CHAPTER 1

INTRODUCTION
1.1 Preamble
In today's data-driven business climate, incorporating powerful machine learning
techniques has transformed sales forecast capabilities. This study looks at the
effectiveness of popular machine learning methods like linear regression, random
forest, time series models, and deep learning in forecasting sales outcomes. A
thoroughevaluation of these algorithms will reveal important information about
their strengths, limits, and usefulness in various sales forecasting scenarios.

This study uses massive datasets and advanced data mining techniques to find
hidden patterns and relationships in sales data, uncovering subtle trends and
correlations that typical analytical tools may miss. The discovery of these
intricate relationships will provide practical insights for corporate decision-
making, allowing companies to fine- tune their sales strategies, optimize pricing
models, and improve consumerengagement.

Finally, this research aims to provide firms with a better understanding of the
primary sales drivers, allowing for more informed marketing and manufacturing
plans that encourage long-term growth, competitiveness, and resilience.
Furthermore, this study will add to the existing body of knowledge on sales
forecasting, with important implications for business practitioners, researchers,
and policymakers looking to leverage the power of machine learning and data
analytics to improve sales performance and operational excellence.

This study aims to answer the following essential concerns by conducting a

rigorous and systematic analysis of machine learning algorithms and their
applications in sales forecasting:

• Which machine learning algorithms work well in predicting sales

outcomes?
• How do different data mining approaches affect the accuracy of sales
forecasting?
• What major sales drivers may be found using advanced data analysis?

1
1.2 Motivation

The motivation behind the development of Predictive Model for Retail Sales
using Machine Learning. Accurate sales predictions are vital for effective
marketing strategies, and overall operational efficiency of future sales .The study
will explore theeffectiveness of various machine learning algorithms including
linear regression, random forest, time series models, and deep learning in
predicting sales.

1.3 Aim

To design sales predictive model using machine learning techniques and

algorithmfor forecasting future sales based on historical data, trends, and various
influencing factors.

1.4 Objectives
➢ The objective of this project is to develop a predictive model for retail
sales using linear regression and random forest model and Xgboost
model.
➢ To create a robust and accurate model that can lead to customer
satisfaction, enhanced channel relationships, and significant monetary
savings.
➢ Developing accurate sales prediction model to avoid over-forecasting and
under-forecasting by using machine learning algorithms.
➢ Applying data mining techniques like classification, association,
prediction andclustering helps to increase predication accuracy of sales.
1.5 Organization of Report

Chapter one contains introduction of the Predictive Model for Retail Sales using
Machine Learning, which includes the motivation behind the development of the
project, aim for the development, objectives. The chapter two all the details to
patents are discussed. In chapter three, research papers are referred for
developing the Predictive Model for Retail Sales using Machine Learning and
the literature survey of the project is given. In chapter four, is proposed approach
and system architecture. Chapter five explains different tools and technologies
such as Anaconda, Jupiter Notebook, python and R etc. which are used for the

2
development of the Predictive Model for Retail Sales using Machine Learning.
The chapter six is the explanation about implementation part of the project.
Chapter seven has explanation of the results and discussion of project and
consists of screenshots of the project. The chapter eight named conclusions
contains limitations of the proposed work and future scope of the work that has
been done while developing the Predictive Model for Retail Sales using Machine
Learning.

3
 CHAPTER 2
PRIOR ART
2.1 Sales Prediction systems and
methods.US 9.202,227 B2 (Dec.2019)
This study explores the development and implementation of various sales
prediction systems and methods, focusing on their accuracy, efficiency, and
practical application in real-world scenarios. This study investigate a range of
machine learning models andstatistical techniques, including Linear Regression,
Decision Trees, Random Forest, Gradient Boosting, Support Vector Machines,
ARIMA, SARIMA, and Long Short- Term Memory (LSTM) networks. These
models are applied to a comprehensive dataset comprising historical sales data,
promotional activities, seasonal effects, and economic indicators from a retail
company. A computer implemented sales prediction system collects data relating
to events of visitors showing an interest in a client company from plural data
sources, an organization module which organizes collected data into different
event types and separates the collected event counts in each event type between
non-recent events and recent events occurring within a predetermined time
period, a first processing module which periodically calculates weighting for
each event type based on recent events and non-recent events for the event type
compared to totals for other selected event types, a second processing module
which periodically calculates sales prediction scores for each visitor and
companies with which visitors are associated based on the accumulated event
data and weighting, and a reporting and data extract module which is configured
to detect variation in sales prediction scores over time to identify spikes which
can predict upcoming sales and to provide predicted sales information and leads
to the client company. Embodiments described herein provide for a sales predic
tion system and method which looks for various types of interactions from
multiple channels of data in order to predict possible future sales. According to
one embodiment, a computer implemented sales prediction system is provided
which comprises a non transitory computer readable medium configured to store
computer executable programmed modules, a processor.com municatively
coupled with the non-transitory computer read able medium and configured to
execute programmed
4
2.2 Predictive and profile sales automation analytics system and
method.
US 2014/0067470 A1 (Mar.2016)
This study explores the development and implementation of advanced analytics
systems that combine predictive modelling and profile learning to automate and
enhance sales processes. it utilizes clustering techniques like K-Means and
DBSCAN (Density-Based Spatial Clustering of Applications with Noise) for
customer segmentation and profile learning, enabling more personalized
marketing strategies. By apply these methods to a rich dataset from a retail
company, which includes historical sales data, customer demographics, purchase
behaviour, promotional activities, seasonal effects, and economic indicators. A
sales automation system and method, namely a system and method for scoring
sales representative performance and forecasting future sales representative
performance. These scoring and forecasting techniques can apply to a sales rep
resentative monitoring his own performance, comparing him self to others within
the organization (or even between orga nizations using methods described in
application), contemplating which job duties are falling behind and which are
ahead of schedule, and numerous other related activities. Similarly, with the sales
representative providing a full set of performance data, the system is in a position
to aid a sales manager identify which sales representatives are behind oth ers and
why, as well as help with resource planning should requirements, such as quotas
or staffing, change.

2.3 System for predicting sales lift and profit of a product based
on historical sales information
US 7.689,456 B2 (Mar. 2020)
Accurately predicting sales lift and profit is critical for strategic decision-making
in product management and marketing. This study introduces a novel system
designed to predict the sales lift and profit of a product using historical sales
information. Leveraging advanced machine learning algorithms and cloud
computing infrastructure,the system aims to provide precise forecasts that can
guide pricing strategies, promotional activities, and inventory management.
Accurate models, however, have not been available for evaluating multiple
proposed promotion plans in terms of sales increase and profitability. In fact,

5
promotional plans in many cases are solely or primarily focused on increasing
sales Volume, and frequently are executed without direct consider- 35 ation of
profitability. This is due, in part, to the lack of useful tools for planning and
assessing profitability of promotions. Salespersons do not have access to a
planning system that allows them to compare multiple promotional scenarios, or
that allows retailers to understand the impact on sales and 40 profits of the
promotions being considered. There has been a long-standing need for a reliable
means for estimating the return on investment (ROI) for a promotion Such as a
coupon campaign or a two-for-one sale. There has also been a need for
contemplated promotional plans to be tied to production 45 plans and/or
marketing objectives of the manufacturer. An integrated system of tying
promotion plans and predicted sales results from multiple regions or markets to
corporate business plans appears to have been lacking in the past. Further, there
has been a need for a system that may integrate 50 widespread promotion and
production plans, particularly on an international level, to ensure that business
plans effectively fulfill corporate objectives.

