollars spent with a vendor, but they typically don't count toward your prebook commitment. Your prebook is inventory you're stocking on your sales floor. Special orders are customer-specific builds. They're different animals. Your forecast addresses floor stock, not special orders.

Why This Matters for Vendor Decisions

Here's where this connects to vendor programs: Once you know what you actually sold, what turns quickly, and what your realistic capacity is, you can evaluate and negotiate a vendor program with confidence. A vendor offering $100k pre-book with free freight makes no sense if your real forecast says $30k is what your business can sustain. You'll either over-order and sit on inventory, or you'll under-fulfill the program and damage the relationship. A vendor asking you to commit before you've built your forecast is asking you to decide without your most important information. If you've ever wondered whether improving your inventory turns makes a financial difference, I put together a tool that shows exactly what faster turns means for your cash flow. Link: Cash Flow Tool. Once you have that clarity, you're ready to evaluate vendor programs. A few weeks ago I wrote about how to evaluate programs. How to find vendors who support your forecast, not theirs. How to build a strategy that actually works. Link: There Might be a Better Way.

Why Data Matters: Without a Map, You're Guessing

Think about it this way: Trying to figure out your prebook without solid data is like trying to navigate from Pukwana, South Dakota to Waxahachie, Texas without a map. You might end up there eventually. But you'll take a lot of wrong turns. You'll waste gas. You'll wonder why the journey took so long. Here's the good news: If you're running a modern POS system, it can already process all of this. But you need to make sure you enter it. Garbage in equals garbage out. If you're not entering the important information—COGS, units, inventory on hand, retail price—then you might be wasting your money on a POS and finding a lot of headaches along the way. Remember trying to get from Pukwana to Waxahatchie without a map? Use your POS. Use your data. It's already there. If you want to see what your data actually looks like and what it's telling you, that's something I help retailers figure out all the time. I can walk you through your numbers, help you identify the patterns, and build a forecast that actually fits your business. This work matters because it gives you control. You're not guessing. You're not hoping your rep's estimates are right. You're building a plan based on what your business actually does.

I put together a tool. It doesn’t have all the answers but it might get you started thinking about your inventory in a healthier way. You can find that tool over here: LINK. Reach out if you want to talk through your numbers. If you need help building your forecast, understanding your inventory turns, or figuring out what this means for your vendor strategy, let me know. That's what I do. Schedule a 30 minute appointment and we’ll figure this out: LINK.