Predicting Daily Store Sales

We have observed beer sales on a daily basis for a major retailer for one of their outlets for the last 2 years. Our objective is to model/forecast beer sales for a particular SKU for a particular store and to make projections for the next 140 days although in practice a much shorter and much more accurate horizon would be used (e.g. 5 days).

Here is some background information about Beer Sales:

1. USA Today reports that 43% of the annual beer sales occur around six holidays and the Super Bowl.
2. The more you charge for beer the lower the sales and vice versa.
3. The hotter it is the more is sold and vice versa.
4. People buy beer at different rates for each day of the week.
5. Holidays, prices and weather relocate demand.
6. People buy beer at different rates based on the week of the year.

The USA Today breakdown of Holiday Sales vs. the Holiday effect for the SKU at the one

Outlet that we studied

Holiday % of the Year % of the 7 Holidays % of the 7 Holidays

July 4^th	7.5%	17.4%	12.7%
Memorial Day	6.8%	15.8%	8.7%
Labor Day	6.6%	15.3%	11.1%
Christmas Day	6.0%	13.9%	42.0%
Thanksgiving Day	5.6%	13.0%	9.7%
Easter	5.3%	12.3%	0%
Super Bowl	5.2%	12.1%	15.9%

Total 43%

Here is a word on the importance of modeling in order to forecast……

Bacon, writing in Novum Organum about 400 years ago said: "Errors of Nature, Sports and Monsters correct the understanding in regard to ordinary things, and reveal general forms. For whoever knows the ways of Nature will more easily notice her deviations; and, on the other hand, whoever knows her deviations will more accurately describe her ways." [ II 29]

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