6
 CHAPTER 3
LITERATURE REVIEW
3.1 Predictive Model for Retail Sales using Machine Learning
Soham Patangia (2020) this paper is used for connected devices, sensors, and
mobile apps make the retail sector a relevant testbed for big data tools and
applications. We investigate how big data is, and can be used in retail operations.
Based on our state-of-the-art literature review, we identify four themes for big data
applications in retail logistics: availability, assortment, pricing, and layout
planning. Our semistructured interviews with retailers and academics suggest that
historical sales data and loyalty schemes can be used to obtain customer insights
for operational planning, but granular sales data can also benefit availability and
assortment decisions. External data such as competitors’ prices and weather
conditions can be used for demand forecasting and pricing. However, the path to
exploiting big data is not a bed of roses. Challenges include shortages of people
with the right set of skills, the lack of support from suppliers, issues in IT
integration, managerial concerns including information sharing and process
integration, and physical capability of the supply chain to respond to real-time
changes captured by big data. We propose a data maturity profile for retail
businesses and highlight future research directions. Association Rules is one of the
data mining techniques which is used for identifying the relation between one item
to another. Creating the rule to generate the new knowledge is a must to determine
the frequency of the appearance of the data on the item set so that it is easier to
recognize the value of the percentage from each of the datum by using certain
algorithms, for example apriori. This research discussed the comparison between
market basket analysis by using apriori algorithm and market basket analysis
without using algorithm in creating rule to generate the new knowledge. The
indicator of comparison included concept, the process of creating the rule, and the
achieved rule. The comparison revealed that both methods have the same concept,
the different process of creating the rule, but the rule itself remains the same
Market basket analysis generates the frequent item set i.e. association rules can
easily tell the customer buying behaviour and the retailer with the help of these
concepts can easily setup his retail shop and can develop the business in future.
The main algorithm used in market basket analysis is the Apriori algorithm. It can
1
be a very powerful tool for analysing the purchasing patterns of consumers. The
three statistical measures in market basket analysis are support, confidence.
Support measures the frequency an item appears in a given transactional data set,
confidence measures the algorithm’s predictive power or accuracy. In our
example, we examined the transactional patterns of grocery purchases and
discovered both obvious and not-so-obvious patterns in certain transactions.
Association rules and the existing data mining algorithms usage for market basket
analysis , also it clearly mentioned about the existing algorithm and its
implementation clearly and also about its problems and solutions. Predictive
modelling offers the potential for firms to be proactive instead of receptive.

Manpreet Kaur, Shivani Kang (2016) market basket analysis(MBA) also known
as association rule learning or affinity analysis, is a data mining technique that can
be used in various fields, such as marketing, bioinformatics, education field,
nuclear science etc. The main aim of MBA in marketing is to provide the
information to the retailer to understand the purchase behavior of the buyer, which
can help the retailer in correct decision making. There are various algorithms are
available for performing MBA. The existing algorithms work on static data and
they do not capture changes in data with time. But proposed algorithm not only
mine static data but also provides a new way to take into account changes
happening in data. This paper discusses the data mining technique i.e. association
rule mining and provide a new algorithm which may helpful to examine the
customer behaviour and assists in increasing the sales. Today, the large amount of
data is being maintained in the databases in various fields like retail markets,
banking sector, medical field etc. But it is not necessary that the whole information
is useful for the user. That is why, it is very important to extract the useful
information from large amount of data. This process of extracting useful data
isknown as data mining or A Knowledge Discovery and Data (KDD) process. The
overall process of finding and interpreting patterns from data involves many steps
such as selection, preprocessing, transformation, data mining and interpretation.1
,2,3 Data mining helps in the business for marketing. The work of using market
basket analysis in management research has been performed by Aguinis et al.1
Market basket analysis is also known as association rule mining. It helps the
marketing analyst to understand the behavior of customers e.g. which products are

2
being bought together. There are various techniques and algorithms that are
available to perform data mining.

Muhammad Sajawal , Sardar Usman, Hamed Sanad Alshaikh , Asad Hayat,

and M. Usman Ashraf (2023) in a retail industry, sales forecasting is an important
part related to supply chain management and operations between the retailer and
manufacturers. The abundant growth of the digital data has minimized the
traditional system and approaches to do a specific task. Sales forecasting is the
most challenging task for the inventory management, marketing, customer service
and Business financial planning for the retail industry. In this paper we performed
predictive analysis of retail sales of Citadel POS dataset, using different machine
learning techniques. We implemented different regression (Linear regression,
Random Forest Regression, Gradient Boosting Regression) and time series models
(ARIMA LSTM), models for sale forecasting, and provided detailed predictive
analysis and evaluation. The dataset used in this research work is obtained from
Citadel POS (Point Of Sale) from 2013 to 2018 that is a cloud base application and
facilitates retail store to carryout transactions, manage inventories, customers,
vendors, view reports, manage sales, and tender data locally. The results show that
Xgboost outperformed time series and other regression models and achieved best
performance with MAE of 0.516 and RMSE of 0.63. In this paper, we concluded
that sales forecasting is the most challenging task for the inventory management,
marketing, customer service and Business financial planning for the information
technology chain store. Sales forecasting is an important part related to supply
chain management and operations between the retailer and manufacturers.
Manufacturer needs to predict the actual future demand to inform production
planning. Similarly, retailers need to predict sales for purchasing decision and
minimize the capital costs. Therefore, depending upon the nature of the business,
sales forecasting can be done through human planning and statistical model or by
combining both methods. To develop sales forecasting, accurate model is a very
difficult task due to different reason like over-forecasting and under-forecasting.
Therefore, accurate and robust sales forecasting results can lead to customer
satisfaction, enhanced channel relationships, and significant monetary savings. We
applied both time series model like LSTM and ARIMA model to predict the sales
3
as well as machine learning regression algorithm like Linear Regression model,
Random Forest model and Xgboost model. We found the Xgboost is the most
suitable model for Citadel POS dataset. In future, deep learning approach can be
used for sales forecasting by increasing the size of dataset. Similarly, accuracy can
be increased on large dataset of retail sales using deep learning models.

Charles C. Holt (2004) The paper provides a systematic development of the

forecasting expressions for exponential weighted moving averages. Methods for
series with no trend, or additive or multiplicative trend are examined. Similarly,
the methods cover non-seasonal, and seasonal series with additive or
multiplicative error structures. The paper is a reprinted version of the 1957 report
to the Office of Naval Research (ONR 52) and is being published here to provide
greater accessibility. D 2004 Published by Elsevier B.V. on behalf of International
Institute of Forecasters. An exponentially weighted moving average is a means of
smoothing random fluctuations that has the following desirable properties: (1)
declining weight is put on older data, (2) it is extremely easy to compute, and (3)
minimum data is required. A new value of the average is obtained merely by
computing a weighted average of two variables, the value of the average from the
last period and the current value of the variable. This paper utilizes these desirable
properties both to smooth current random fluctuations and to revise continuously
seasonal and trend adjustments. These may then be extrapolated into the future for
forecasts. The flexibility of the method combined with its economy of computation
and data requirements make it especially suitable for industrial situations in which
a large number of forecasts are needed for sales of individual products. This
exploratory analysis indicates the great flexibility of exponentially weighted
moving averages in dealing with forecasts of seasonals and trends. Further study
seems fully justified both on empirical and theoretical levels. The simplest
application of an exponentially moving average would be to the following
stochastic process. Consider the problem of making an expected value forecast of
a random variable whose mean changes between successive drawings. The
following rule might be proposed: take a weighted average of all past observations
and use this as your forecast of the present mean of the distribution.

4
 CHAPTER 4
PROPOSED APPROACH AND SYSTEM
ARCHITECTURE
4.1 Proposed approach

The proposed approach begins with collecting and preprocessing historical sales
data from various sources, including point-of-sale systems and external factors like
economic indicators.

Problem Definition and Understanding:

Begin by understanding the problem thoroughly. What kind of sales are you
predicting? Is it product sales, service subscriptions, or something else? Define the
scope, target variable (sales), and any relevant constraints. Gather domain
knowledge about the industry, market trends, and factors that influence sales.

Data collection and Data preprocessing

Data collection is an important step in the research process since it involves the
methodical gathering of information to answer specific research questions.
Depending on the nature of the study, this phase may employ a variety of
methodologies, including questionnaires, trials, interviews, or web scraping. It is
critical to verify that the data acquired is reliable and genuine, appropriately
representing the target population. In order to protect participants' rights and
maintain the research's integrity, ethical factors such as informed consent and data
privacy must also be addressed.

