Success in retail often boils down to one formula: the right product to the right market at the right price. Add to that the right time
and place, and you’ve got yourself a winner.
So how do we know what the right things are?
Retail analytics can provide you with the information you need to determine these factors. In the past, the most valuable data that retailers can obtain from the market was sales history. Today, more and more information is available to merchants. These
pieces of data and information can be turned into valuable knowledge that retailers can translate into sales.
Let’s take a look at what retail analytics is and how it can help boost merchant performance in sales and marketing.
What is Retail Analytics?
Retail analytics is the study of consumer data as it relates to the retail industry. Retail analytics helps merchants to respond appropriately
to the needs and wants of their target markets. Before the advent of the Internet and advanced technology, retailers relied on broad market information published by marketing research firms, or more specific—yet still general—data
gleaned by their own marketing teams.
In essence, retail analytics is all about understanding the customer:
- It is focused on the future. Proper analysis will yield crucial data that allow retailers to make an informed decision about which products to make and sell to which customer segment. The past, or sales history, can only tell you which
products moved fastest, and not much else.
- It gives retailers a clearer picture of their customers. Retail analytics can provide you with a more specific profile of your target market—their lifestyle, spending habits, eating habits, and other things. It’s no longer
just “people in their 30s and 40s who are working with families.” It’s “Sarah, a 34-year-old married mom with two kids who loves to go hiking with her family and needs water-resistant bags to hold her kids’ snacks.”
- It allows retailers to check if their products still match their target market. You started with dresses aimed at the young female professional and marketed them accordingly. But then a deeper analysis showed that it’s the older
female professionals who are buying those dresses. All right then, you say, time to switch marketing gears and cater to the market actually buying our goods, instead of wasting dollars enticing a customer segment that is largely ignoring you.
Retail Analytics for Online Shopping
With the rise of online shopping, it’s actually much easier now for retailers to get a glimpse of who their customers are. Have you ever bought something online—or even just browsed online without purchasing anything—then find that
the next time you log on to that website, it shows you similar products?
Technology has allowed retailers online to probe further into the habits and movements of their customers. What products were the most viewed? From what part of the country or world did the most sales come from? Which items were viewed a lot but were
not purchased? What did the customers end up purchasing?
The answers to these questions help retailers make better decisions about their strategies, making advertising and marketing campaigns more cost-effective.
Retail Analytics for Brick-and-Mortar Stores
What about the stores that only operate with physical branches, or get most of their revenue from brick-and-mortar stores?
The good news is that technology has also opened up new ways to analyze customer data for these
types of retail stores.
- Time data capture – How long do people typically spend at the store?
- Traffic flow – What is the foot traffic like inside the store? Outside the store? Do more people linger around specific product racks?
- Movement vector – What kinds of movements do certain groups of people make in and around the store? What do they do?
There are companies that offer to track these metrics for retailers, using GPS from users’ smartphones. It is important to note, however, that this is still a tricky line because of data privacy laws.
Still, these kinds of information would be very valuable to a retailer. Some data will even include competitor analysis if the information shows where a potential customer ended up buying what they needed.
Impact of Retail Analytics
In the end, it’s not only sales and marketing that will benefit from a good retail analytics system. Inventory will also benefit from it, as it will allow merchants to manage inventory more efficiently according to forecasted sales from an analysis.
The technology we have today also means increased automation, leading
to more insights for better planning.
Retail analytics is a worthwhile and practical tool for retailers to understand their customers better and give them what they want. The retail industry is highly dependent on the behavior of their markets, and so to understand them will likely lead
to improved performance, if not outright success.
Are you a retailer struggling to understand your target market? Have any questions for us? Let us know your thoughts by getting in contact.