whitepaper-what can data do for you

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What Can DataDo For You?What Can DataDo For You?How Small to Mid-Sized RetailersCan Benefit from BusinessIntelligence

How Small to Mid-Sized RetailersCan Benefit from BusinessIntelligence


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Introduction

Business owners are faced with a series of important questions: How can I make my company profitable? What do I need to do to promote scalable growth? Who should I be targeting as a potential customer? Within the retail industry, these broadly applicable, large-scale questions become more specific: How much inventory should I carry at any given time? What products provide the greatest return on my investment? What is the best way to connect with the customers I want in my store? The answers to these questions are rooted in the analysis of large amounts of data. When analyzed e!ectively, this data holds the key to systematic decision-making, allowing you as a business owner to unlock your company’s full potential through a better understanding of the specific operations of your business.

What is BI?Business intelligence, or BI, according to the textbook definition, involves the “skills, processes, technologies, applications and practices used to support decision making.”1 This broad definition encompasses a variety of methods of data recording, analysis, and reporting, and allows you to implement these in your decision-making strategy. What this means for you, as a storeowner or professional within the retail industry, is that it is crucial to understand why certain products sell well or poorly, where money is best spent, and how your business can profit and grow dynamically and sustainably. This is where business intelligence comes into play. By collecting and measuring data, and then assembling it into an easily accessible, digestible format, BI equips storeowners with the knowledge necessary for understanding how to make profitable choices.

What Can Data Do For You? How Small to Mid-size Retailers Can Benefit from Business Intelligence

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How do I use these statistics to advance my business?We’re telling you to measure data, but what exactly should you be measuring? Reporting dashboards can be unique to your business and industry; however, there are a handful of key metrics we strongly recommend our clients track on a monthly, quarterly and yearly basis.

The Top KPI for Retailers: ROI

Key performance indicators (KPIs) allow you to track actual store progress against your goals. Keeping track of these KPIs allows you to better quantify your performance and to forecast expected profits and results. There are numerous KPIs that can be measured in order to assess a business’s success; we’re going to highlight the handful that we recommend as mission critical. Return on investment (ROI) provides the most accurate method of determining whether a product is profitable enough to be worth carrying. It’s an indicator of performance. When evaluating the success of a certain product, ROI provides the most specific, accurate method of calculating data to determine whether a product has been profitable enough to make it worth carrying. ROI is calculated by dividing profit by cost, and may be calculated on a product or store level over any given length of time. For example: if you want to calculate your return on investment for all of the products sold in one of your stores, you divide your profit during a certain sales period (month, quarter, or year) by your cost of inventory during that sales period. This equation provides you with the information necessary to determine whether your investment in carrying a product is worthwhile, as well as to compare di!erent products and determine which are truly the best sellers.


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Who is using BI?Big-box retailers rely on business intelligence for success. According to Mark Larson, KPMG global retail leader:


Technology is paramount to driving growth and enhancing customer engagement for retailers… With consumer behavior, spending and demographic profiles changing rapidly, it is absolutely critical that companies take an omnichannel approach to engage consumers, utilizing all the platforms at their disposal, including brick and mortar, online and mobile.2“ ”

Statistics echo Larson’s perspective. A study conducted by CompTIA established that 73% of retailers believe that technology is important to their business, and the projected number of people who will agree with this in 2014 rises to 83%, as illustrated in the chart below. In accordance with this mindset, 53% of retailers plan to increase IT spending in the next year, emphasizing the importance of e"cient retail technology.3

Importance of Technology to Retailer Success Trends Upward

Source: CompTIA

Neutral Net ImportantNet UnimportantNeutral Net ImportantNet Unimportant

VeryImportant

Important

VeryImportant

Important

48%

35%

36%

37%

21%13%

Importance Today Anticipated Importance in 2014

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Simply put, those who haven’t adopted technology that allows them to measure key performance indicators and organize data in a way that promotes predictable, data-driven decision making are falling behind their competitors. Customers have already demanded more data when making purchasing decisions; retailers must do the same.


A key to success will be investing in technology to harness the vast amounts of structured data that reside in a company … That data can drive the insights that will allow retailers to interact with consumers more e!ectively and capture more ‘wallet-share’, as well as identify new markets, new strategies and new operating models to generate growth and profitability.2

“ ”

How does this apply to small and mid-size retailers?While you may not have the budget to match that of a big-box retailer, your ideas and ambitions can be just as big. Retail technology enables you to be competitive by knowing which metrics to measure, what goals to set, and how to measure whether you’re reaching those objectives.

Technology is essential to the retail industry, allowing storeowners to perform tasks like ringing transactions on the POS, managing inventory, overseeing employees, and storing customer information and purchase history. Taking these basic functions further, Larson states:

In other words, it pays to invest in retail technology that can give you data. Great retail technology not only gives retail storeowners and managers real time access to this data, but also generates reports and provides dashboards that give you the tools necessary to make the best decisions for your business. For small and mid-sized retailers, data analysis is particulary crucial. It allows business owners to react to trends and capitalize on growth opportunities without requiring significant time or resources.

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At RICS, our robust reporting engine, accessiable across all platforms, keeps you up to date on your business’ latest statistics at all times. This knowledge facilitates e!ective goal-setting tactics and provides you with the proper benchmarks upon which to base future progress. Instead of having to waiting for this information to be collected on a weekly or monthly basis, it is possible to immediately take control of your business’s trajectory.

