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How Retail Data Helps Take the Guesswork Out and Improves Results

By Tess Clarendon, Contributor | February 18, 2021

Independent retailers are realizing the benefits of a data-driven approach to business. Even more so since 2020’s digital innovation wave. Analytics help inform decisions you make, offering more ease to your processes while optimizing overall performance of your business. Looking closely at everyday activities can reveal opportunities that have big business impacts.

Think about analyzing data in four key areas of your business: sales, inventory, pricing, and customer loyalty. Looking into activity and making small adjustments that address what you find can have surprisingly powerful effects.

Here's a look at some examples of how independent retailers are using data to streamline and optimize their businesses.

Sales Analytics to Help Improve Profit

You need to understand what your customers want to drive business growth. That means assessing your sales regularly to determine what items are in high demand and whether that continues over time.

When Covid-19 quarantines drove shoppers online, many businesses discovered they had an information deficit. The abrupt change in buying behavior left retailers without enough relevant sales data for online buying trends.

You need to understand what your customers want to drive business growth.

"In our post-stay-at-home reality, companies need to recognize that their existing predictive models, forecasts, and dashboards may all be unreliable ... and that their analytic tools need recalibrating," say the data expert authors of, "Retailers Face a Data Deficit," in Harvard Business Review.

And for Lori Terpstra, owner of Rylee's Ace Hardware in Grand Rapids, Michigan, sales analytics aren't just about accurately measuring and predicting trends; data can also be the key to generating thousands more in profits.

Mini blinds were a top 10 item for Rylee's until sales dropped dramatically. A look at the analytics revealed that a single customer accounted for most mini blinds purchases. Rylee’s contacted the client and discovered he manages residential buildings and went to a competitor because the item was often out of stock. Equipped with that information, it was an easy fix. They reassured the client that reorders would be adjusted to increase the quantity on hand. This one adjustment increased sales and gross margins on the item by 40 percent.

Key Performance Indicators (KPIs) are designed to show you how effectively you're meeting your goals, but they also highlight areas that may need improvement. By using business reporting tools, you can surface similar situations that have the potential to improve your sales.

Inventory Analytics to Help Improve Efficiency

When you've got thousands of products on your store shelves, it's critical to have a system that tracks stock and helps you get inventory levels just right. The cost of inventory is typically twice as much as your labor expenses, so it's important to keep a close eye on your data. Run reports with your point of sale or retail management system regularly to actively monitor and manage inventory to optimize efficiency and costs.

Washington, Missouri-based Hillermann Nursery & Florist earns 60% of its revenue over the course of just 10 weeks every spring, so the garden center relies heavily on inventory analytics to maximize productivity and make smart purchasing decisions.

To streamline their operations, one of the changes this seasonal business made was to switch from an annual or semi-annual physical inventory to a perpetual cycle count inventory. “Every class in every department is counted every six months," explains Hillermann President Sandi McDonald. "This is a better process for us, and it's more accurate. We also rely on zero quantity reports to identify items that were rung incorrectly." McDonald adds that her business gained a 25% improvement in productivity since automating its system—and increased profits.

By adopting inventory management software that tracks everything from sales and materials to labor and turnaround times, businesses like Hillermann's have the data they need to take control of their inventory. Once you have a better understanding of the heart of your retail business, you can take action to make changes that drive improvement and efficiency. These strategies can help:

  • Monitor low inventory levels. To avoid running low on popular items, review your Quantity on Hand (QOH) report and restock before you're out. Knowing your "top sellers" and "bottom dwellers" can help you be more profitable.
  • Keep an eye on excess inventory. Conversely, ordering too much stock costs businesses. Compare your QOH with your order points to make sure you're not ordering and stocking excess product. Then, assess your approach to merchandising and promotional pricing to keep items selling.
  • Value your inventory daily. Every day run an inventory valuation report by department, location, or vendor. This helps you keep track of how much cash is tied up in your inventory.

Pricing Analytics to Help Improve Margins

Pricing is an area of retail where a "set it and forget it" mindset can work against you. Protect your margins by regularly analyzing cost versus price and adjust.

Sometimes that's easier said than done. An example is when a business operates in a small retail space. Pricing items in a way that keeps inventory moving while also generating revenue requires a shrewd strategy.

Protect your margins by regularly analyzing cost versus price and adjust.

Cornell's True Value Hardware in Eastchester, New York solved this challenge by using a pricing planning tool designed to get the maximum margin for each product while also remaining competitive.

"Before, it was a time-consuming manual process to evaluate competitive pricing," says John Fix III, president of Cornell's True Value. "We'd visit stores and jot down items or look through their ads. In addition, we were never confident in which True Value-suggested pricing tier we should use for each item," he explains. "Then we faced implementing price changes, which is also time-consuming."

Now, Cornell's adjusts pricing for items on a case by case basis. "I decided to take advantage of higher margins and set my retail price to True Value's tier two pricing level, but only for certain items," Fix says. "Instead of running a large batch of price changes every few weeks, I can do three or four smaller sets of price changes in a single day. It's more flexible and saves a lot of time." It also saves on resources as staff was no longer needed to make manual pricing adjustments.

Pricing analytics positively impact Cornell's margins. Since they can now more accurately assess price sensitivity, they can identify the sweet spot where price is set for a higher margin even if fewer units are ultimately sold.

Customer Loyalty Analytics to Help Improve Appeal

There is also customer loyalty information that informs your business in sales, inventory, and pricing analytics. For example, keeping popular products in stock and pricing them competitively can improve a customer’s affinity for your business and brand. Knowing what your customers are buying also informs you about what they want—so you can deliver more of it.

That includes a positive in-store experience. When you track your customers' purchases, you can also determine when they're most likely to shop. "I use the transaction volume data to help better manage our labor costs and ensure we have enough staff during the busy times," says Hillermann's Sandi McDonald.

Many retailers also offer loyalty programs that provide access to special discounts and rebates. Customers benefit from enrolling, but the programs also give retailers important data. You can use it to track purchases and gain a better understanding your customers.

Peter Mezitt, president of New England's Weston Nurseries, enjoys having the ability to, "… drill down on customer data and inventory information for our top-level departments and classes—year-over-year, by month, and by store." If he wants to get a sense of how many loyalty program members there are or what they're purchasing, he simply runs a report.

In addition to helping Weston Nurseries gain significant margin improvements, customer loyalty analytics increased their average rings per customer by 0.3%. "This doesn't sound like much," Mezitt says, "but it's big for our more traditional lawn and garden business that doesn't have 'consumable' items like food or gifts that people need more often."

Reveal Your Opportunities

Regularly analyzing key data and KPIs keeps you connected to your business operations. It can also surface opportunities to make adjustments that can significantly impact your revenue. Committing to regular data analysis gives you more insight into your business and drives efficiency to help improve your performance and growth.

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