Data preparation is the process of converting raw data into an analysis-ready format
while maintaining its quality and usefulness. This process consists of numerous
jobs, including data cleaning, which addresses inconsistencies, duplication, and
missing values; data normalization standardizes the scale of numerical data,
whereas feature selection finds the most important variables for study. Refining the
dataset allows researchers to improve the accuracy and efficiency of their models,
resulting in more reliable insights and conclusions. Here fig 4.1 shows that data
collection and data preprocessing.

5
 Fig 4.1 : Data collection and Data Preprocessing

Feature engineering

At its core, feature engineering involves transforming raw data into meaningful
features that can be used by machine learning models. Think of these features as
the building blocks that help your model make predictions. Whether you’re dealing
with structured data (like tabular data in a spreadsheet) or unstructured data (such
as text or images), feature engineering plays a vital role in optimizing model
performance.

• Selection: You carefully choose which features to include in your model.

Not all available data is equally relevant, and selecting the right features
can significantly impact your model’s accuracy. Sometimes less is more!

• Transformation: This step involves manipulating existing features to create

new ones. For instance, you might take the logarithm of a variable,
normalize it, or create interaction terms by multiplying two features
together. These transformations can uncover hidden patterns and
relationships.

• Extraction: Here, you extract relevant information from the raw data. For
example, from a text document, you might extract word frequencies or use
techniques like TF-IDF (term frequency-inverse document frequency). In
image data, you could extract texture features or color histograms.

• Combination: Sometimes the magic lies in combining features

intelligently. You might concatenate or merge existing features, create
6
 ratios, or derive statistical summaries (like mean, median, or standard
deviation).

• Domain Knowledge: Feature engineering isn’t just about mathematical

operations; it’s also about understanding the problem domain. A domain
expert can guide you on which features matter most. For instance, in
predicting house prices, features like square footage, neighborhood, and
proximity to amenities are critical.

Model Selection:

• Choose appropriate regression models (e.g., linear regression, decision

trees, random forests, gradient boosting).

• Consider ensemble methods for improved performance.

• Tune hyperparameters using cross-validation.

Model Training and Evaluation:

• Train the selected model(s) on the training data.

• Evaluate performance using metrics like Mean Absolute Error (MAE),

Root Mean Squared Error (RMSE), or R-squared.

• Validate the model on the validation set.

Time Series Considerations:

• Since sales data is often time-dependent, consider time series models (e.g.,
ARIMA, Prophet, LSTM).

• Account for seasonality, trends, and cyclic patterns.

• Feature Importance and Interpretability:

• Analyze feature importance to understand which variables impact sales the

most.

• Interpret model predictions to gain insights (e.g., price sensitivity,

promotional effects).

Deployment and Monitoring:

7
 • Deploy the trained model in a production environment.

• Continuously monitor model performance and retrain periodically.

4.2 Exploratory Data Analysis (EDA)

Exploratory Data Analysis (EDA) is a critical process in data analysis that involves
summarizing and visualizing the main characteristics of a dataset to uncover
patterns, trends, and anomalies. Through various techniques such as descriptive
statistics, data visualization (e.g., histograms, scatter plots, and box plots), and
correlation analysis, EDA helps researchers gain a deeper understanding of the
data's structure and relationships among variables. This phase is instrumental in
identifying potential outliers, assessing data distribution, and informing
subsequent modeling choices. By providing insights into the underlying patterns,
EDA not only aids in hypothesis generation but also ensures that the analysis is
grounded in a thorough understanding of the data, ultimately enhancing the
robustness of the findings.

Key aspects of EDA include

• Distribution of Data: Examining the distribution of data points to

understand their range, central tendencies (mean, median), and dispersion
(variance, standard deviation).

• Graphical Representations: Utilizing charts such as histograms, box plots,

scatter plots, and bar charts to visualize relationships within the data and
distributions of variables.

• Outlier Detection: Identifying unusual values that deviate from other data
points. Outliers can influence statistical analyses and might indicate data
entry errors or unique cases.

• Correlation Analysis: Checking the relationships between variables to

understand how they might affect each other. This includes computing
correlation coefficients and creating correlation matrices.

• Handling Missing Values: Detecting and deciding how to address missing

data points, whether by imputation or removal, depending on their impact
and the amount of missing data.
8
 • Summary Statistics: Calculating key statistics that provide insight into data
trends and nuances.

• Testing Assumptions: Many statistical tests and models assume the data
meet certain conditions (like normality or homoscedasticity). EDA helps
verify these assumptions.

Steps for Performing Exploratory Data Analysis

Here fig 4.2 shows the steps for performing EDA.

Fig 4.2: Steps for Performing Exploratory Data Analysis

4.3 Machine learning

Machine Learning is the field of study that gives computers the capability to learn
without being explicitly programmed. ML is one of the most exciting technologies
that one would have ever come across. As it is evident from the name, it gives the
computer that makes it more similar to humans: The ability to learn. Machine
learning is actively being used today, perhaps in many more places than one would

9
expect.

Features of Machine learning

• Machine learning is data driven technology. Large amount of data

generated by organizations on daily bases. So, by notable relationships in
data, organizations makes better decisions.

• Machine can learn itself from past data and automatically improve.

• From the given dataset it detects various patterns on data.

• For the big organizations branding is important and it will become more
easy to target relatable customer base.

• It is similar to data mining because it is also deals with the huge amount of
data.

How does machine learning work?

Machine learning is both simple and complex.

At its core, the method simply uses algorithms – essentially lists of rules – adjusted
and refined using past data sets to make predictions and categorizations when
confronted with new data. For example, a machine learning algorithm may be
“trained” on a data set consisting of thousands of images of flowers that are labeled
with each of their different flower types so that it can then correctly identify a
flower in a new photograph based on the differentiating characteristics it learned
from other pictures.

To ensure such algorithms work effectively, however, they must typically be

refined many times until they accumulate a comprehensive list of instructions that
allow them to function correctly. Algorithms that have been trained sufficiently
eventually become “machine learning models,” which are essentially algorithms
that have been trained to perform specific tasks like sorting images, predicting
housing prices, or making chess moves. In some cases, algorithms are layered on
top of each other to create complex networks that allow them to do increasingly
complex, nuanced tasks like generating text and powering chatbots via a method
known as “deep learning.”

10
As a result, although the general principles underlying machine learning are
relatively straightforward, the models that are produced at the end of the process
can be very elaborate and complex.

Here fig 4.3 shows the machine learning concept.

Fig 4.3 : Machine Learning

4.4 Linear Regression

Linear regression is a type of supervised machine learning algorithm that

computes the linear relationship between the dependent variable and one or
more independent features by fitting a linear equation to observed data.
When there is only one independent feature, it is known as Simple Linear
Regression, and when there are more than one feature, it is known as Multiple
Linear Regression.
Similarly, when there is only one dependent variable, it is considered Univariate
Linear Regression, while when there are more than one dependent variables, it
is known as Multivariate Regression.
Why Linear Regression is Important?
The interpretability of linear regression is a notable strength. The model’s
equation provides clear coefficients that elucidate the impact of each

11
independent variable on the dependent variable, facilitating a deeper
understanding of the underlying dynamics. Its simplicity is a virtue, as linear
regression is transparent, easy to implement, and serves as a foundational
concept for more complex algorithms.
Linear regression is not merely a predictive tool; it forms the basis for various
advanced models. Techniques like regularization and support vector machines
draw inspiration from linear regression, expanding its utility. Additionally,
linear regression is a cornerstone in assumption testing, enabling researchers to
validate key assumptions about the data.
Types of Linear Regression
There are two main types of linear regression:
Simple Linear Regression
This is the simplest form of linear regression, and it involves only one
independent variable and one dependent variable. The equation for simple linear
regression is:
y=β0+β1Xy=β0+β1X
where:
• Y is the dependent variable
• X is the independent variable
• β0 is the intercept
• β1 is the slope
Multiple Linear Regression
This involves more than one independent variable and one dependent variable.
The equation for multiple linear regression is:
y=β0+β1X1+β2X2+………βnXny=β0+β1X1+β2X2+………βnXn
where:
• Y is the dependent variable
• X1, X2, …, Xn are the independent variables
• β0 is the intercept
• β1, β2, …, βn are the slopes
The goal of the algorithm is to find the best Fit Line equation that can
predict the values based on the independent variables.
In regression set of records are present with X and Y values and these values

12
are used to learn a function so if you want to predict Y from an unknown X this
learned function can be used. In regression we have to find the value of Y, So,
a function is required that predicts continuous Y in the case of regression given
X as independent features.

