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International Journal of Pure and Applied Mathematics

Volume 119 No. 12 2018, 1931-1940


ISSN: 1314-3395 (on-line version)
url: http://www.ijpam.eu
Special Issue
ijpam.eu

A Profit Prediction model with Time Series Analysis for


Retail Store

1 2 3
Sridevi. U.K , Shanthi Palaniappan , Nagaveni Palanisamy
1
Department of Computer Applications,
Sri Krishna College of Engineering and Technology, Coimbatore, INDIA

2
Department of Computer Applications,
Sri Krishna College of Engineering and Technology, Coimbatore, INDIA

3
Department of Mathematics
Coimbatore Institute of Technologies, Coimbatore, INDIA

ABSTRACT

Based on the past data the company runs several promotional markdown events
throughout the year. The data analytics helps in business to build better
products and deliver better services. Predictive analytics will make a
personalized recommendation of products. Data analyses have been growing
importance on the stock market in the recent years. The quarterly by-store profit
information is given and the prediction is done for the following year’s profit
based on the different environment variables that affect the profit of the store.
The seasonal variations can be identified by additive and multiplicative models.
The model is developed for profit prediction. The accuracy of the model is
compared with the results of the forecast error calculation. The results show that
the accuracy of the model is better than that of other model.

Keywords: Prediction, Time Series, Data Analytics

1 INTRODUCTION

Data analytics is in the method of analyzing large amounts of data to find


patterns or correlations within the data. Big data analytics examines the large
data set to reveal the hidden patterns, market trends and customer preferences.
The analytical findings can lead to more effective marketing better customer
service and satisfaction, newer products and services, improved operational

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International Journal of Pure and Applied Mathematics Special Issue

efficiency, reduced expenditure, competitive advantages over rival organization,


boosted business gains, etc. Predictive analysis is the process of a collection of
huge amounts of data to find the underlying trends and patterns in the data to
make scientific decisions in the future.

An online retailer announces the “Big Sale Day” for a particular week. The
trend in purchase many vary and the discount for the item may be fixed based on
trend analysis, the purchased may be increased during the discount week and in
the same way after the week, the business may be less. The prediction of market
analysis needs to be done the company to improve their sales.

Business forecasting has consistently been critical organization capability for


both strategic and tactical business planning (Filder,1994). Predictive analytics
use the time series data, which can be taken on a daily, weekly and monthly
basis. In this research the time series model will be discussed for forecasting
profit prediction.

2. PROBLEM OBJECTIVE

To effectively predict profit for a company is a very important research


problem. The marketing team of store wants to build a prediction model for
profitability in a new location. The time series analysis and data mining
techniques can be combined to do predictive analytics from large amounts of
data. Predictive analytics that predict the present focus on analyzing what
happens within a stable and current situation, based on a set of assumptions
that describe reality. Evaluated and predicts the profits of the remaining years.

3. RELATED WORK

Data analyses have been growing importance on the stock market in the
recent years. In order to get the profit of the investing, many investors need to
know how to analyze the important data from the stock market. The interest for
data mining techniques has increased tremendously during the past decades,
and numerous classification techniques have been applied in a wide range of
business applications (Thomas, 2013). Predictive performance evaluation is a
fundamental issue in design, development, and deployment of classification
systems (Huang, 2015). Predictive performance evaluation is considered as a
multidimensional problem. The single scalar summaries such as error rate can
be used to evaluate all the aspects that a complete and reliable evaluation must
be considered (Ronaldo, 2011). Thomas (2013) developed a predictive model
which maximizes the profit and classification accuracy. Data mining techniques
have been applied to stock (market) prediction. The pre-processing step of data
mining filters out unrepresentative variables from a given dataset for effective
prediction (Chih-Fong Tsai,2010). Zhang et al., used the predictive model to
forecast the stock market through twitter.

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International Journal of Pure and Applied Mathematics Special Issue

The method can be used to curve fitting , designing a system around past
data rather than identifying repeatable behavior, represents a potential risk for
company the company should seek parameter that correlate to changes in the
price of a given security. The technical indicator is a series of data points that
are derived by applying formula to the prices data of security includes any
combination of the open, high, low or close over a period of time. The technical
indicator used are SMA (Simple Moving Average), a simple or arithmetic,
moving average that is calculated by adding the closing price of the security for a
number of time periods and then dividing this total by number of time periods.
MACD (Moving Average Convergence Divergence) MACD indicator is one of the
simplest and the most effective available momentum indicator. The MACD turns
two trends following indicator, moving averages into momentum oscillator by
subtracting the longer moving average from the shorter moving average. Chih-
Fong Tsai(2010) used the multiple feature selection in the prediction. The
moving average and weighted moving average method can be used in forecasting
(Hatchett, 2009). Lijun et al., used genetic algorithm is applied to evaluate the
moving average trading rules on future market prediction.

