In many ways, it is a challenging time for brick-and-mortar retailers. Recent store closures from big box brands such as Macy’s and Sears show that changing consumer demand continues to affect the retail industry, particularly brick-and-mortar retailers. As consumers turn to online retail stores for 24/7 access to purchase any item they could possibly want, brick-and-mortar retailers risk failing to fulfill the shopping needs and demands of today’s consumers. Without in-store demand, big box stores and retailers are finding that their old business model no longer enables them to increase revenue and drive higher customer traffic.
“Retailers should leverage POS data in combination with geographic data to determine the buying preferences of consumers in different areas”
While smaller storefronts and regional chains may not be struggling in the same ways as big box stores, the recent news can be seen as a wake-up call for retailers to rethink their own business strategy in order to maintain and grow as customer needs change.
How Can Small and Regional Retailers Re-evaluate Business Strategy?
Start by reassessing your stock strategy. The constant maintenance of a large array of stock items is a big contributor to the decline of large retailers. As consumers have more options both in-store and online, the need for stores to have the largest stock available has greatly diminished. Instead, retailers are now seeing consumers shop in store for a certain type of product that meets a very specific need.
Target is a great example of a big box retailer that is already making the necessary stock changes to adapt to a shift in meeting specific consumer need. While looking to reduce its stock size to simplify its supply chain and avoid overstocks or out-of-stocks, Target went beyond just examining insights derived from changes in sales and used data to stock products that truly reflected the needs of its customers. While toothpaste and laundry detergent won’t make Target a more exciting store, keeping a core stock and eliminating superfluous items shows that a retailer understands its customers’ needs and can fulfill them the moment a customer enters the store.
The goal is to replicate this customer-centric experience across all store locations. However, retailers should take caution in implementing a blanket stock strategy across all retail locations. Customers’ needs and purchasing habits significantly vary in each location, and stocking the same products at every location is ineffective and detrimental to your bottom line. When it comes to understanding the needs of each location, account for every possible factor that could affect daily sales. Overall performance accounting begins by building a framework that intersects Point-of-Sale (POS) data with loyalty demographics and program data on a continuous basis, which will help determine customer purchasing habits and brand sentiment, allowing retailers to better anticipate demand and expedite shifts in products to meet changes in the consumer market.
So, When It Comes to Performance Analysis, What Should Retailers Be Looking for?
When building a performance framework, it’s not just about analyzing data but ensuring that the retailer is pulling insights and patterns that allow continuous improvement in square foot performance. When examining data, retailers should look to answer the following questions:
What is valuable to my business?
This is the most important question retailers should be asking. When re-examining business performance strategy, retailers should first understand overall goals and what will contribute to their success. By eliminating silos and integrating all sources of data–which can include setting sales benchmarks and noting trends from POS data and loyalty programs that relate to increases in sales and/or consumer traffic – retailers can correlate sales data to growth trajectory. It’s essential to ensure no data is stored in silos in order to gain a clear and complete understanding of what’s valuable and what’s not.
What limitations does my business have?
One reason retailers struggle with shifts in consumer demand is an inability to move quickly. As soon as a problem or notable change has been identified, it is critical to find a solution quickly or the problem becomes worse. This is seen everyday in big box retailers, where the number of clearances and layers of red tape can put a serious delay on implementing a new sales strategy – causing small stock issues to become big revenue problems.
Luckily, for small and regional businesses, new sales strategies can be executed more quickly because of fewer levels of approval. Here, small retailers instead run into delays of making quick sales changes based on a lack of preparation. To remove these limitations, retailers should find a process that gives those employees who are closest to the customer the power and obligation to execute the goals of top management. With the right systems in place and a corporate culture that gives them the power and stake to make the smartest decisions possible, the entire organization can then practice continuous improvement to achieve the greatest results. Habitually reviewing data to understand sales gaps and performance, as well as identify and remediate outliers,ensures retailers are well positioned to quickly anticipate and implement future changes to meet new consumer demands, leading to more agility and profitability.
How does the location of a store alter demand and sales?
Consumer demand across the U.S. does not always follow the same pattern. Retailers should leverage POS data in combination with geographic data to determine the buying preferences of consumers in different areas. Taking this a step further, retailer should also examine demographic data derived from loyalty programs to grasp how this demand differs across generations, all of which better defines an individual store’s target customer.
What segments of my inventory actually sell?
Determining what products are in high-demand and where you can cut the fat in your product line is one of the most important insights you can analyze from your company’s data. To better understand how product demand changes, retailers should examine data from a longer sales cycle, typically six to nine months. Extrapolating data from this length of time not only allows retailers to more efficiently coordinate with distributors to minimize or maximize stock throughout the year, but also safeguards against instances of overstock or out-of-stock products.
How do my offerings compare to that of my competitors?
Analyzing data from your POS and loyalty programs can also show sales inefficiencies among your competitors. What specific products do your competitors keep in stock at the front of the store? What gaps do they have in their inventory? How does this compare to consumer consumption in your business? By assessing how a business moves products in comparison to competitors, companies can get a better sense of hidden opportunities.
How can you better incentivize customers?
Beyond meeting consumer demand, insights pulled from a retailer’s data can help retailers improve strategy for general promotions and discounts by creating more targeted campaigns to drive traffic. Analyzing data on specific buying habits empowers retailers to make continuous improvements and provides a unique understanding of how to serve customers in a more intimate and personalized way, without serving authority, which ultimately drives higher sales and greater loyalty.
While there have been some significant challenges in the world of brick-and-mortar retail, there are ways that brands can stay relevant to meet consumer demands. By strategically leveraging data that’s available through POS systems and loyalty programs, retailers can better align with customers’ in-store needs, all of which helps increase store traffic and the bottom line.