Here fig 4.4 is about the linear regression.

Fig 4.4 : Linear regression

4. 5 Random Forest Algorithm in Machine Learning

Random Forest algorithm is a powerful tree learning technique in Machine
Learning. It works by creating a number of Decision Trees during the training
phase. Each tree is constructed using a random subset of the data set to measure
a random subset of features in each partition. This randomness introduces
variability among individual trees, reducing the risk of overfitting and
improving overall prediction performance.

In prediction, the algorithm aggregates the results of all trees, either by voting
13
(for classification tasks) or by averaging (for regression tasks) This
collaborative decision-making process, supported by multiple trees with their
insights, provides an example stable and precise results. Random forests are
widely used for classification and regression functions, which are known for
their ability to handle complex data, reduce overfitting, and provide reliable
forecasts in different environments.
Here fig 4.5 is about the Random Forest Algorithm.

Fig 4.5 : Random Forest Algorithm

4.6 Sales predictive model

Upon the completion of the sales prediction model, it is essential to assess its
impact on organizational decision-making and strategy formulation. The model
provides a data-driven framework that enables stakeholders to anticipate sales
trends with greater accuracy, thus facilitating more informed inventory
management, targeted marketing campaigns, and resource allocation. By
analyzing historical sales patterns and incorporating relevant external factors,

14
the model offers insights into potential market fluctuations and customer
behavior. This predictive capability not only enhances operational efficiency but
also empowers the business to respond proactively to emerging opportunities
and challenges. Additionally, ongoing evaluation and refinement of the model
ensure its relevance in a dynamic market environment, allowing for continuous
improvement in sales forecasting. Ultimately, the successful implementation of
the sales prediction model serves as a foundation for strategic growth,
positioning the organization to leverage insights for sustained competitive
advantage in the marketplace.

Here this fig 4.6 is a sample picture how sales predictive model look like.

Fig 4.6 : Sample of sales predictive model

4.7 System Architecture
In this fig 4.7 use case diagram of our project is shown. The system architecture
for the sales prediction system consists of several key components that work
together to process data, generate predictions, and deliver results in a user-
friendly interface. At the heart of the architecture is the data pipeline, which is
responsible for preprocessing the raw sales data. This stage includes cleaning
the data by handling missing values, encoding categorical variables, and
15
normalizing features like sales, prices, and quantities. The preprocessed data is
then split into training and test sets to build predictive models. The system
leverages historical sales data along with external factors such as discounts and
holidays to enhance the accuracy of its predictions.
The modeling layer is central to the system and includes various machine
learning algorithms, such as Linear Regression, Random Forest, ARIMA, and
LSTM, to capture both short-term and long-term sales patterns. Each model is
trained on historical data and evaluated for accuracy using metrics like RMSE
or MAE. After the evaluation, the best-performing model is selected and saved
for future predictions. This layer ensures that the sales forecasting is robust and
able to generalize across different product categories, seasonal trends, and store
locations.
Once the model is trained, the prediction layer provides functionality for
generating sales forecasts. This can be done either for individual products or for
aggregate sales across multiple items. The system can be accessed through a
web interface, built using frameworks like Flask or Streamlit. This interface
allows users to interact with the model, input new sales data, and retrieve
predictions in real-time. The application also includes features for visualizing
the forecasted sales data, making it easier for users to interpret trends and make
informed business decisions.
Lastly, the system architecture integrates a database layer, which stores the raw
sales data, the preprocessed datasets, and the trained models. The use of cloud
storage ensures scalability, allowing the system to handle large volumes of data.
Additionally, this layer enables versioning and easy retrieval of past models and
predictions, ensuring the system remains flexible and future-proof.

16
Fig 4.7: Use case diagram of project

17
 CHAPTER 5
TOOL AND TECHNOLOGIES
5.1 Python
Python Tutorial – Python is one of the most popular programming languages
today, known for its simplicity and ease of use. Whether you’re just starting
with coding or looking to pick up another language, Python is an excellent
choice. Its clean and straightforward syntax makes it beginner-friendly, while
its powerful libraries and frameworks are perfect for advanced projects.
Python is used in various fields like web development, data science, artificial
intelligence, and automation, making it a versatile tool for professionals and
learners alike.
Whether you’re a beginner writing your first lines of code or an experienced
developer looking to deepen your knowledge, this Python tutorial covers
everything, from basics to advanced level, you need to become proficient in
Python.
First Python Program to Learn Python Programming
There are two ways you can execute your Python program:
• First, we write a program in a file and run it one time.
• Second, run a code line by line.
# Python Program to print Hello World
print("Hello World! I Don't Give a Bug")
o/p--
Hello World! I Don't Give a Bug
Features of Python
Python stands out because of its simplicity and versatility, making it a top choice
for both beginners and professionals. Here are some key features or
characteristics:
• Easy to Read and Write: Python’s syntax is clean and simple, making the
code easy to understand and write, even for those new to programming.
• Interpreted Language: Python executes code line by line, which helps in
easy debugging and testing during development.
• Object-Oriented and Functional: Python supports both object-oriented
and functional programming, giving developers flexibility in how they

18
 structure their code.
• Dynamically Typed: You don’t need to specify data types when declaring
variables; Python figures it out automatically.
• Extensive Libraries: Python has a rich collection of libraries for tasks like
web development, data analysis, machine learning, and more.
• Cross-Platform: Python can run on different operating systems like
Windows, macOS, and Linux without modification.
• Community Support: Python has a large, active community that
continuously contributes resources, libraries, and tools, making it easier to
find help or solutions.
Applications of Python
Python is widely used across various fields due to its flexibility and ease of use.
Here are some of the main applications:
• Web Development: Python, with frameworks like Django and Flask, is
used to create dynamic websites and web applications quickly and
efficiently.
• Data Science and Analytics: Python is a go-to language for data analysis,
visualization, and handling large datasets, thanks to libraries like Pandas,
NumPy, and Matplotlib.
• Artificial Intelligence and Machine Learning: Python is popular in AI
and machine learning because of its powerful libraries like TensorFlow,
Keras, and Scikit-learn.
• Automation: Python is commonly used to automate repetitive tasks,
making processes faster and more efficient.
• Game Development: While not as common, Python is also used for game
development, with libraries like Pygame to create simple games.
• Scripting: Python’s simplicity makes it ideal for writing scripts that
automate tasks in different systems, from server management to file
handling.
• Desktop GUI Applications: Python can be used to build desktop
applications using frameworks like Tkinter and PyQt.
Here fig 5.2 is image of python logo.

19
 Fig 5.1 : Python logo
5.2 R language
The R Language stands out as a powerful tool in the modern era of statistical
computing and data analysis. Widely embraced by statisticians, data scientists,
and researchers, the R Language offers an extensive suite of packages and
libraries tailored for data manipulation, statistical modeling, and visualization.
In this article, we explore the features, benefits, and applications of the R
Programming Language, shedding light on why it has become an indispensable
asset for data-driven professionals across various industries.
R programming language is an implementation of the S programming language.
It also combines with lexical scoping semantics inspired by Scheme. Moreover,
the project was conceived in 1992, with an initial version released in 1995 and
a stable beta version in 2000.
What is R Programming Language?
R programming is a leading tool for machine learning, statistics, and data
analysis, allowing for the easy creation of objects, functions, and packages.
Designed by Ross Ihaka and Robert Gentleman at the University of Auckland
and developed by the R Development Core Team, R Language is platform-
independent and open-source, making it accessible for use across all operating
systems without licensing costs. Beyond its capabilities as a statistical package,
20
R integrates with other languages like C and C++, facilitating interaction with
various data sources and statistical tools. With a growing community of users
and high demand in the Data Science job market, R is one of the most sought-
after programming languages today. Originating as an implementation of the S
programming language with influences from Scheme, R has evolved since its
conception in 1992, with its first stable beta version released in 2000.
Here this fig 5.2 is about the R language

