Five Steps to Becoming a Data-Driven Retail Organization: Step 1

October 08, 2014

Become data-driven or risk being tossed out like last week's stale bread.

Numbers are everything in the retail world. Of course you already know that. But do you know how many factors really influence the numbers? Let's take a look at a fast moving consumer good such as bread. There are a least 10-15 factors that have impact on the numbers for bread sales.

Think about some of them: Delays in delivery, damaged delivery, time from stock to shelves, placement in shop, theft/fraud, discounts, campaigns (both internal and from competitors), brand, season (holidays impact bread sales), trends, quality and customer experiences with the brand, web activities, customer loyalty, store hours, competition from other products, complementary products such as cold cuts, butter etc., and expiration dates.

I confess that I’m always checking expiration dates on my bread while shopping. To me, price and brand are secondary if the expiration date is closing in, and I automatically reach for the bread in the back of the shelves or for another brand instead of cutting it close with freshness.


In fact, I just heard a store is about to open in Denmark that only sells products that have passed their expiration dates since general grocery stores often don't manage to sell all of their perishable goods within time causing much of their food then goes to waste. Letting so much food expire in the first place is not a proactive business approach, and makes me wonder how great of an impact on business it would make to have expiration dates a trackable piece of information in each product’s barcode.

That -- combined with business intelligence -- would give the stores a chance to manage the products in combination with expiration dates and react in time. That could be as simple as reducing the price as the date approaches, or as strategic as tracking customers that commonly buy goods nearing the expiration dates and send them special offers for those products as dates approach.

Are you beginning to see the possibilities of data management here? In this series, I hope to challenge you to not only look at data differently, but to question what influencers have impact on the numbers that are important to your business.

The success or failure of any business in this crowded and complex marketplace comes down to whether every location can meet its goals, control inventory levels effectively, and maintain the foot and web traffic that generates sales.

Small changes to any aspect of a retail business can have a huge impact. Adjusting the positioning of one product line relative to other complementary product lines, and the sales for all of them can jump dramatically. Conversely, ordering too much of a product that doesn’t sell means the company is stuck storing stock that can’t be moved.

With such a slim margin of error, every business decision can have a huge impact on revenue. That’s why it’s critical that retail businesses react to changing trends proactively. Data shouldn’t be examined just to understand results, but to also have an understanding of why those results took place.

Being a data-driven retail business means measuring everything there is to measure in the organization and scouring the information to determine what’s working and what’s not. To break yourself into the data-driven mindset, it's important to know what a data-driven organization looks likeOnce you see the potential at your fingertips, read on for my five steps to becoming a truly data-driven retail organization and I’ll be releasing them here on the blog. First up today is step number one.

Step 1: Know What You Want to Measure

The first step in the process of becoming a data-driven organization is to determine what questions you want your data to answer. We recently released an eBook on how to determine the metrics that matter for your business and it's definitely worth a read if you even think you might be one of the 80% of businesses around the world who aren't measuring the full picture. You can download it here.

The questions you’re looking at should have tangible answers; this isn’t where you think about the open-ended philosophical questions that drive your company’s overall direction.

But what are the burning questions you’d love answers to that can make your job easier? Every business is different, and the term “retail business” can encompass an incredibly wide variety of organizations, from car dealers to supermarkets to furniture stores and everything in between. We can’t tell you what questions to ask, but we’ve got a few examples of questions that may be useful to your organization. For example:

  • Do you know how your chosen vendors and distributors affect turnover rates across your locations?
  • Do you know how each new product introduction affects the sales of your existing product lines? Is it the same at every location?
  • Are you keeping more inventory on hand than you need to? How could you reduce your inventory requirements?
  • Where are the hiccups in your supply chain? Can you use what you know about one location’s supply chain to correct problems in another location’s?
  • Is there a way to more efficiently distribute manpower among your locations?

My favorite part of this initial question-asking process? Questions create questions. It’s common for a user of business intelligence to be curious about a particular question, and upon finding the answer, become curious about how the numbers got to be where they are. That’s how great KPIs are built – asking good questions and always having the answer on hand.

Taking measurements is only the first of several steps in building a data-driven organization, but every step thereafter relies upon these figures for success. Bad decisions result from bad data, so choose your questions and KPIs carefully.

Stay tuned for step two for becoming a data-driven retail organization in my next post. In the meantime, feel free to contact me for more information on thinking outside the data box and I’ll be happy to get you started.

Want to see how TARGIT helped global retailer Message streamline their processes and grow, despite a global financial crisis? Read their TARGIT success story.

Can't wait to get your hands on the five steps to becoming a data-driven retail organization? Lucky for you, you can download the eBook version right now.