Retail Analytics & Why It Matters
“It has never been easier to start a company- but it has never been more difficult to scale it.”
Regardless of channel, be it brick & mortar or e-commerce, the realm of retail has never seemed more daunting.
With new competitors and old incumbents trying new initiatives left and right, it has become immensely difficult to scale out.
Scaling = (Operation Optimization + Exploiting Opportunities)^ Speed of Decision Making
Scaling is the combination of optimizing different parts of the day-to-day operations, exploring new opportunities and doubling down on established channels.
Oh! And you have to make these decisions at breakneck speeds so that your competition doesn’t catch up.
So let’s break this equation down.
With an industry average gross profit margin of between 25-35%, we don’t have a lot of bandwidth to play with.
Three quick fixes that immediately impact your monthly sales:
Should those shoes be selling for $45 or $55 a pair?
Hey, that makes a huge difference when you have 1,000 SKUs and significant monthly traffic.
Assuming you over/under-priced certain goods, what happens to your monthly sales if every transaction increased by $1? Doesn’t that make a difference to your bottom-line?
2. Shopper Retargeting
You know more than you think.
Do your shoppers rush in during the evenings or do they only shop once a year? These sort of behavioral traits should be captured somewhere and they can do wonders if you have the right person doing the analysis.
3. Product assortment
“People who bought this also bought this” – we have all seen this.
If you are in a brick & mortar setting, make these anchor products really easy to find and their adjacent products somewhere close to the checkout counter.
If you are in the e-commerce space, these products should already be on your first page.
If you don’t know which of your products are the anchor products, run a correlation test across all your monthly transactions- this tends to change over time.
Don’t look for the silver bullets, try the lead bullets first.
We have the innate tendency to “double down” on the next “growth hack” to grow our monthly revenues without first understanding why it worked out.
By the way, in case you didn’t catch what I was saying- “YOU ARE WASTING MONEY”.
- If your sales went up…
- Was there a holiday?
- Did some celebrity/media mention your store?
- If your shoppers came back again…
- Did prices drop?
- Was there another email campaign?
- If you product sell-through was faster than expected
- Did the marketing campaign click-through rate increase?
- Was the product placed closer to the checkout counter?
You have to find out WHY.
That is the only way you can double down on a particular initiative and replicate the success.
The speed of Decision Making
Whether you are the business owner, someone in the management or a new employee, we all want our businesses to make good decisions faster.
Why? Because we don’t want to lose.
Every other competitor is working their ass off and scaling faster than you because they have already implemented an action plan while you are still debating if this is a good metric to measure.
- Decide on metrics early (get upper management’s buy-in)
- Monitor them
- Act on them
There is a caveat here. You NEED to have the right infrastructure in place.
- If you haven’t decided what metrics are important, chances are…
- …you haven’t bought the tools to monitor them and…
- …no one in the organisation can act without your approval…
No form of analytics can work magic if you are selling something that people don’t want. You have to get this right, at least in the early days, before thinking about scaling the business.
Scaling in a hyper-competitive market requires you to get too many things right. You can’t count on your intuition for everything. You will need to have the right people and tools in place so they can help you scale and grow the business.
Get people who can work comfortably with some data to set the foundation right.
If you have any feedback or questions about this post, we would love to hear from you.