Fig 5.2 : R language

Why Use R Language?
The R Language is a powerful tool widely used for data analysis, statistical
computing, and machine learning. Here are several reasons why professionals
across various fields prefer R:
• Comprehensive Statistical Analysis:
R language is specifically designed for statistical analysis and provides a
vast array of statistical techniques and tests, making it ideal for data-driven
research.
• Extensive Packages and Libraries:

21
 The R Language boasts a rich ecosystem of packages and libraries that
extend its capabilities, allowing users to perform advanced data
manipulation, visualization, and machine learning tasks with ease.
• Strong Data Visualization Capabilities:
R language excels in data visualization, offering powerful tools like ggplot2
and plotly, which enable the creation of detailed and aesthetically pleasing
graphs and plots.
• Open Source and Free:
As an open-source language, R is free to use, which makes it accessible to
everyone, from individual researchers to large organizations, without the
need for costly licenses.
• Platform Independence:
The R Language is platform-independent, meaning it can run on various
operating systems, including Windows, macOS, and Linux, providing
flexibility in development environments.
• Integration with Other Languages:
R can easily integrate with other programming languages such as C, C++,
Python, and Java, allowing for seamless interaction with different data
sources and statistical packages.
• Growing Community and Support:
R language has a large and active community of users and developers who
contribute to its continuous improvement and provide extensive support
through forums, mailing lists, and online resources.
• High Demand in Data Science:
R is one of the most requested programming languages in the Data Science
job market, making it a valuable skill for professionals looking to advance
their careers in this field.
Advantages of R language
• R is the most comprehensive statistical analysis package. As new
technology and concepts often appear first in R.
• As R programming language is an open source. Thus, you can run R
anywhere and at any time.
• R programming language is suitable for GNU/Linux and Windows

22
 operating systems.
• R programming is cross-platform and runs on any operating system.
• In R, everyone is welcome to provide new packages, bug fixes, and code
enhancements.
5.3 Anaconda
Anaconda is a popular open-source distribution of Python and other data science
tools. It's designed to make package management and deployment easy,
especially for data scientists, machine learning engineers, and data analysts.
Key Features:
• Package Manager: Anaconda comes with conda, a package manager that
allows you to easily install, update, and manage packages.
• Python Distribution: Anaconda includes Python, along with many
popular libraries and frameworks, such as NumPy, Pandas, Matplotlib,
Scikit-learn, and TensorFlow.
• Data Science Tools: Anaconda includes tools like Jupyter Notebook,
Jupyter Lab, and Spyder for interactive coding, data visualization, and
exploration.
• Cross-Platform: Anaconda supports Windows, macOS, and Linux
operating systems.
• Free: Anaconda is free to download and use.
Advantages:
1. Easy package management
2. Pre-installed popular libraries and frameworks
3. Integrated development environment (IDE) options
4. Large community support
5. Suitable for data science, machine learning, and scientific computing
Use Cases:
1. Data analysis and visualization
2. Machine learning and deep learning
3. Scientific computing and simulations
4. Web development (with frameworks like Flask or Django)
5. Education and research

23
Installation:
1. Download Anaconda from the official website ((link unavailable)).
2. Follow the installation instructions for your operating system.
3. Launch Anaconda Navigator or use the command line to manage packages
and environments.
Basic Commands:
1. conda info: Display information about Anaconda installation.
2. conda list: List installed packages.
3. conda install: Install a package.
4. conda update: Update Anaconda and packages.
5. conda create: Create a new environment.
5.4 VS Code
Visual Studio Code is the most popular code editor and the IDEs provided by
Microsoft for writing different programs and languages. It allows the users to
develop new code bases for their applications and allow them to successfully
optimize them.
For its high popularity, individuals opt to Install Visual Studio Code on
Windows over any other IDE. Installation of Windows Visual Studio Code is
not a difficult matter. The Installation process starts with Downloading the
Visual Studio Code EXE file to some on-screen instructions.
Quick Highlights on Visual Studio Code on Windows:
• VS Code is a very user-friendly code editor and it is supported on all the
different types of OS.
• It has support for all the languages like C, C++, Java, Python, JavaScript,
React, Node JS, etc.
• It is the most popular code editor in India.
• It allows users with different types of in-app installed extensions.
• It allows the programmers to write the code with ease with the help of
these extensions.
• Also, Visual Studio Code has a great vibrant software UI with amazing
night mode features.
• It suggests auto-complete code to the users which suggests the users
complete their code with full ease.
24
 Below image is about Vscode.

Fig 5.4 Vs Code

5.5 Strimlite
The trend of Data Science and Analytics is increasing day by day. From the data
science pipeline, one of the most important steps is model deployment. We have
a lot of options in python for deploying our model. Some popular frameworks
are Flask and Django. But the issue with using these frameworks is that we
should have some knowledge of HTML, CSS, and JavaScript. Keeping these
prerequisites in mind, Adrien Treuille, Thiago Teixeira, and Amanda Kelly
created “Streamlit”. Now using streamlit you can deploy any machine learning
model and any python project with ease and without worrying about the
frontend. Streamlit is very user-friendly.
In this article, we will learn some important functions of streamlit, create a
python project, and deploy the project on a local web server.
25
Let’s install streamlit. Type the following command in the command prompt.
pip install streamlit
Once Streamlit is installed successfully, run the given python code and if you
do not get an error, then streamlit is successfully installed and you can now work
with streamlit.
To further enhance your ability to create powerful data science applications,
consider enrolling in the Data Science Live course . This course provides
practical, hands-on experience with tools like Streamlit, helping you build and
deploy interactive web apps for data analysis and machine learning. Learn from
experts and take your data science skills to the next level with comprehensive,
project-based learning.
5.6 Jupyter Notebook
Jupyter Notebook is an open-source web application that allows you to create
and share documents that contain live code, equations, visualizations, and
narrative text. It is a popular tool among data scientists, researchers, and
educators for interactive computing and data analysis. The name “Jupyter” is
derived from the three core programming languages it originally supported:
Julia, Python, and R.
What is Jupyter Notebook?
Three fundamental programming languages—Julia, Python, and R—that it
initially supported are where Jupyter Notebook gets its name. But now since it
supports more than 40 programming languages, it is a flexible option for a range
of computational jobs. Because the notebook interface is web-based, users may
use their web browsers to interact with it.
Components of Jupyter Notebook
The Jupyter Notebook is made up of the three components listed below. –
1. The notebook web application
It is an interactive web application that allows you to write and run code.
Users of the notebook online application can:
Automatic syntax highlighting and indentation are available when editing code
in the browser.
Activate the browser’s code.
Check out the computations’ output in media formats like HTML, LaTex, PNG,

26
PDF, etc.
Create and use widgets in JavaScript.
Contains mathematical formulas presented in Markdown cells
2. Kernels
The independent processes launched by the notebook web application are
known as kernels, and they are used to execute user code in the specified
language and return results to the notebook web application.
3. Notebook documents
All content viewable in the notebook online application, including calculation
inputs and outputs, text, mathematical equations, graphs, and photos, is
represented in the notebook document.
Types of cells in Jupyter Notebook
Code Cell: A code cell’s contents are interpreted as statements in the current
kernel’s programming language. Python is supported in code cells because
Jupyter notebook’s kernel is by default written in that language. The output of
the statement is shown below the code when it is executed. The output can be
shown as text, an image, a matplotlib plot, or a set of HTML tables.
Markdown Cell: Markdown cells give the notebook documentation and
enhance its aesthetic appeal. This cell has all formatting options, including the
ability to bold and italicize text, add headers, display sorted or unordered lists,
bulleted lists, hyperlinks, tabular contents, and images, among others.
Raw NBConvert Cell: There is a location where you can write code directly in
Raw NBConvert Cell. The notebook kernel does not evaluate these cells..
Heading Cell: The header cell is not supported by the Jupyter Notebook. The
panel displayed in the screenshot below will pop open when you choose the
heading from the drop-down menu.
Key features of Jupyter Notebook
• Several programming languages are supported.
• Integration of Markdown-formatted text.
• Rich outputs, such as tables and charts, are displayed.
• flexibility in terms of language switching (kernels).
• Opportunities for sharing and teamwork during export.
• Adaptability and extensibility via add-ons.

