When HO HO HO becomes OH OH OH!
Tis the season of make or break for many retailers. The consequences of a poor Christmas selling season for many independent retailers is dramatic since for some Christmas represents up to 30% of their annual sales. Early indications are that on-lines will again experience at 15% or higher year over year growth while stores sales will solid but not spectacular at somewhere between 3% and 4% over last year. When you factor in the effect of lower energy prices giving the consumer more expendable income the increase is not impressive. Some of the reasons are a shorter selling season this year, the mild weather that most of the county is experiencing and the obvious effect of-line shopping. These factors are out of the control of the independent retailer; however there are factors you can control. At the end of the season dig deep into your sales results not just top line sales. Compare the following year over year:
- Number of transactions
- Average sales per transaction
- Number of items per sale
- Gross margin
- Sales by department
- Gift Card sales
These numbers are a good starting point to gain insight into this season’s results and for making adjustments to your business recognizing the new reality of retail. The new reality is being driven by the online and mobile centric consumer. This consumer uses the web not only for shopping but for researching product. Contrary to popular belief they still enjoy many of the advantages of shopping in stores but they want the following: A fast and efficient shopping experience, liberal return policies and clerks you have good product knowledge. So let’s examine how these numbers help us gain insight:
Average number of transactions: Traffic counter tell us how many people came into the stores but transactions tell us the conversion rate.
Average sale per transaction: Is this number increasing, flat or decreasing. This is a good indication of your clerk’s ability to suggest add on items.
Number of items per transactions: This number follows the logic of the average transaction in that it is not only an indicator of clerk performance but also an indicator of how you merchandise to promote add on and complimentary sales. The simple example is placing the Salsa next to the Chips.
Gross Margin: This is a more complicated number to analyze because of the many factors that influence seasonal sales. A mild winter will certainly affect the sales of scarves and hats when last year winter came early and hard. How this is still and key indicator of performance that has to be scrutinized not only against last year but this year’s plan. Think about what a two per-cent increase in gross margin means to your bottom line.
Sales by department: Depending on your inventory hierarchy you can go deeper into sub-departments to get a more accurate picture. Again there is a weather related factor in these numbers but they also provide insight into trends. Carhartt noticed a younger consumer was buying durable work wear in their stores. The first indication was a spike in the sales of certain categories which upon more in-depth analysis showed certain product categories were becoming “street hip”. This is an obvious example but there are trends happening within your merchandise hierarchy that are precursors to where they market may be going.
Gift Cards: These are the gift that keeps on giving for retailers. There low cost, they don’t go out fashion, they bring in new customers, they boost post Christmas sales, they are over redeemed by between 10% and 20% per-cent and about 8% of the value of gift cards never gets redeemed. If you’re not displaying gift cards prominently and promoting them you missing a tremendous opportunity.
The plight of the independent retail is real. There will be winners and losers but the survivors will thrive and grow. The data is there to help you make the adjustments necessary to be a survivor. Use it or lose it!