As e-commerce continues its impressive growth trajectory, with global B2C sales projected to grow at a 14.4% compound annual growth rate by 2027, it’s tempting for many online retailers to expect that same rate of expansion for their own businesses. However, while the overall industry is booming, not all e-commerce businesses will see the same results. Sales projections can miss the mark for a variety of reasons, and when they do, it can have significant consequences on financial planning and growth strategies.
In this article, we’ll explore the most common reasons why sales projections go wrong and how to improve them. We’ll also examine how leveraging the 4 Ps of Marketing—Product, Price, Place, and Promotion—can enhance the accuracy of your sales forecasting.
Common Pitfalls in Forming Sales Projections
One of the biggest mistakes e-commerce businesses make in forming projections is miscalculating the costs of marketing and advertising. Many projections assume the same customer acquisition cost as previous periods or a constant return on ad spend. However, as competition increases advertising costs often rise. As a result, more funds are required to achieve the same results. Failing to account for this change can cause businesses to underestimate their marketing expenses.
Additionally, online retailers may also overlook other costs that impact sales projections such as rising tariffs, shipping fees, currency exchange rates (for international businesses) and unexpected operational expenses.
Lastly, many businesses fail to properly analyze historical data or not account for seasonality of demand. A sales spike during a limited period, such as back-to-school shopping or holiday sales, might not be sustainable throughout the year. Without factoring in these natural cycles, businesses may set expectations that are too high.
Establish A Framework for Better Sales Forecasting
To make sales projections more accurate, e-commerce businesses can benefit from refining each element of the marketing mix. Here’s how the 4 Ps of Marketing – Product, Price, Place, and Promotion – play a role in improving sales forecasting:
Product
Most ecommerce sellers are excited about the viability of their product leading to aggressive sales projections. When projections miss the mark they can be left wondering what went wrong.
When forming projections consider where your product is in its lifecycle: introduction, growth, maturity, or decline. New products have an unpredictable demand while established products will have stable sales patterns. Adjusting your sales projections to take this into account will prevent underperformance.
Price
Pricing plays a crucial role in sales success. Gather current data about competitor pricing and regularly compare it to your pricing. Are your competitors running seasonal specials or has a new competitor entered the market at a lower price in order to gain market share? Ensure you are keeping close tabs on the industry and remain nimble in response to changes.
Also consider Sweetwater Logistics’ “$15 Rule”. Products sold online must have an order value of at least $15 to be sustainable. Low-cost items may not generate enough margin to cover shipping and operational costs. Consider bundling products together or offering free shipping after reaching a minimum amount in the cart to boost average order value.
Place
“Place” refers to the locations your items are sold online and the distribution of your product. To ensure accurate sales projections, track your performance on each channel to determine which ones yield the highest sales. You may find if certain channels have faster shipping or better delivery capabilities they may perform better affecting overall sales volume and projections. Adjust your predictions to reflect the variations you uncover. For international businesses, be sure to account for variations in demand based on the regions of the country where your product is sold. Some products may perform better in specific areas and ignoring these differences can lead to inaccurate projections.
Promotion
Your sales cycle is likely significantly impacted by varied performance on different promotional channels. Businesses can see swings in demand as a result of promotions. 74% of online shoppers said discounts were a major factor in purchase decisions in 2023. By evaluating the performance of promotions run on each channel including social media, email marketing and paid search, businesses can determine which strategies are most likely to drive sales and adjust projections to reflect these findings.
Create An Informed Sales Projection
Combining insights from examining product performance, pricing strategies, distribution channels and promotional tactics will help you create more precise sales projections. Accurate forecasting is essential for managing your business’s budget, inventory and marketing strategies. By refining each element of your marketing mix you’ll be able to form a clearer picture of your expected sales and profits.
Fortunately, you don’t have to do all of this on your own. Partnering with an experienced logistics provider like Sweetwater Logistics can help you avoid common forecasting pitfalls. We go beyond simply shipping your product to the consumer. We leverage their industry experience to advise you on customized sales and marketing strategies that will help you grow your business. Reach out for assistance in forming data-driven sales projections for your online business.