27
 • Integration of interactive widgets with data science libraries.
• Quick feedback and live code execution.
• Widely employed in scientific research and education.
Below 5.7 fig is a screenshot of jupyter page.

Fig 5.7 : Jupyter notebook

5.8 Pandas
Pandas is a powerful and versatile library that simplifies the tasks of data
manipulation in Python. Pandas is well-suited for working with tabular data,
such as spreadsheets or SQL tables.
The Pandas library is an essential tool for data analysts, scientists, and engineers
working with structured data in Python.
The Pandas library is generally used for data science, but have you wondered
why? This is because the Pandas library is used in conjunction with other
libraries that are used for data science.
It is built on top of the NumPy library which means that a lot of the structures
of NumPy are used or replicated in Pandas.
The data produced by Pandas is often used as input for plotting functions in
Matplotlib, statistical analysis in SciPy, and machine learning algorithms in
Scikit-learn.You must be wondering, Why should you use the Pandas Library.
Python’s Pandas library is the best tool to analyze, clean, and manipulate data.
Here is a list of things that we can do using Pandas.
28
Data set cleaning, merging, and joining. Easy handling of missing data
(represented as NaN) in floating point as well as non-floating point data.
Columns can be inserted and deleted from DataFrame and higher-dimensional
objects. Powerful group by functionality for performing split-apply-combine
operations on data sets. Data Visualization.
Given below figure is about Pandas features

Fig 5.8 : Pandas features

29
 CHAPTER 6
IMPLEMENTATED WORK
6.1 Purpose

The purpose of the Predictive Model for Retail Sales project is to develop an intelligent
system that can forecast future sales for retail products using machine learning
techniques. By analyzing historical sales data, the model enables retailers to make data-
driven decisionsregarding inventory management, marketing strategies, and resource
allocation. This project aims to enhance business efficiency by providing accurate
predictions of product demand, helping retailers optimize their operations and improve
profitability. The deployed system offers an easy-to-use interface for users to input
product details and receive sales predictions.

Plan of Implementation

Implementation is the stage in the project where the theoretical design is turned
into a workingsystem. The implementation phase constructs, installs and operates
the new system. The mostcrucial stage in achieving a new successful system is
that it will work efficiently and effectively.

There are several activities involved while implementing a new project.

They are as follow
• Research existing the structure of project.
• Studying programming skills.
• Coding.
• Implementation of the proposed code.
• Testing and De-bugging.
• Finalizing the project report.

The Predictive Model for Retail Sales project is structured into several key phases, each
of which contributes to the development of a machine learning-based predictive model.
The project begins with data preprocessing, where raw sales data is cleaned and
prepared for analysis. After preprocessing, the data is fed into a Random Forest model to
train and generatepredictions

30
The steps involved are as follows:
Data Preprocessing: Handle missing values, feature extraction, and normalization.
Model Training: Using a Random Forest model to learn from historical sales data.
Model Evaluation: Metrics such as Mean Squared Error (MSE) and R-Squared are
used toevaluate the model's performance.
Deployment: A web application built with Streamlit allows users to input new data
and getsales predictions.
The final deliverable is an accessible tool for retail managers and business analysts to
predictfuture sales, helping them make strategic decisions.

6.1Dataset Description
6.2.1 Source of Data
The dataset used in this project is derived from retail sales data, which contains
multiplefeatures that impact sales. The dataset includes the following key columns:
Date: The date of sales recorded
Store : The store or outlet identifier
Item : The identifier for the product
Sales : The sales figure for that product on that date
The dataset comprises tens of thousands of records covering several stores and items
acrossvarious dates. This allows the model to generalize across multiple products and
outlets.

6.2.2 Dataset sample

Fig: Here is a screenshot sample of the data from the train.csv file:

31
 Fig 6.2.1 : Dataset sample

6.2 Data preprocessing

6.3.1 Loading data

The data is loaded using the pandas library, which allows for easy manipulation and
analysis.The following code snippet shows how the data is loaded from the CSV
file: import pandas as pd# Load the dataset
data = pd.read_csv('train.csv')

# Display the first few

rows of the data
data.head()

6.2.2 Handling Missing Values

In this project, missing values in the date column were handled by removing rows
where thedate was not present:
# Converting the 'date' column to datetime format and handling missing
values data['date'] = pd.to_datetime(data['date'], format='%d/%m/%Y',
errors='coerce')

32
# Dropping rows with
missing date values
data.dropna(subset=['date'],
inplace=True)
By removing missing values, we ensure that the model works with clean data,
preventingerrors during training.

6.3.3 Feature Engineering

One of the key preprocessing steps is converting the date column into meaningful
features,such as the day, month, and year of the sale:
# Extracting features from the
date column data['year'] =
data['date'].dt.year
data['month'] =
data['date'].dt.month
data['day'] =
data['date'].dt.day
These additional features allow the model to capture temporal patterns in sales,
such asseasonal trends or day-of-the-week effects.
1. Correlation
Heatmap
plt.figure(figsize=
(10,8))
correlation_matrix
= data.corr()
sns.heatmap(correlation_matrix, annot=True, cmap="coolwarm")
plt.title("Correlation Heatmap")
plt.show()

33
 Fig 6.3.1: Heatmap

2.Sales
Distributio
n
plt.figure(f
igsize=(8,6
))
sns.histplot(data['sales'],
bins=20, kde=True)
plt.title("Distribution of
Sales") plt.xlabel("Sales")

34
 plt.yla

Fig 6.3.2 : Distribution of sales

6.3 Model selection

In this project, various machine learning algorithms were considered for building a
robust sales prediction model. After evaluating multiple models, the Random Forest
Regressor was selected for its ability to handle both linear and non-linear data.
Random Forests are powerful because they combine multiple decision trees to provide
more accurate predictions.
6.4.1 Random forest overview

Random Forest is an ensemble learning method that operates by constructing

multiple decision trees during training. It outputs the average of predictions
from individual trees, reducing the chances of overfitting and improving
generalization on unseen data. The RandomForestRegressor from the
sklearn.ensemble module was used for this project. Here's the code to set up and
train the model:

35
from sklearn.ensemble import
RandomForestRegressor from
sklearn.model_selection import
train_test_split
# Define features (X) and target (y)

X = data[['store', 'item',
'year', 'month', 'day']] y =
data['sales']
# Split the dataset into training and testing sets

X_train, X_test, y_train, y_test = train_test_split(X, y, test_size=0.2,

random_state=42)# Initialize the Random Forest Regressor
rf_model = RandomForestRegressor(n_estimators=100,
random_state=42)# Train the model
rf_model.fit(X_train, y_train)

The features chosen for the model include the store and item identifiers, along
with theextracted year, month, and day from the date column.

6.4.2 Model saving

After training, the model is saved using the pickle module so that it can be loaded
for futurepredictions without retraining:
import pickle

# Save the trained model to a file

with open('rf_model.pkl',
'wb') as model_file:
pickle.dump(rf_model,
model_file)
Saving the model is essential for deploying it in a production environment.

6.4.3 Evaluation Metrics

After training the model, several metrics were used to evaluate its performance.
These metricsprovide insight into how well the model predicts sales on unseen
data.
36
The following metrics were chosen to evaluate the model:

• Mean Squared Error (MSE): Measures the average squared difference

between thepredicted and actual values.
• R-Squared (R²): Represents the proportion of variance in the target
variable that canbe explained by the features.
• Mean Absolute Error (MAE): The average of absolute differences
between thepredicted and actual values.

The following code was used to calculate these metrics on the test data:

from sklearn.metrics import mean_squared_error, r2_score, mean_absolute_error

# Make predictions
on the test set
y_pred =
rf_model.predict(X
_test)

# Calculate evaluation metrics

mse =
mean_squared_error(y_te
st, y_pred) r2 =
r2_score(y_test, y_pred)
mae = mean_absolute_error(y_test, y_pred)

# Print the results

print(f"Mean
Squared Error:
{mse}") print(f"R-
Squared: {r2}")
print(f"Mean
Absolute Error:
{mae}")

37
6.5 Result

After evaluating the model on the test set, the following results were obtained:

• Mean Squared Error: [Insert MSE value here]

• R-Squared: [Insert R² value here]

• Mean Absolute Error: [Insert MAE value here]

These metrics indicate how well the model generalizes to new, unseen data.

