A latent class analysis for item demand based on temperature difference and store characteristics

In retail stores, there is an increasing need for predicting item demand using accumulated purchase history data to cope with the fluctuating consumer demands. These fluctuations in item demand are influenced by external factors and consumer preferences. Among these, store characteristics and weather conditions, which are closely related to consumer behavior, have strong effects on item demand. For this reason, it is very important to quantitatively grasp demand fluctuations of items that are influenced by changes in weather conditions for each store by using an integrated analysis of the purchase history data of many stores and weather conditions. In this research, we focus on the temperature difference, which is the average temperature difference from the previous day, as a weather condition affecting item sales. Because consumer feeling about a temperature is dependent on the temperature difference from the previous day, it is meaningful to construct a prediction model using this information. In this research, we propose a latent class model to express the relationship between weather conditions, store characteristics, and item demand fluctuation. Also, through an analysis experiment using an actual data set, we show the usefulness of the proposed model by extracting items that are influenced by weather conditions.