4. METHODOLOGY

In time series analysis a sequence of observation is measured on one or more


variables at different points in time and over different periods of time. The
measurements may be taken every hour, day, week, month, or year, or at any
other regular interval. Profit Predictive analysis of the store is able to find the
trend using moving averages and regression. The trend can be found by using
regression analysis by the least square method. The moving average is an
average of certain period.
The data consists of anonymized information about 45 stores, indicating the type
and size of store

Features of the stores are as follows:


Contains additional data related to the store, a department, and regional activity
for given dates.
Store - store number
Date - week
Temperature - average temperature in the region
Fuel_Price - cost of fuel in the region
CPI - consumer price index
Unemployment - unemployment rate

IsHoliday - whether the week is a special holiday week Sales


Store - the store number
Dept - the department number
Date - the week
Weekly_Sales - sales for the given department in the given store
IsHoliday - whether the week is a special holiday week

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International Journal of Pure and Applied Mathematics Special Issue

Prediction tasks are as follows:


(i)Predict the department-wide sales for each store in the following year
(ii)Model the effects of markdowns on holiday weeks
(iii)Provide recommended actions based on the insights drawn, with
prioritization
placed on largest business impact

Forecasts of future values can be made as follows.

(a) Calculate a trend line using moving averages or regression analysis.

(b) Use the trend line to forecast future trend line values.

(c) Adjust these values by the average seasonal variation applicable to the future
period to determine the forecast for that period.

Moving Average

The simple moving average is mainly used by online traders. The trend
directions can be identified and it produces signals to buy and sell.

Consider the prices for the last 5 days were 25, 28, 26, 24, 25.

The average would be (25+28+26+26+27)/5 = 26.4.

Weighted Moving Average

Forecast is computed as the weighted average of the most recent k-observations


where the most recent observation has the highest weight

Consider the prices for the last 3 days is 5,4,8

Assign weight for the recent day as the weight of 3, the second recent day may
be 2, and the last day of the period receives a weight of 1.

The weights are assigned in decreasing order and the sum of the weight is 1.

The calculation is as follows:

[(3 x 8) + (2 x 4) + (1 x 5)] / 6 = 6.17

Flexible weights reflect relative importance of each previous observation in


forecasting and optimal weights can be found to obtain the best forecasting [7].

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International Journal of Pure and Applied Mathematics Special Issue

5. Results and Discussion

The store profit information is given for last 4 years of the stores and the
prediction needs to be done for the following year’s profit for shops based on
environmental variables of the stores. The quarterly profits needs to be predicted
for the stores. The moving averages could cover the profits of a shop over periods
of four quarters. The forecast error is used to calculate the accuracy of the model
and the sample forecast accuracy is given in the table 1. The various parameters
that influence the profit of the shop is listed in the table 2.

The forecast of future profit can be calculated by calculating a trend line


using moving averages or regression analysis. Forecasting analysis can help to
predict the total profit from quarter to quarter. The values can be adjusted by
the average seasonal variation applicable to the future period, to determine the
forecast for that period. The quarterly by-store profit information is given and
the prediction is done for the following year’s profit based on the different
environment variables that affect the profit of the store.

Weighing the features minimize the error rate improves the prediction
accuracy by at least 10% in the all the test cases. The trends analysis is
identifies both the profit and sales. This representation is useful for complex
nonlinear models with multiple inputs.

Table. 1. Forecast error calculation


Absolute
Absoulte
Forecast

value of
forecast
Series
Week

value
Time

error

error
% of

1 17 - -

2 21 17 4 19.05

3 19 21 2 10.53

4 23 19 4 17.39

5 18 23 5 27.78

6 16 18 2 12.5

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International Journal of Pure and Applied Mathematics Special Issue

7 20 16 4 20

8 18 20 2 11.11

9 22 18 4 18.18

10 20 22 2 10

11 15 20 5 33.33

12 22 15 7 31.82

Table .2. Parameters influencing the prediction model

Quarter Pop Income Temp Tour


1 776 87406 60.29 219873.8
2 760 87172.53 77.11 137845.6
3 776 89355.76 59.97 67551.58
4 793 88138.51 40.72 18827.46
5 789 83347.33 56.62 18183.78
6 790 80319.69 77.03 89026.92
7 789 82238.07 64.62 157613.6
8 774 79566.67 37.37 200865.2
9 781 79174.93 59.39 195671.1
10 752 74539.4 76.75 123328.8
11 754 78769.54 52.78 56299.72
12 764 79912.12 21.11 13619.15

