Top-down forecasting uses sales projections against categories and narrows these projections down to SKU level to predict future sales of individual products/variants. For example, if a variant contributes 2% to the total sales for a category, the forecast will continue to show the variant contributing 2%. This follows fluctuations in the category performance for seasonal products.
Top-down forecasting is in contrast with bottom-up forecasting where projections are generated for each SKU and are then summed up to product, category, vendor or total level,
When to use top-down forecasting
Use top-down forecasting when you have plenty of sales data at category level, i.e. more than 12 months of history; your forecasts will then account for spikes in sales.
Top-down forecasting also works well for products lacking a long sales history, for example when you add a new collection to an existing category and expect demand to follow a similar trend to older products in that category.
Enabling top-down forecasting
Go to Account > Settings > Forecast to enable the setting globally.
Viewing and editing the forecast
Go to Edit Forecast (on the left side menu) to view by product, category, vendor or total. Select 'Top-down by....'
If you anticipate higher demand due to promotions or new sales efforts, then you can enter an override. The increase (or decrease) will scale proportionally to all associated variants. For example, if the original forecast is 500 units, then the override is 750 units, all associated, replenishable variants will see a 150% increase to the forecasted demand for that month.