How to forecast sales volume?

forecasting sales volume in new ecommerce shop

[thetmz]

Hi,

I am preparing a plan and strategy on starting a new ecommerce (maybe not only one) project. How do you guys forecast initial sales volumes? I do have one example (i know all the parameters, sales, volumes etc), which is too successful to take it as an example.

How would you suggest to do the initial forecast of sales for budget planning?

The e-commerce project is going to be dedicated to EU market (later maybe to US). It will sell handmade things from glass that have a brand name and sell pretty good in real shop.

Thanks in advance

[krolik]

It would be very difficult to estimate future sales for new site. It is dependent on many many factors, like website ranking, popularity of product, competition, prices, advertising etc, etc. You will learn as you go.
Try to keep as little inventory as possible. Don't "freeze" too much money. We started out 6 months ago with 1 piece of every widget type we are selling. If we run out of something and in the meantime customer ordered we just emailed him informing that product was backordered and it will be shipped by some date. Usually customer would have to wait 1 week longer. We haven't had any complaints or order cancellation for that reason. Some products are selling really well and now we keep higher quantities stocked but some we still haven't sold since opening and they wait on the shelf.
I hope it helps somehow and good luck!

[thetmz]

thanks for the quick reply!
well, how long have you waited till the first order came on stage?
I will use your advice on putting 1-2 pieces of every inventory. Thanks.

Also, what is the wise solution for the initial marketing budget (like google adwords etc).

[Morgenhund]

> the initial forecast of sales for budget planning?

Zero. Until you have your first five sales.

> well, how long have you waited till the first order came on stage?

Up to several weeks should be normal. It really depends on your traffic sources, and initially most likely will be split between SE traffic and AdWords.

If you site is newly opened, it takes month-two for SEs to come and index your site (providing you have inbound links or have notified SEs). If one of 300 visitors converts (not the worst ratio, I've had worse), you need to collect 300 visitors till your first order comes. Check your daily traffic and wait :-)

AdWords have its own conversion ratio (say, 5%) -- then you need 20 visitors for an order to come in. Check if AdWords cost for these 20 visitors will be covered with your single order profit.

Budgets with AdWords can be pretty moderate. Check how expensive are keywords in your niche. Then calculate how many visitors you need, and correspondingly budget.

Have I missed something?

[edited by: Morgenhund at 5:13 pm (utc) on Dec. 12, 2007]

[thetmz]

I used adwords for the other site I got.

"Budgets with AdWords can be pretty moderate. Check how expensive are keywords in your niche. Then calculate how many visitors you need, and correspondingly budget."

How to check how expensive keywords in a niche? Is there any tool?

Thanks

[krolik]

Morgenhund is absolutely right about orders volume.
You have to build traffic. Our conversion is ~ 1% (except for December when it goes up due to Christmas).
We waited around 3 weeks for first order to arrive, then next month we had I think 4 orders, then following month 6 orders and so on. The most important is that it is growing.
Our main source of traffic is AdWords and now we are focusing on organic traffic, but it takes lots of time and also money (if you don't do it by yourself).
About the budget for marketing you have to figure it out by yourself. It is very dependent on your market and cost of your keywords. Start with some $$ amount you are comfortable with and see what traffic it brings to your site, where you ad is positioned with this money (1 page or 10th page) and go from there. Try Google and Overture and see which one converts better. We run for a while both campaigns but in our case Overture didn't work (very low conversion) and we switched to google entirely.
You have to test everything by yourself and learn as you go. Be very patient, it takes time and constant improvement to pick up.

[thetmz]

krolik: what is your niche, what are u selling? if it's not a secret.

[Morgenhund]

If you have used AdWords, you should have noticed that there is a "minimum bid" for each keyword.

This "minimum bid" depends on many factors -- I suppose, mainly on the fact how big is competition for this keyword, and what other advertizers are going to pay for it.

Also, specific keywords are cheaper than general ones.

Once you are trying to establish your AdWords campaign, you will see how expensive are keywords in your niche.

In other words keyword "luxury cars" should be much more expensive than "socks second hand"

[krolik]

"krolik: what is your niche, what are u selling? if it's not a secret."

We are in jewelry (not mainstream though like diamonds etc, it is rather a niche)