8/27/2014
Who Knows Better Than You?
Bill McCurry
Who knows your business better than you? The person who understands the data, that’s who. It’s embarrassing to guess how many “add-on” items go into each cart only to have the data show you’ve been overly optimistic about how well you’re doing. It’s natural to assume things are better than they actually are, but how can you improve if you don’t know where you stand?
Your company’s data tells you what you’re doing right. As John Heaton (Knupper Nursery in Palatine, Illinois) says, “It’s okay to be awesome!” John and his wife Sue invest the extra time to ensure accurate and timely data. They aren’t slaves to data—they make data their slave. They know their sales data over a nine-year period, consistently spotting trends and using the numbers to adjust behaviors as needed.
Daily they look at the IAT (Individual Average Transaction—aka average register ring or average basket/cart total). John looks at days-of-the-week comparisons (Monday to Sunday), while Sue looks at days of the month as well (from the first to the last day of a month). Depending on the season, one method can be more accurate than the other. The 24th of December will always be the 24th, regardless of the day of the week. A spring Saturday on the 5th of the month will generally outperform last year’s 5th of that month when it fell on a Friday.
John’s a believer in tracking coupons to determine which is most effective and what distribution methods get the best results. Again, this is tracked daily. The best coupons are repeated. The losers are replaced or updated based on the characteristics of the “winners.”
A significant cost saver involves tracking percentages of seasonal product left over at the end of the regular price season. Too many retailers count what’s left after the markdown sales. Correctly, John believes that retailers should look at the pile left before the markdown is taken and incorporate that information into the next season’s buying.
John says knowing his numbers gives him a pinpoint focus on what’s working. He looks at sales and margin dollars generated per square foot. He takes total margin dollars and divides it by the square footage of the department area. Approaching the end of the year, the Knupper square footage devoted to Christmas grows larger. When that happens, it must be remeasured and the divisor in the formula changed. It’s a huge amount of work to track which departments are paying their way and which are below average and require attention. “How can you understand what’s working if you’re not accurately adjusting for seasonality?” John asks, already knowing the answer.
Inventory is a retailer’s biggest investment and requires more and more data to fine tune. For years, Bachman’s in Minnesota had inventory and information in “various silos that didn’t talk nicely with each other,” says Jeff Pilla, Manager of Bachman’s Lyndale location, who believes their investment in an all new company-wide information system will result in better inventory management and better experiences for the customer. “We’ll have customer loyalty programs that will allow us to give perks—things that matter—to the consumer over time, plus the right inventory in the right place at the right time.”
Jeff sees the future as having more opportunities to use customer data. “We can concentrate on the traits of the largest-spending demographic and use that to laser-focus our resources. We understand the younger generation will soon be adopting garden center shopping habits. We aren’t waiting. We want to grow our business now.” Having a centralized information system allowing both buyers and marketers to analyze trends will give Bachman’s an eagle’s eye view of their market. More importantly, it will allow them to see future potential.
Neither Knupper nor Bachman’s is looking for “business as usual.” They both realize markets change frequently. Both use hard data rather than “gut feel” to fine tune their organization and make the best decisions possible. We can all learn from them.
GP
Bill would love to hear from you with questions, comments or ideas for future columns. Please contact him at wmccurry@mccurryassoc.com or (609) 688-1169.