How retailers can be sure on format and the product mixes while offline store expansion
Retail analytics can do wonders by providing critical business insights and helping businesses take measured decisions in marketing management and product-market expansion strategies.BY Indian Retailer Bureau | Feb 13, 2017 | comments ( 0 ) |
Relevant use of retail analytics in offline (brick and mortar stores) retail is augmenting and constantly innovating with various tools used by the retailers to maximize their engagement with customers, learn more about consumer behavior and increase transactional value. Retail Analytics has been an eye-opener for retail brands who otherwise worked purely on their instincts. Your Retail Coach(YRC) a Mumbai based retail consulting has shared the example of one of their Indian fashion retailers who leveraged from retail analytics.
This fashion retailer had 70 operational stores and was looking to start 20 new stores in the span of six months. 80% of stores were on lease and the retailer had tried small, medium and large formats with various product mixes in his existing 70 stores.
For his upcoming 20 stores, he wanted to be extremely sure on the format and the product mixes. Though his inner voice always prompted him to go in for smaller stores, considering the rental rates and the risk involved in the larger ones, but he knew he was being biased in thinking so.
How retail analytics helped
The use of retail analytics significantly influenced the precision and speed of planning and executing the retail strategies. Our experts treaded carefully adopting the carpenters’ approach of “measure twice, cut once”.
YRC team started digging out maximum possible information of his existing stores, right from sales, area, staff, basket size, slow moving/fast moving/dead categories, per sq.ft. sale and several other KPIs affecting the operations.
Product mix and the format of the store were two of the most important factors which could decide the fate of the future stores. A brand already running 70 stores, 30% owned and the rest on lease, never had worked on the profitability of individual cost centres.
Deciding the format
With the help of retail analytics and business intelligence tools experts gathered the relevant data; studied and analyzed them to form meaningful business information, to arrive at the customer demographics and the consumer buying behavior applicable to the existingstores and product lines of the client. It is imperative to have the right format to yield a healthy ROI.
Deciding on the product mix
The client had a wide range of product lines. But there was a need to alter the product mix since not all of them were performing as desired. After assessment of the entire product mix, several filtering and sorting parameters were applied.
The products were objectively grouped into four categories –
1. Products requiring cost reduction – This included products with low profitability but high market share.Even a small fraction of cost reduction may lead to increased profitability and enhanced sales. These are also the highly competitive and price sensitive products.
2. Products requiring intensive promotion –This included products with high profitability but smaller market share. Here, product promotion may tend to be narrow and specific targeting a small market segment.
3. Products which could be used in line featuring – This included the star performance products which could be used as flagship products for customer attraction. These are the products with high profitability and high market share.
4. Products which could be discarded– This included products with low profitability and low market share. These products could be taken off the shelf.
Under-performing assets–Client’s business was bearing the burden of many under-performing stores. These stores were bringing down the overall ROI of the group. Such underperforming stores were planned to be closed, which would free up the blocked resources in those stores.
The key suggestions in the final report included adoption of large formats for the proposed expansion, closing down of underperforming stores and pruning the length of product lines by discarding low performing – low potential products. The report also covered the adjustments warranted in the product mix and adoption of a consistent product line pricing strategy.
24 Nov 2015, Hotel Pullman, Aerocity, New Delhi.
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How technology is helping
Technology is playing a pivotal role as far as customer experience is concerned. Now, retailers have