The past year has been one of frantic, reactive activity for retailers. Those that successfully hung on during the seismic shifts that rocked the industry in the early days of the pandemic, and then managed to weather all the uncertainty around reopening that set in as the pandemic wore on are now contemplating a business that is vastly different.
As we approach the end of Q1, we can see the light at the end of the tunnel, but it’s still too soon to say what the “new normal” will be. Customer behavior has significantly shifted over the past year, but some consistency is developing. We can go back into planning mode, but we need to stay nimble until we understand what customer behavior will be like going forward. There are still so many questions.
Time and place have shifted; weekends used to be the biggest shopping days, but now it’s weekdays and it’s online. There’s a lot more shipped directly to the consumer. How do you make that fit within your business model and make a profit? How do you support your brand experience online and on a mobile phone?
Retailers will have to analyze and predict trends by category and channel. They need to be prepared to quickly adjust assortments and support in-stocks to meet the buyers’ purchasing preferences.
7 Focus Analytics Areas for Retailers
Retailers turned to data and analytics to help them through the tumult of the previous year. Building on analytics capabilities will be important in smoothing the transition to the next phase. There’s a lot more data being used to drive decisions than ever, and we need to continue along that path so that we can respond quickly to the coming shifts. Here are seven things retailers should focus on now to strengthen their analytics practice for the future:
- Get a connected view of the customer. There are still a lot of companies that have not connected the customer who shops online to the same customer who shops in-store. That’s a huge miss. If you’re going to understand how customer shopping patterns have changed, you need that complete data set. If you do have that 360-view, use it to customize the content sent to customers. Get in front of their needs, before they know they need it.
- Add more lifestyle-oriented product attributes. There’s an opportunity for retailers to help customers bridge from their old lives to their new ones through their messaging, branding and marketing. But, we need a more nuanced understanding of their shopping habits. Look beyond the standard product hierarchy or attributes of brand and vendor; tops versus bottoms; size and color. Get more granular, adding attributes such as street wear, work wear, work from home wear, etc. to understand usage and be able to quickly identify shifting lifestyle trends.
- Strive for forecast accuracy. Just using last year as a baseline isn’t going to work anymore. For example, there was a huge increase in demand for toilet paper and paper towels at the start of pandemic. That’s probably not going to happen again, so you don’t want to base your inventory and supply chain on that level of product sales. A bottoms up approach, combined with top down planning may be more important than ever to ensure forecast accuracy. Utilizing more current sales trends will allow you to emerge ahead. Tracking data more frequently, maybe weekly vs. monthly, will allow you to pivot quickly when trends are changing. Sharing these timely sales forecasts across all parts of your company will allow for improved operational planning, right-sizing inventory and maximized manufacturing or supplier supply chain.
- Understand the impact of store closings. It’s estimated that over 11,000 retailers went out of business in 2020. Another 20-25,000 are projected to go dark this year, and 100,000 by 2025. You have to keep a close watch on changes to the competition and how that impacts you. If your competition went out of business last fall, what does your upcoming fall look like? How do you adjust your location plans and your assortments to capture incremental business? That means being able to pull together a lot of external data about the locations and dates of closings and then understand what the opportunity is.
- Get good at using external data. Some retailers made great use of external COVID data, but most still need to get better at using external data in general. How does weather impact your business? Gas prices? Inflation rate? Unemployment? There are so many external data sources available now, and figuring out which ones apply to your business and mixing them in with your internal data can be an extremely valuable source of actionable insights and competitive advantage.
- Track ROI from changes. There’s been a big shift to online, and a lot of shifting of people, process, data, and technology investment has gone along with that. You need to be continually measuring the ROI from those changes to inform future investments. For example, if your conversion rate on the e-com side was 2% and you want to invest in additional targeted messaging and content, do you need additional resources to get this done? Or do you need to shift resources from the retail side to the ecom side to accomplish the work? Ultimately, how does your conversion rate change, and what does that mean to your bottom line?
- Nurture curiosity. Companies are getting better at asking more questions and are adding more analysts to really dig into the data, but there’s still opportunity. For example, when reviewing your website, look beyond traffic and conversion rates at basket composition. Does it differ for first time buyers? Who are your clearance-only customers? Will they buy at full price? How well do you understand purchasing frequency? How many times should you be reaching out to them? What kind of assortment should you suggest?
Take notes on the questions that come up in meetings that you just can’t answer, and find out why. Is it that you just don’t have the data, or you can’t get to it? Use these questions to drive continual improvement of your data collection and analytics processes.
The experience of the past year has been (I hope) a once in a lifetime experience. A huge amount of change was thrust on retailers in a very short period of time. One silver lining was that it forced many retailers to up their analytics game and become more data driven. Continuing to develop your analytics capabilities is the key to navigating any changes, and developing the resiliency we clearly need for the unforeseeable future.
If you would like to learn more about data analytics for retailers, check out our eBook: Retail Insights in Minutes, not Months.