Before joining RICS last year, I spent 35 years in the Athletic Specialty Industry on both the retail and brand side of the business. I have seen a significant change in how product is sold and how the consumer shops. The one thing that has stayed consistent is the value of data in managing a business and informing your decisions.
I learned through my own experience of trial and error that having a little bit of data can be as dangerous as having no data. This is the most common mistake retailers can make.
That is why I believe that having data and analyzing it against the bigger picture is so important.
A single piece of information without a broader picture can represent a result that is either over or understated. It is like looking through a camera lens that is zoomed in too tightly. By pulling back and bringing the result into focus you begin to see the full picture.
That bigger picture, or context, can include several data points, such as amount, time, cost, and expectations. This is what allows you as a business owner to make more informed decisions, whether that is future product purchases, applying the appropriate markdowns, or creating an effective marketing campaign.
So how do you determine context and then put that data to use?
1. Set, communicate, and manage against goals
Running a business without clearly defined goals is like taking a trip with no destination or directions on how to get there. Your goals should start with your store and then your products, and finally, include your employees. It is important that your staff know what the goals are for the store(s) and themselves, especially if you are not making the day-to-day decisions.
2. Determine the data you need
The amount of data available to you as a retailer can seem intimidating. Setting your goals and understanding the nature of your business allows you to decide which data is necessary to make the right decisions. A fashion business might not need to look at individual styles and still be able to manage at the class or vendor level, while a store with a larger number of carryover or re-order styles would need drill down deeper to the SKU level. At RICS, we recommend that all our clients use sell-through percentage, turn rates, gross margin percentage, and ROI as the best means of evaluating class/category, vendor, and style performance.
3. Use multiple data points
It is very important that you use several data points as a means of validating and confirming any single result and the actions you take. For example, a high sell-through rate (Units Sold/Units Sold + Units On-hand) needs to be compared to the amount time it took to sell that product (Turn Rate) and the Gross Margin percentage (Sales $ – COGS/Sales $) to know if that product is selling profitably.
Before making any additional purchases, you should review your Open Orders to avoid bringing in excess inventory. If you have access to customer purchase history, this is a great way to confirm your expectations and recognize any changes in your customers’ preferences.
4. Schedule a consistent time to pull, analyze, and act
In order for the data to be most effective in understanding your business, it is important that you set a regular time to review the data, analyze the results, and then take action. That might include purchasing more of a product, reducing open orders, or taking a markdown to drive sales. Most of our retailers are reviewing their data every week. There are other points in time that are important checkpoints, such as quarterly or seasonal reviews, or before attending a tradeshow or a meeting with a vendor. While they may not act on the numbers every week, they can recognize trends and evaluate individual results against the overall performance of their business.
If you’re interested in learning more about the power of data and how to apply it to your business, we offer a variety of webinars on the topic. You can also listen to me talk about the topic on the Boutique Boss Podcast hosted by Ashley Alderson, Founder of The Boutique Hub. Learn more here!