“The future is an unknown, but a somewhat predictable unknown.”
These words, often attributed to Einstein, have come to define the world of retail analytics. Democratization of data and accessibility of advanced technology are putting valuable insights and predictive power into the hands of business leaders and even retail associates—proving you don’t have to be an Einstein to understand:
- What’s happening in your business
- Why it’s happening
- What the future holds
- What you should do next
Not so long ago, these insights were unearthed manually. Analysts would gather data in a spreadsheet and apply statistical models to look for correlations and project future trends. However, the increasing breadth and complexity of today’s data makes this a difficult undertaking. With the help of diagnostic analytics, machine learning, and AI, businesses are able to overcome this hurdle and learn more than ever before.
So how can you drive value with data? Start by tracking these key actionable metrics first, then move confidently into the future.
If you can measure it, you can improve it
Actionable metrics help you understand customer behavior. The KPIs you measure should always align with your business strategy and ladder up to your overarching objectives. Here are some examples you might want to add to your dashboard:
Gross margin return on investment (GMROI)
- Formula: gross profit ➗ average inventory cost
- Insight: GMROI measures the profit made from inventory. You can target specific products and categories to understand which are bringing in the dough.
- Action: Armed with intel on what customers are buying and therefore most interested in, you can make informed decisions on which items to keep in stock, which to discontinue, and which need a pricing adjustment. This helps you achieve money-saving efficiencies by prioritizing the most profitable products.
Average order value (AOV)
- Formula: total revenue ➗ number of orders
- Insight: Not to be mistaken with average transaction value (ATV), which includes additional costs like taxes and shipping fees, AOV is a stronger reflection of actual customer behaviors and decisions since it doesn’t include those elements that are sometimes out of your control. AOV tells you the average dollar amount spent on the goods or services.
- Action: Your next step depends on your amount. A low AOV could be an indication that you need to change your game. For example, you might decide to offer payment flexibility to customers making a purchase to help them spring for higher-priced items. Whatever your tactic, it should provide value to your customers (we can help you there).
- Formula: ((CE-CN) / CS)) x 100
Identify a given period you want to analyze (week, month, or quarter) and find out how many customers you have at the end (CE) of this period. Subtract the number of new customers (CN) you acquired during this time. Divide by the number of customers you had at the start (CS) of that period. Multiply by 100.
- Insight: This rate tells you the number of customers that return to your store. In turn, this can help you determine if your customer service and user experience are creating customer loyalty or if you might be falling short in these crucial areas.
- Action: With these findings you can take steps to better manage your customer relationships. This might mean tracking customer purchases and introducing personalization, implementing loyalty and rewards programs, or developing engaging events to get customers involved.
- Formula: # of sales ➗ # of visitors
- Insight: Foot and digital traffic are important, but they’re not enough on their own to measurably benefit your business. You need these visitors to make a purchase in order to tangibly contribute to your bottom line. Conversion rates show how you’re performing now and can be a big indicator of opportunities to improve, especially in customer experience.
- Action: Based on your analysis you might choose to empower your in-store associates with further training and tech so that they can become approachable experts and sources of real-time information for visitors. You might also consider ways to eliminate barriers to purchase along the shopping journey, such as a complicated online or in-store checkout process.
Keeping people in the equation
In a retail environment focused on profitability, it’s hard not to get caught up in all of the numbers and dollar signs. Here’s our advice: make people your constant.
Foster a data-driven culture that helps you make connections with customers and create a modern workplace better suited to today’s evolving needs. Selecting a data strategy that benefits your customers and employees will always create goodwill and ultimately benefit your bottom line.
Forecast for success
Smart analytics can play a crucial role for retailers, no matter what stage of their digital transformation journeys they find themselves in. 52% of retailers already have advanced analytics in place, and 32% plan on expanding their use. Whether you’re using traditional business intelligence or have already adopted automation to zero in on customer behaviors, having a strong foundation for your data strategy is critical for future success.
Here are the key takeaways to ensure your analytics are up to snuff:
- Make sure your metrics align with your business goals and consistently track them.
- Establish internal support by hiring data analysts who can study and solve problems (bonus points if they can also educate others).
- Supplement your efforts by teaming up with partners who add value—our merchant partners benefit from a portal of downloadable transaction data and reporting.
Then you know what to do: put those insights into action!
KrisAnne Madaus is a NY-based copy and content writer at Zip who has served various clients in the tech, data analytics, and consulting arenas throughout her writing career. She enjoys creating content that helps business leaders foster innovation in retail, ecommerce, and management.