Three Pieces of External Data Impacting Retailers’ Bottom Lines
Retailers are constantly looking for smart ways to gauge their performance, and understanding data is crucial to this process. When looking to make quick decisions – from determining which products to stock at certain locations to optimizing pricing based on in-store promotions – much of a retailer’s success relies on insights gained from its internal data. Information collected from POS systems and loyalty programs can provide key insights, helping retailers make the best possible business decisions. However, retailers are missing out on a big piece of the equation by not incorporating external information into their analysis, too. There are various uncontrollable factors that have an impact on a retailer’s business that often aren’t considered.
By taking these outside aspects into account when monitoring performance, retail decision-makers will have a much clearer and more complete picture of their business as a whole.
Here are three key data sources most retailers didn’t even know could be affecting their bottom line, and why they need to start incorporating them into their performance accounting process.
1. Geospatial data: Looking at the wider environment
Previously, analyzing geospatial data meant looking at dots on a map in order to understand a retailer’s general market penetration in comparison to its competitors. This has quickly transformed into a much more complex application, allowing retailers to gain a clear view of business operations in a specific locale and helping them spot opportunities to continuously improve based on each environment.
By incorporating geospatial data into their analytics tools, retailers can gain a full overview of performance. However, the real benefits come from pairing this capability with additional data sources, such as census information. This combination allows retailers to dive even deeper into understanding how each specific product is performing against the maximum available potential in a particular market.
2. Census data: Knowing your customer across locations
This brings us to layering in census data to the analysis. At both the national and local levels, census information can provide more powerful insights into issues and opportunities that could have an effect on a retailer’s bottom line.
Specifically, this data allows retailers to measure characteristic information at the most granular level – from population size to average income to demographics and ethnicity information – in order to gain a full picture of penetration per capita. The value of this capability is that it allows retailers to analyze demographics of current customers, all the way down to the specific products they purchase. From there, census and geospatial data helps retailers identify similar population pockets that they can begin to target. Looking at the overall market and layering in this additional information helps retailers truly understand where they stand amongst their competitors, ultimately helping them make smarter and more strategic business decisions to support growth.
3. Weather patterns: Anticipating and preparing for potential issues
A final key factor that few retailers take into consideration during their performance analysis is weather. Have sales been slow due to heavy snowfall in the winter? Notice delayed deliveries caused by a nearby hurricane or tornado warning? Even though they can’t control it, weather affects retailers every day, from the manufacturer all the way down to internal operations issues. Therefore, it only makes sense to incorporate this data into their performance accounting process.
Not only does this information allow retailers to better understand why they over or underperformed on a specific day or time period, but drawing in weather data offers the ability to anticipate potential issues by making correlations between weather patterns, stock and sales. For example, if a grocer is aware of an upcoming blizzard expected to hit in the next couple of days, it can properly prepare by overstocking common products that customers bought during the previous snowstorm. This means no more empty shelves where the water, milk and bread used to be – ultimately increasing sales and making for happier customers.
For retailers, the ability to gain a full picture of operations and performance is invaluable – but this is only achievable if retailers move beyond traditional data analysis and start making correlations between both internal and external data. In performance accounting, there are so many environmental constraints that could be affecting a retailer’s bottom line and once these factors are accounted for, retailers will have a more complete view of their world and be able to optimize how they do business.