Data, retail and political!
We may have learned an interesting lesson on the use and source of data based on the election results. I’ve been a 100% proponent that in retail of the adage that” if you can’t measure it you can’t manage it”. At one point this was very straight forward primarily because access to data was limited. Now we can dive deep into data and into the components of any group we are analyzing. I watched the election results with great interest and in particular how a specific demographic group voted. They were able to dive into a demographic using multiple factors such as white suburban, college educated, millennial women with a strong religious affiliation. Additionally they benched marked that data against the performance of that subset in prior elections.
The similarity from a data perspective between political polling and retail is strong. Retail has always been about analyzing numbers to fully understand the performance of your store. Relational databases allow retailers to dive deep into sales history and come up with and almost limitless number of calculations. The basic numbers that were there standards for monitoring performance were simple: Gross margin, gross profit, turns and value of inventory to name a few. Typically retailers are focused on inventory data to manage their businesses which is a critically important asset. An efficient inventory, specifically having the right product at the right time and at the right price is essential for sustained profitability. Customer analytics is not given the same attention by retailers as inventory analytics. There’s no question that retailers recognize customers as the life blood of their business but they don’t really track and benchmark their activity. Here are a five metrics a retailer can use as key indicators to measure customer behavior. In order to make these numbers relevant they need to be benchmarked against historical numbers by month to spot trends and react to them.
- Number of individual transactions
- Average sale per transaction
- Average number of items per sale
- Average gross margin per sale
- Retail value of inventory at the end of the month
Let me explain why this composition numbers provides a good basis for getting good insight into the performance of your retail business.
The value of the capturing the number of transactions per month is obvious, however you need to factor in the other data elements to get a complete picture. Consider that sales are up month over month but your average sale is down and the number of items per transactions is also down. If you only look at the top line number of total sales number you would be missing a trend that may be an indicator of a problem. I recommend that my clients post these numbers to a spreadsheet every month as an analytical tool. The manual process of entering these numbers into a spreadsheet is a great way to get a retailer to stay on top some subtle changes that may happening.