Fast Diagnostics in Retail: How to Detect Chain “Pains” in a Few Clicks?
Retail is the most dynamic business model, which is affected by every minor change in the economy. This requires a quick response to any market fluctuations and timely decision-making, especially in crisis times. However, how to detect problems in time, understand existing dependencies in business processes, and prevent failures?
To solve this problem, it is necessary to provide employees with appropriate analytics.
In the article, we will talk about business analytics in retail and the most important metrics of chain success.
Business analytics in retail: requirements and expectations
Most modern chains have established analytical processes. However, most often it is a collection of historical sales data, which is difficult to systematize and gain insights into the strengths and weaknesses of stores. Managers spend a lot of time and effort processing them, analyzing them, and building dashboards. This is the reason for wrong decisions, ignoring problems, failures, and losses.
Analytics is not just a list of metrics and indexes, but a whole complex of encompassing actions: data collection by stores, their systematization, and evaluation. In the future, such information gives a complete picture of how the business functions:
- how profitable the stores are;
- whether the assortment matrix is correctly formed;
- how the chain interacts with partners: suppliers, transport companies;
- whether customer service is organized correctly.
Are all analytics actionable? – No.
Modern analytics must be actionable. That is, it should answer the questions:
- What happened on the chain? – is not only about collecting and analyzing chain data, but also focusing on identifying problems or weaknesses.
- Why did this happen? – analytics establishes dependencies between processes and reveals the reasons for the decline in sales or the reasons for their growth.
- What to expect in the future? – based on existing trends and external factors, analytics should provide for the plans implementation or the achievement of the main metrics values.
- How to proceed? – effective recommendations generated by artificial intelligence built into analytics allow you to choose the right strategic directions: assortment, pricing policy, order size, etc.
The Ukrainian product IT company Datawiz has studied all the retail “pains” and the requirements for analytical solutions and has created a powerful and flexible platform for retailers – Datawiz BES. It is a holistic “ecosystem” of desktop and mobile solutions with closed-loop management that covers diagnosing your business, identifying problems, and providing recommendations for solving them.
With this platform, you can not only analyze your business data but also solve problems quickly.
A significant advantage of Datawiz BES is its personalized dashboard, which is customized to the needs and responsibilities of various business roles. With its help, in a few seconds, managers and executives get an overall picture of the main KPIs, which are indicators of the “health” of the business. So, it is easy to keep a “hand on the pulse” and avoid failures and losses.
Chain KPIs: what is their value for different roles?
Key performance indicators are the most important metrics for your business. Constant monitoring of them will allow you to understand whether your network is on the right track and whether there are any problematic “places”. We tried to highlight the most popular and universal KPI list for retail, which is understandable to everyone.
- Sales value. It is the main key metric and measure of success. Most international retailer ratings are formed based on sales value since it indicates the scale of the entire business. In addition, the sales value is used to calculate many ratios: turnover ratio, profitability, and investment attractiveness.
- For the chain owner, the sales value will indicate the amount of return on investment and the effectiveness of the work done (advertising, promotions, personnel).
- With its help, the store manager can evaluate the success of their store and understand how correctly the assortment of goods is selected and how efficiently the staff works.
- For a category manager (CM), the sales value will be interesting in the context of managed categories. This will show how much the goods in the controlled categories are in demand among buyers.
- A marketer can analyze the effectiveness of promotions by evaluating the sales value of the ongoing promotion.
- Sales Qty. This is the natural equivalent of sales value. This performance metric allows you to exclude the price factor and assess the real situation in sales.
- With its help, the chain owner and the store manager receives the necessary information not only to manage sales, but also the processes of supplying goods. Since it indicates how many goods left the shelves of the chain/store as a result of sales and how many need to be ordered.
- For CM, it will show which goods in the controlled categories are in high demand, and which are slow-moving goods.
- A marketer can understand how much the current promotion interested buyers, that is, how many goods within the framework of the promotion found their end consumer.
- Gross profit. In simple words, this is part of the revenue that remains after paying the costs (cost of sales), or – the amount of the realized markup.
- The chain owner evaluates the payment for their risks and the possibility of scaling the business.
- The store manager understands how efficient the store was and how much the costs of the main activities were covered by the proceeds from the sale of goods.
- For CM, profit by category will indicate the optimal assortment, well-chosen suppliers, and pricing policy.
- Receipt Qty indicates customer activity and reaches as it reflects the number of purchases made by customers.
- For the chain owner and the store manager, this metric indicates the popularity of the retail chain/store and the workload of the terminals.
- With the help of this indicator, the CM can understand how many customers have chosen its particular categories.
- The marketer uses this metric for figuring out how many promotions were interesting and how they affected the shopping cart.
- Average receipt is an important performance indicator that allows you to understand the value of each average customer of a store/chain.
- For the chain owner and the store manager, it indicates how many monetary units, on average, the client leaves in the chain/store during one purchase.
- CM and marketer – understand how much customers spend on one purchase of a certain category or promotional goods.
How to evaluate the KPI store?
Evaluation of KPI depends on the tasks. But today we will talk about express diagnostics, which will give a general understanding of the current situation and highlight problem areas. It should cover:
- Monitoring of actual values of KPI for different periods of time (day, week, month, quarter, year). It is important to know what values are achieved by the indicators for the day, month, or year.
- Analysis of the dynamics of indicators – absolute and percentage (growth rate) deviations compared to previous periods. So, if the Sales value for a month was 2 million $, this is good, but if it is known that its value is 0.5 million $ or 20% less than the previous year, then this is a completely different situation.
- Evaluate the completion of plans and determine the expected performance with existing sales trends. Already in the middle of the month, it should be understood whether it will be possible to achieve the desired indicators and, if necessary, take appropriate measures to improve the situation.
These analytical procedures can be quickly performed using the interactive panel (Main Page) on the Datawiz BES analytical platform. Here all the main indicators will be at your fingertips. Using the panel, in a matter of minutes you can not only conduct an express analysis, but also form a rating of stores/categories/promotions and identify gaps in the chain in time.
The Relationship Between Key Selling KPIs: Tips and Tricks
Comparing KPIs with each other, you can easily find problem areas. Let’s consider several options.
- Sales Value and Sales Qty. Sales value is the result of the interaction of at least two factors: price and quantity of sales. Comparing the indicators of growth (decrease) in sales value and the sales qty, you can understand what caused the increase in revenue.
Example: If Sales Value increased by 10%, while Sales Qty increased by 3.5%, this indicates that the increase in revenue was mainly due to price increases. The price contributed to the sales value increase by 6.3% (1.10 ÷ 1.035). That is, the rise in prices, and not the activation of buyers, led to an increase in sales value.
- Average Receipt and Receipt Qty. A comparison of indicators shows how the activity and value of chain customers are changing.
Example: The receipt Qty increased by 0.8%, and the Average receipt – by 5.2%. This indicates that with a slight change in the number of visits with successful purchases, the value of each client for the chain has increased significantly.
- Sales Value and Profit. Comparing the percentage configurations of these characteristics allows you to understand what products are sold on the chain.
Example: With a 10% increase in sales value, Profit increased by 15.4%, which indicates an increase in demand for higher margin products.
You need to remember that every business is unique and finding a universal key to success is difficult. But if you regularly study the statistics of basic key performance indicators, you can not only evaluate the results but also prevent failures and losses in the business in a timely manner.
With the help of BI Datawiz reports and dashboards, you will learn to read the metrics between the lines and speak the same language with all metrics. To learn more about the solution, feel free to try our free demo.