Can retailers afford to forego business intelligence?
In retail business, as in life, there can be no such thing as stagnancy; you are either moving forward or you’re falling behind. Every tactic that is not in line with the corporate strategy is effectively undermining it. Every expense – whether inventory, technology, rent, sales staff, or any other expense – that is not driven by concrete data justifying its necessity is a waste and the opportunity cost of proper resource allocation is unsalvageable.
Misinvestment into inventory that proves to be slow-moving means sub-par sales, decreased profit margins, and loss of customer interest, which snowballs into lost market share, less resources for the next season, poorer company performance, and impaired investor relations. The effects can be crippling and compound over time.
In retail business, as in life, you only have one shot at getting it right.
It’s no wonder business intelligence is so critical a factor in every industry. A growing number of retailers are seeing the need for a more strategic use of the raw data they collect from every transaction. The challenge then becomes knowing which data to single out from the torrent of data they have available to them: which metrics should a retail company track when leveraging their retail management software’s reporting functions?
When the stakes are so high, you cannot afford to make mistakes. Yet so many companies continue to sacrifice their performance by foregoing the use of BI. According to a SunGard survey of executives in two industries, only 13% of respondents utilize advanced BI techniques such as predictive analytics and alerts. The remaining 87% of businesses are steadily chiseling away at their profit margin with uninformed decisions, or decisions made from siloed departmental data, which is a fragmented, incomplete representation of the company’s health. “The ambition for retail growth, when severed from a holistic recognition of performance drivers and shortcomings, is powerless to effect productive change,” said Kerry Lemos, CEO of Retail Pro International, a global retail management software provider
For the global apparel retail company, American Apparel, business intelligence has been paramount to success. American Apparel integrated retail tools that give comprehensive visibility into all stock across locations, which has resulted in an overall reduction in inventory. Along with better turn, the strategic use of business intelligence also streamlined their related operations, which drives improvement in resource allocation.
But leveraging data for smarter operations is not a feat reserved solely for the global retailer. In fact, small and medium-sized retailers are often in a better position to see into their data and derive actionable strategies for improvement. Crafty Yankee, a US specialty retail gift shop with two locations, saw the value of business intelligence early on. Owner Kathy Fields has been using the reporting tools in her retail management software to inform every aspect of her retail decisions. “I like to analyze my business in different segments. Let’s say we had a 20% increase last month. Where did that come from? Jewelry? Glass? Pottery? Once I see the trend in the data, I can break it down by vendor or resources, and I can compare that data to last year’s.”
The changing retail landscape and evolving customer expectations necessitated her use of BI. “I constantly reshape the store,” said Fields. “We must change with the customer: Patterns, age, tastes.”
Retail Pro University, the training arm of Retail Pro International, has developed a new training series to help retailers capitalize on the data they collect. The new course, titled Understanding Retail Metrics, is a partnership with Dan Jablons from Retail Smart Guys, a consulting company for independent retail. Each video lecture features a particular key performance indicator, from turn to sell through percentage to gross margin return on investment, and, most critically, gives insight on how to use the statistic to be more profitable. Retailers are taking advantage of resources like these as an integral springboard for smarter retailing.
In the same way that uninformed decision-making carries compounding inefficiencies, intelligent use of data in strategic, tactical, and operational retail decisions can create compounding productivity benefits that translate into profits.
BI, says journalist Kim Nash, is all about understanding what makes your company thrive. Knowing what makes your company thrive improves decision-making. Improved decision-making – little by little, day after day, season after season – builds the foundation for sustainable retail growth and long-term retail success.