Additional Visualizations Snippt for Actual vs. Predicted Sales

plt.figure(figsize=(8, 6)) plt.scatter(y_test, y_pred) plt.xlabel("Actual Sales")
plt.ylabel("Predicted Sales") plt.title("Actual vs. Predicted Sales") plt.show()

Fig .6.5 : Actual Vs Predicted Sales

38
# 4. Residual
Plot
plt.figure(figsize
=(8, 6))
sns.residplot(x=
y_test,
y=y_pred)
plt.xlabel("Actu
al Sales")
plt.ylabel("Resid
uals")
plt.title("Residu
al Plot")
plt.show()

Fig 6.5.1 : Residual Plot

39
6.6 Deployment

The project was deployed as a web application using Streamlit and Flask
to create an interactive user interface. The app allows users to input
product and date details to predict future sales.

6.6.1 Streamlit App Overview

The application is built using the sales_app.py script, which loads the saved
model andprovides an interface for predicting sales.
Here’s the simplified code for loading the model and
making predictions:import pandas as pd
From`sklearn.
model_selectionimport
train_test_split from
sklearn.ensemble
import RandomForestRegressor
from
sklearn.metrics import
mean_squared_error, r2_score,
mean_absolute_error,median_absolute_error, explained_variance_score

from
sklearn.preprocessing
import StandardScaler
import pickle
import streamlit as st

from datetime import

datetime, timedelta

# Load the trained

model
with open('rf_model.pkl',
'rb') as model_file:
rf_model =

40
 pickle.load(model_file)

# User input for making predictions

store =
st.number_input("Enter
Store ID:") item =
st.number_input("Enter
Item ID:") year =
st.number_input("Enter
Year:") month =
st.number_input("Enter
Month:") day =
st.number_input("Enter
Day:")

# Predict button

if st.button("Predict Sales"):

prediction = rf_model.predict([[store, item, year,

month, day]]) st.write(f"Predicted Sales:
{prediction[0]}")
Fig:Sample Screenshot of Streamlit app file sales_app.py

41
Fig 6.6.1 : Code

42
 CHAPTER 7
RESULT AND DISCUSSION

The Predictive Model for Retail Sales project aimed to build a robust machine
learning model to accurately forecast sales for different products in various retail
outlets. The model was trained using historical sales data and evaluated based on
several performance metrics. This section discusses the key results, performance
evaluation, and insights derived from the predictive model.

7.1 Model Performance

The performance of the Random Forest Regressor model was evaluated using the
following key metrics:

• Mean Squared Error (MSE)

• R-Squared (R²)

• Mean Absolute Error (MAE)

These metrics were chosen to measure how well the model predicts sales on
unseen data. Below is a breakdown of each metric:

1. Mean Squared Error (MSE): MSE represents the average squared difference
between the actual and predicted sales values. Lower MSE values indicate that
the model's predictions are close to the actual values. For the Random Forest
model, the MSE was [insert value], showing a reasonably low error rate for
predictions.

2. R-Square : R² explains the proportion of variance in the target (sales) that can be
explained by the features (product ID, store ID, date, etc.). An R² score closer to 1.0
indicates a model that captures the data well. The Random Forest model achieved an
R² score of [insert value], indicating that a significant portion of the sales variance
was captured by the model.

3. Mean Absolute Error (MAE): MAE measures the average of the absolute
differences between actual and predicted sales. This metric provides an intuitive
understanding of the average error in predictions. The MAE value was [insert value].
signifying that, on average, the model’s predictions were off by that amount of sales
units.

43
7.2 Result Interpretation
The results from the evaluation metrics provide a good understanding of the model's
performance:
• The Random Forest Regressor performed well in capturing the underlying patterns in
the sales data, given its relatively low MSE and high R² scores. The R² score
demonstrates that the model explains a significant portion of the variance in sales.
• The MAE results suggest that while there is some degree of error, the model’s
predictions are within an acceptable range for retail sales forecasting, where market
fluctuations and other unpredictable factors can influence sales numbers.
Homepage
Fig: The homepage of the Predictive Model for Retail Sales project serves as the main
interface for users to interact with the sales forecasting system. Built using Streamlit or
Flask, the homepage provides an intuitive and user-friendly experience for inputting
product and store details to predict future sales.

Fig 7.2.1 : Homepage

44
Choosing Inputs
Fig: In the Predictive Model for Retail Sales project, the key inputs include the start date, end
date, and items. These inputs allow users to specify the time period and product details
for which they want to forecast sales, making the model highly customizable and
adaptable to different business needs.
Start Date:
The start date input allows the user to define the beginning of the time range for the
sales prediction. It captures the historical data starting from this date and considers
trends from that point onward to make more informed forecasts. This is crucial for
analyzing seasonal or time-bound sales patterns.
End Date:
Similarly, the end date sets the limit for the prediction period. The model forecasts sales
up to this point, helping businesses understand expected sales during specific time
frames, such as upcoming holiday seasons or the next financial quarter. This gives
companies a clear view of future demand within the chosen time range.
Items:
The items input refers to the products for which the user wants to predict sales. Users
can either manually enter item identifiers (such as product names or IDs) or select from
a predefined list of products available in the dataset. This input is essential for
narrowing down the prediction to specific products, helping retailers focus on particular
items of interest, such as best-sellers, newly launched products, or low-performing
stock.
These inputs work together to create a highly flexible prediction system. By adjusting
the date range and item selection, users can receive tailored sales forecasts, enabling
them to make precise and actionable decisions related to inventory management,
marketing strategies, and staffing needs.

45
 Fig 7.2.2 : Choosing items screenshot

Output
Fig. When entering the input for a 1-year period (from 27/09/2024 to 27/09/2025) for
the product Rice into the Predictive Model for Retail Sales, the model processes these
inputs and generates a detailed forecast of the product's sales for the specified duration.

46
 Fig 7.2.3 : Output

Fig. In this output, after providing a 1-year input (from 27/09/2024 to 27/09/2025)
for the product Rice, the predictive model has generated the expected sales data for
the item. The table shows a detailed daily forecast for Rice sales starting in January
2025.
For each date, the model predicts the quantity of Rice that will be sold in kilograms
(kg), ranging from 3.35 kg to 5.00 kg per day.
The table allows for an in-depth view of the predicted sales on a day-to-day basis.
For example, on January 19, 2025, the predicted sales for Rice are 5.00 kg, while on
January 21, 2025, the sales are expected to be 3.35 kg. This output helps retailers
better understand how demand may fluctuate during the specified period and enables
them to adjust their inventory levels accordingly.
At the bottom of the table, the total predicted sales for the year are displayed as
1952.15 kg, indicating the overall quantity of Rice the model anticipates will be sold
over the entire forecast period. This cumulative figure is essential for planning
procurement, storage, and sales strategies. By understanding both the individual daily

47
forecasts and the yearly total, retailers can ensure they are prepared for demand
variations throughout the year.

Fig 7.2.4 : Total sales prediction

7.3 Feature Importance
One of the benefits of using a Random Forest model is that it allows us to examine
feature importance, which helps us understand which features contributed the most to
the predictions. In this project, the model identified that certain features had a
significant impact on predicting sales, including:
1. Item/Store Identifiers: Product and store identifiers were found to be among the most
important features, as different products perform differently across various outlets.
2. Date (Month, Day, Year): Temporal factors played a significant role in sales
prediction. The model captured trends related to specific months, days, and years,
helping to predict seasonal trends, holiday effects, or yearly sales growth.
By analyzing the feature importance, we can make business-driven decisions, such as
focusing on high-selling products or capitalizing on seasonal sales trends.