In other words, it pays to invest in retail technology that can give you data. Great retail technology not only gives retail storeowners and managers real time access to this data, but also generates reports and provides dashboards that give you the tools necessary to make the best decisions for your business. For small and mid-sized retailers, data analysis is particulary crucial. It allows business owners to react to trends and capitalize on growth opportunities without requiring significant time or resources.


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At RICS, our robust reporting engine, accessiable across all platforms, keeps you up to date on your business’ latest statistics at all times. This knowledge facilitates e!ective goal-setting tactics and provides you with the proper benchmarks upon which to base future progress. Instead of having to waiting for this information to be collected on a weekly or monthly basis, it is possible to immediately take control of your business’s trajectory.

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@ricssoftware


Other indicators such as daily sales and the number of units sold are useful as well, but should be used with caution as a basis for decisions, as they can be misleading. Using daily sales as a KPI, while important, does not provide enough detail on which to base future decisions since this number serves as a snapshot that does not include larger trends. Number of units sold can indicate whether a product is popular, but it does not include the cost and price of particular items, thereby failing to take profitability into consideration. For example: compare a product that costs $50 to stock and sells for $75 (Product A) to one that costs only $35 to stock and sells for $40 (Product B). If a store sold one Product A and three Product B’s, the number of units sold would indicate that Product B was more successful than Product A. When calculating the ROI, however, you can see that Product A is the more profitable choice.

RICS calculates this number as a value per dollar, making it easy to understand the value derived from the sales of a certain product. For example, a 1.8 ROI would indicate a return of $1.80 on a $1.00 investment. RICS can also simplify this number to a percentage (in this case, 180%) in order to make the numbers as direct and easy to compare as possible.

ROI = Profit During Sales Period

Inventory Cost over Sales Period

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Other Useful KPIs

There are a few other KPI’s we recommend retailers track on a regular basis:

Best Sellers

While ROI is usually the best indicator of performance, there are certainly other useful ways to measure success and understand what aspects of your business could be improved. Best Sellers, Salesperson Analysis, and Best Customer are all valuable metrics that provide insight into what components of your business can be further optimized. Best Sellers typically refers to quantity sold of a product, though as previously described, it may be calculated using the ROI equation as well. The quantity sold indicator is a straightforward measurement that reveals exactly what the name states: how many units of a particular product are sold within a given period of time. This allows you to manage inventory as accurately as possible, ensuring that you do not have an improper amount of assets tied up in inventory, as well as making sure that you do not miss opportunities for sales by being poorly stocked.

Salesperson Analysis

Salesperson Analysis provides key information about your employees, indicating who has the most and fewest sales, both overall and per hour. This data takes much of the guesswork out of sta"ng decisions by allowing you to see which employees are most e!ective, therefore giving you the best return on your investment.

Best Customer

Customers fuel business, so it is necessary that business owners have a way of identifying their best customers and build lasting relationships with these individuals to establish brand loyalty. Finding these customers relies on the Quantity Purchased indicator: a repeat buyer who has made multiple visits and purchases is very likely to be loyal to your brand, and therefore more likely to spread positive information to others. By collecting, storing, and analyzing customer data and purchase history, retail management software allows you to easily pinpoint your most reliable customers. This data may then be utilized to put a rewards program or discount coupon plan into place in order to establish a solid and reliable client base and build loyalty.

In order to capitalize on Best Customer data, it is important to build, nurture, and manage relationships with your customers. In small to mid-sized businesses it is particularly crucial. You can create buyer incentives, loyalty programs and discounts, but none of these tactics will be maximally e!ective without organized data analysis and reporting to guide you toward where your e!orts will secure the greatest ROI. Business intelligence, and more specifically, Customer Relationship Management (CRM), allows you to use data to put plans into action that will have the greatest impact on customer behavior. By identifying “best customers,” studying purchasing trends, and comparing behavior over time within di!erent sales environments, you can ensure that your decisions are data-driven and produce tangible results for your business.

Conclusion

According to the Platt Retail Institute, “it has been advanced that retailers, as an industry, underinvest in technology.”3 With today’s high rate of technological growth, the compilation, storage, analysis, and reporting of data are crucial components of a company’s business strategy. In order to remain competitive it is imperative that retail stores embrace business intelligence. Small to mid-sized retailers must aggressively pursue the available channels of data analysis. Here at RICS, we strive to simplify this process, allowing business owners to devote full attention to managing resources and increasing profits.

For more information about our retail management solution visit our website at www.ricssoftware.com or call 800.654.3123 ext 2.




Other Useful KPIs



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Best Sellers




Best Customer


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Conclusion






Other Useful KPIs


Best Sellers




Best Customer



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Conclusion



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Citations

1 NexDimensionhttp://www.nexdimension.net/solutions/business-intelligence/

2 KPMG http://www.kpmg.com/us/en/issuesandinsights/articlespublications/press-releases/pages/retailers-ready-to-spend-on-expansion-technology-branding-for-growth-in-2013-kpmg-survey.aspx

3 Platt Retail Institute http://www.plattretailinstitute.org/documents/free/download.phx?navid=366&itemid=419


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