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As the global economic slowdown puts pressure on businesses and as Australians become tighter with their spending, retailers will need to watch and track sales interactions very closely. Ironically, the best strategies are often hiding within the data and insights that retailers already possess.
Advanced retail analytics has become an integral part of decision-making for retailers of all sizes. In challenging times, business trade-offs based on a deeper assessment of business performance and metrics, like ROI, become very important.
So, can retailers build an analytical framework to drive better decisions using data analytics?
Establish a retail analytics framework
The retail analytics framework is a proactive model that enables retailers to group and analyse data across the business value chain by focusing on two major areas: “upstream logistics” and “downstream logistics”.
Upstream logistics relates to operations that prepare retailers for sales, like procuring and managing inventory, while downstream logistics focuses on fulfilment issues like point-of-sale and delivery. Think of this as managing the “supply” side and the “demand” side to optimise operations and improve returns.
Explore upstream retail logistics (supply)
Dynamic optimisation of inventory against demand is a foundation of effective supply chain management. Overstocking will lock up valuable cash and may also force future discounts to reduce inventory, resulting in lower margins, if not outright losses. This was the case with many retailers in the second half of 2022 as pent-up, post-pandemic demand started to rapidly ebb. Understocking can compromise availability, miss capitalising on trends, and leave shoppers disappointed. There is an optimal band.
This is the challenge retailers often face in inventory management. By using advanced analytical capabilities, they can track and measure inventory metrics to build a clearer picture of customer demand and prior fulfilment history, thereby improving future performance.
Sell-through rate (STR) is one metric that can boost retailer performance. The sell-through rate tracks the inventory sold within a period against the inventory shipped to the retailer by their suppliers. When STR falls outside of an ideal range, it can uncover issues like poor sales, poor forecasting, or mismatched products. When assessed at the level of suppliers, product lines, and store locations, retailers can get a complete picture of product movements and bottlenecks.
Understand downstream retail logistics (demand)
Downstream logistics involves direct engagement with customers to better understand their behaviour and thereby improve customer engagement and boost sales. Retailers should monitor their sales from multiple standpoints like products, locations, and transactions, combining online and in-store operations, where applicable.
Monthly sales analysis can help retailers unlock insights like customer purchasing patterns, buying habits, and performance against prior sales targets. Each of these provide invaluable insights into consumer behaviour and business performance.
Modern Business Intelligence (BI) platforms can help retailers study and forecast monthly sales. This becomes especially valuable in uncertain business times with low predictability of demand.
Boost revenue and operational performance
The aim of optimising upstream and downstream operations is to improve financial performance. Analysis of financial KPIs such as gross/net profits and margins, and marginal revenue calculations can help optimise performance.
Traditionally, retailers would have to create these reports and access these insights manually and periodically. Modern BI platforms can help retailers automate this process, saving valuable time and making it part of their decision-making culture. For example, Ask Zia is the Artificial Intelligence assistant in Zoho Analytics, a BI package that enables users with even little-to-no tech expertise to create reports and dashboards and derive insights through simple natural language questions.
Ultimately, a retail analytics framework—powered by an advanced analytics platform—provides retailers with a powerful foundation to take a strategic view of their business, uncover revenue hotspots, and optimise their internal and customer-facing operations. During difficult economic conditions as we may likely see in 2023, retail success and revenue growth can be achieved by carefully studying the existing business, using the right tools.
Vijay Sundaram is chief strategy officer at Zoho.
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