In a previous post, I discussed how top storage vendors believe that global data stores are doubling every few hours or weeks, and how this problem can be turned into an opportunity in almost every vertical or field of work. Today, let's focus on one of the retail sector's larger data opportunities, and how this data can increase profitability for organizations who deploy retail analytics.
Seasonality, new products, changing margins, social media trends, surpluses, constraints, hot weather, and day of the week are all aspects of the retail environment that can impact sales. The impact is dual: how an organization behaves and how the customer behaves. The merger of the two behaviors yields profit or loss on the income statement, and having an understanding of this two-sided relationship enables business leaders to influence the outcome of a profit over a loss. Your purchasing behavior has some predictability. For example, you are more likely to buy shorts in the spring and summer than in the fall and winter. Likewise, you are more likely to buy milk once a week vs. once a quarter (assuming you drink milk).
Knowing these types of information allows retailers to manage their supply chains, offer promotions, and manage their pricing. This is almost entirely done now with a discipline called retail analytics. By leveraging all that data, retailers, suppliers, distributors, and manufacturers can bring stability to their business by predicting what will happen based on what has happened.
Retail's Crystal Ball: Actionable Key Performance IndicatorsThey accomplish this via actionable key performance indicators (AKPIs). Examples are:
- Market basket analysis: Connecting the dots between items in a shopping basket for an attach rate. In other words, how often do you buy milk and cereal together?
- Attach rate: How many non-primary goods are sold for each primary product.
Other Types of Retail AnalyticsFar beyond product placement and store location are a multitude of other retail analytics that can be leveraged by a retail organization. Other such AKPIs include:
- Average sales per customer transaction
- Sell through % (# of units sold/the beginning on-hand inventory.)
- Sales per hour
- GMROI - gross margin return on investment (sales margin/time)/inventory cost
- Increase the number of customers
- Increase the spend of existing customers
- Increase the mix of higher margin items to existing sales
- Decrease costs
- A mix of the above