Knowing what will be bought tomorrow: How OTTO uses artificial intelligence to forecast sales

Since 2019, OTTO has been using a specially developed solution to forecast future article sales with the help of AI. This AI forecasting is a central component of strategic planning and the operational management of the retail business. The forecasts provide the company with the basis for all end-to-end management for retailers and logistics.

AI-supported sales forecasts: how profitable is an item?

AI forecasting offers a holistic “view into the future” for all process participants - from assortment planning to delivery to the end customer. This means OTTO knows which items will arrive in the warehouse when and what sales can be expected at what time.

The AI-supported sales forecasts aim to assess the profitability of a product. They help to decide whether and in what quantity an item should be included in the range and how it should be distributed - for example, whether products should be distributed as stock items via the Group's own logistics or sent directly from the manufacturer to the customer. Based on the answers, the responsible departments can make well-founded decisions for purchasing, warehousing, marketing and many other areas. Sales can also use these findings to plan sales campaigns in order to come up with the right offer in times of high demand.

Optimized warehouse logistics thanks to artificial intelligence

OTTO uses AI to determine procurement quantities in line with demand in order to reduce excess stock, which the company would otherwise have to sell, sometimes at a high loss. OTTO can also optimize its warehouse logistics in this way, as only what is actually needed is always in stock. This is crucial, not least from a sustainability perspective, as it helps suppliers to avoid overproduction. At the same time, the sales forecasts ensure that items are in stock when demand picks up. The AI even calculates potential sales losses that could result from unavailability. With success: 35% of the product ranges are already being automatically reordered.

In order to enable rapid delivery to customers, AI Forecasting creates regionalized forecasts. It tries to predict which products will be ordered where and in what quantities. In this way, OTTO efficiently optimizes the supply chain by being able to deliver the relevant items to a distribution depot near the expected order volume in advance. This not only shortens delivery times, but also reduces CO2 emissions as unnecessary transportation routes are avoided.

No fortune-telling: when data replaces the crystal ball

These forecasts are anything but fortune-telling. Instead, they anticipate the most likely future scenario based on predefined or current framework conditions. These include, for example, the price, the current business climate index or sales budgets. Where a machine used to calculate results based on a formula fed in by a human, today the AI determines the formula from the data and in turn correlates the data. At OTTO, this is done on the basis of around 30 billion individual forecasts per month. Every day, the possible course of around 2.5 million article numbers is analyzed for the next 450 days. The data used for this includes historical sales figures, customer behavior, seasonal trends, public holidays and planned marketing activities. The weather can also be included as a metric in order to anticipate increased sales of fans during upcoming hot spells, for example.

AI forecasting: the prognosis is positive

The use of AI is paying off: OTTO has been able to increase the profitability of its product ranges, optimize warehouse logistics and increase customer satisfaction through shorter delivery times thanks to the precise predictions. So it's no wonder that OTTO is constantly working on further improving its sales forecasts. In logistics alone, the company aims to save tens of millions in the current financial year through forecast-based, automated management. So you don't need to be a fortune teller to realize this: AI-supported sales forecasts are the future of economical and responsible e-commerce.