Define and describe a trend analysis. Give an example of the ways in which a department store like Macy's or Dillard's might use a trend analysis.

Question

What will be an ideal response?

Answer 1

A trend analysis is a hypothetical extension of a past series of events into the future. The basic assumption is that the picture of the present can be projected into the future. This is not a bad assumption, if you have enough historical data, but it is always subject to surprises. And if your data are unreliable, they will produce erroneous trend projections. An example of trend analysis is a time-series forecast, which predicts the future based on patterns of historical data. Time-series forecasts are used to predict long-term trends, cyclic patterns (as in the up-and-down nature of the business cycle), and seasonal variations (as in Christmas sales versus summer sales).

Department stores like Macy's and Dillard's will look for seasonal trends—for example, they will certainly sell more swimsuits in July than they do in December. They will sell more men's clothes around Father's Day, and they will sell more women's clothes around Mother's Day. They will carefully examine which types of products are being purchased by people of different age groups; for example, they may see 20-somethings buying the latest electronic gadgets while 60-somethings purchase baby clothes for their newly born grandchildren. Examining sales data and trends will help the stores' buyers choose the best selection of merchandise for each store at any given time of year and will also help the stores' marketers customize their marketing outreach to different demographics.