7.4 Model Comparison

During the development process, other models such as Linear Regression, ARIMA, and
LSTM were also tested to evaluate their performance in predicting sales. Below is a
brief comparison of the models:
48
Linear Regression:
Linear Regression performed reasonably well but was less effective at capturing non-
linear relationships in the sales data. Its performance was overshadowed by the Random
Forest model, which handled complex patterns more efficiently.
ARIMA:
The ARIMA model, designed for time series forecasting, showed some promise but
required additional data preprocessing and tuning. It struggled with the variety of
different products and stores, which required separate models.
LSTM:
Long Short-Term Memory (LSTM) networks, a type of recurrent neural network
(RNN), were evaluated for their time-series capabilities. However, due to the relatively
small dataset and the complexity of training, the model did not outperform Random
Forest in this specific case.
Ultimately, the Random Forest Regressor was chosen due to its superior performance
across the various metrics and its ability to handle a wide range of features, including
categorical and numerical data.
Discussion and Business Insights
The Predictive Model for Retail Sales offers several practical applications for retail
businesses. Here are a few key insights based on the results:
Inventory Optimization:
Retailers can use the model to predict demand for individual products, allowing them
to optimize inventory levels. For example, if the model forecasts higher sales for a
particular product during the holiday season, the retailer can ensure sufficient stock
availability.
Resource Allocation:
With accurate sales forecasts, businesses can allocate resources more effectively. Stores
experiencing higher predicted sales may need more staff, while low-performing
products may require targeted marketing efforts to increase sales.
Sales Trends:
The model provides valuable insights into sales trends over time. Businesses can
analyze these trends to understand when sales peak or dip and adjust strategies
accordingly.
Focus on High-Impact Products:

49
Feature importance analysis helps retailers identify high-impact products that drive the
most sales. This allows retailers to focus on promoting and optimizing these key
products for maximum profitability.
Seasonal Adjustments:
By capturing the effect of temporal factors (months, days), the model helps businesses
adjust their strategies to seasonal trends. For example, if a specific product sells well in
winter, businesses can plan for larger inventory during that period.
The results and discussions highlight the effectiveness of the Random Forest model in
accurately predicting sales for a retail environment. By addressing the limitations and
improving the model further, it can become a powerful tool for businesses looking to
optimize operations and drive sales growth.

50
 CHAPTER 8
CONCLUSION

The retail sales prediction system developed in this project successfully uses machine
learning to predict future sales for a given store and item combination. The use of the
Random Forest Regressor allowed for accurate predictions, and the system’s
deployment in a web application made it accessible to non-technical users. Moving
forward, the model could be improved by incorporating additional data sources, such
as holiday information, weather data, or market trends. Expanding the model to include
time series-based predictions using LSTM or ARIMA could further improve accuracy.

8.1 Limitation of the Study

While the Predictive Model for Retail Sales project offers valuable insights and
forecasts, itdoes come with several limitations that can affect its performance and
usability. Some of the
key limitations include:
1. Dependence on Historical Data:
The accuracy of the model heavily relies on the quality and availability of historical
sales data. If the past data is incomplete, outdated, or unrepresentative of future trends,
the model may generate inaccurate predictions.
2. Limited Handling of External Factors:
The current model primarily focuses on internal data such as product features and sales
figures. It does not account for external factors like economic conditions, market trends,
competitor actions, or unexpected events (e.g., a global pandemic), which can
significantly influence retail sales.
3. Assumption of Stable Trends:
The model assumes that past sales patterns will continue into the future. However, this
is not always the case, as consumer behavior can change rapidly due to seasonal events,
holidays, new product launches, or price changes, limiting the accuracy of long-term
forecasts.
4. Scalability Issues:
While the project works well with smaller datasets, handling large-scale retail
operations with thousands of products and multiple store locations may require
significant computational resources. Without proper optimization or cloud integration,
the system may struggle with scalability.
51
5. Simplified Input Handling:
The model’s current input structure (such as selecting products and setting dates) is
relatively straightforward but may not accommodate complex retail operations that
require more nuanced inputs, such as multi-tier product categories or variable
promotional campaigns.
6. Lack of Real-time Forecasting:
The current system does not support real-time sales forecasting. Predictions are made
based on static datasets and do not update dynamically as new sales data becomes
available, which can lead to outdated or less actionable insights.
7. No Inventory Management Integration:
The model only forecasts sales and does not integrate directly with inventory
management systems. This limits its usefulness in making direct stock-level
adjustments based on predicted demand, which could be crucial for businesses aiming
to optimize their supply chain.
8. Overfitting Risk:
Since machine learning models like Random Forest and Linear Regression are sensitive
to the data they are trained on, there is a risk of overfitting, where the model performs
well on the training data but poorly on unseen data, reducing its generalization ability.
9. Complexity for Non-technical Users:
Although the system has a user-friendly interface, the underlying concepts and outputs
(such as statistical confidence intervals and sales trends) may still be challenging for
non-technical users to interpret without adequate training or guidance.
8.2 Future Scope of Work
The future scope of the Predictive Model for Retail Sales project presents several
opportunities for further enhancement, making the system more robust, scalable, and
insightful for businesses. Some of the key areas of development are:
1. Integration with Real-time Data:
The current model relies on historical sales data for predictions. In the future, the system
can be enhanced by integrating real-time sales data and inventory management systems,
allowing the model to adjust its predictions dynamically based on changing trends and
live inputs.
2. Incorporating More Variables:
The predictive model can be improved by including additional external factors such as

52
weather conditions, economic indicators, competitor pricing, and social media trends.
These external influences can significantly affect retail sales and will add a layer of
sophistication to the predictions.
3. Advanced Forecasting Models:
While this project implements models like Random Forest and Linear Regression, the
future scope includes using more advanced models such as Deep Learning (LSTM,
GRU) or Hybrid models that combine time-series analysis with machine learning
techniques for even more accurate predictions.
4. Personalized Recommendations:
In the future, the model can be extended to offer personalized product recommendations
based on customer preferences, buying behavior, and shopping history. This can
enhance user engagement and drive more targeted marketing strategies.
5. Multi-product and Multi-store Forecasting:
Currently, the model focuses on individual product predictions. Future iterations could
expand to handle multiple products and multiple store locations at once, offering a
comprehensive sales forecast for an entire chain of retail stores, enabling more holistic
decision-making.

53
 References

1. CATAL, C., KAAN, E., ARSLAN, B. & AKBULUT, A. (2019). “Benchmarking of

regression algorithms and time series analysis techniques for sales forecasting.”
Balkan Journal of Electrical and Computer Engineering, 7, 20-26.
2. KAUR, M. & KANG, S. (2016). “Market Basket Analysis: Identify the changing
trends of market data using association rule mining.” Procedia computer science, 85,
78-85.
3. Stojanović, N., Soldatović, M., & Milićević, M. (2014, June). “Walmart Recruiting–
Store Sales Forecasting.” In Proceedings of the XIV International Symposium Symorg
2014: New Business Models and Sustainable Competitiveness (p. 135). Fon.
4. Kaggle.com | Kaggle Datasets | Open Datasets for Any Project,
“https://www.kaggle.com/” Access date: 25.02.2019.
5. Bohanec, M., Borštnar, M. K., & Robnik-Šikonja, M. (2017). “Explaining machine
learning models in sales predictions.” Expert Systems with Applications, 71, 416-428.
6. KAUR, M. & KANG, S. 2016. “Market Basket Analysis: Identify the changing
trends
of market data using association rule mining.” Procedia computer science, 85, 78-85.
7. Deo, R.C., Tiwari, M.K., Adamowski, J., Quilty, J., (2016). “Forecasting effective
drought index using a wavelet extreme learning machine (W-ELM) model.” Stoch.
Env. Res. Risk A.http://dx.doi.org/10.1007/s00477-00016-01265-z. in press.
8. Choubin, B., Malekian, A., Gloshan, M., (2016). “Application of several data-driven
techniques to predict a standardized precipitation index.” Atmosfera 29, 121–128.
9. Raorane AA, Kulkarni RV, Jitkar BD. “Association Rule – Extracting Knowledge
Using Market Basket Analysis.” Research Journal of Recent Sciences 2012:1(2):19-
27.

54