Table .3. Stores Profits


Quarter Store_Id Profits
13 651 51292.54
14 651 55319.29
15 651 60219.8
16 651 41832.67
13 652 19431.76
14 652 11471.36
15 652 18694.58
16 652 11066.32
13 653 6164.78
14 653 11869.61
15 653 7904.79
16 653 -2202.44

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International Journal of Pure and Applied Mathematics Special Issue

13 654 2181.92
14 654 17504.53
15 654 19403.03
16 654 -2877.26
The store’s profit is listed below in Table 3 and the moving average for the
interval 3 is in the Table 4.

Table.4. Moving average


Moving
Quarter Profits average
13 51292.54
14 55319.29
15 60219.8 55610.54
16 41832.67 52457.25
13 19431.76 40494.74
14 11471.36 24245.26
15 18694.58 16532.57
16 11066.32 13744.09
13 6164.78 11975.23
14 11869.61 9700.237
15 7904.79 8646.393
16 -2202.44 5857.32
13 2181.92 2628.09
14 17504.53 5828.003
15 19403.03 13029.83
16 -2877.26 11343.43

Figure.1 Forecasting of Sales prediction

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International Journal of Pure and Applied Mathematics Special Issue

The figure 1 shows the initial visual analysis of the series “Sales” from “data”. The
graph is generated by using RStudio forecasting library. The model is build with 80% of
dataset for training phase and the predicted with 20% of dataset for testing phase. The
prediction accuracy is based on the ratio of the correct predicted values to the testing
data observation.

Figure. 2. Profit and moving average using Time series Plot

The seasonal variations can be identified by additive and multiplicative models.


The figure 2 shows the time series plot for shop profit data. We compared the
results of the model with k-nearest neighbor algorithm. The results show that
the accuracy of the model is better than that of other model. Experimental result
shows the performance of the time series analysis using K-nearest neighbor
algorithm and statistical performance which are of 79% and 78.98% accuracy
respectively. This has implications for business in that sellers can utilize the
proposed system to effectively predict the profit. By predicting the profit of the
company can optimize the growth of the company. Based on the prediction the
manager can develop plans for the products and infrastructure development.

5. Conclusion
The predictive model has implications for business in that sellers can utilize the
proposed system to effectively predict the profit. By predicting the profit of the
company can optimize the growth of the company. Based on the prediction the
manager can develop plans for the products and infrastructure development.

6.Reference

[1] Chih-Fong Tsai., Yu-Chieh Hsiao, “Combining multiple feature selection


methods for stock prediction: Union, intersection, and multi-intersection
approaches”, Decision support systems, 50,2010

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International Journal of Pure and Applied Mathematics Special Issue

[2]Filder.R.,Hastings.R, “The organization and Improvement of the market


Forecasting”, Journal of operation Research society.45, 1994

[3] Hatchett, R. B., B. W.Brorsen., and K. B. Anderson, “ Optimal Length of


Moving Average to Forecast Futures Basis”, Proceedings of the NCCC-134
Conference on Applied Commodity Price Analysis, Forecasting, and Market
Risk Management, 2009

[4] Huang, W.,Qing Zhang., Wei Xu., Xun Liang, “A Novel Trigger Model for
Sales Prediction with Data Mining Techniques”. Data Science Journal, 14,
2015

[5] Lijun Wang., Haizhong An., Xiaohua Xia., Xiaojia Liu., Xiaoqi Sun., and
Xuan Huang, “ Generating Moving Average Trading Rules on the Oil
Futures Market with Genetic Algorithms”, Mathematical Problems in
Engineering, 2014

[6] Ronaldo C. Prati ., Gustavo E. A., Batista.P. , Maria Carolina Monard, “A


Survey on Graphical Methods for Classification Predictive Performance
Evaluation”,
IEEE Transactions on Knowledge and Data Engineering. 23, 2011

[7] Thomas Verbraken., Wouter Verbeke., Bart Baesens, “ A Novel Profit


Maximizing Metric for Measuring Classification Performance of Customer
Churn Prediction Models” IEEE Transactions on Knowledge and Data
Engineering. 25, 2013

[8] Zhang,X., Fuehres,H., and Gloor,P.AC, “Predicting stock market indicator


through twitter”, Proceeding social and behavioral sciences. 26, 2011

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