Depeche mode: the devil is in the data detail

Phil Mullis –5th May 2016

Businesses deal with data everyday but for retailers using it to aid planning and decision making can make all the difference to the bottom line.

So, the questions are:

How can retailers use that data to their best advantage; and

How can they find that all-important insight within the often, sizeable volume of data?

Data driven forecasting

Retailers can use predictive analysis to help them stock their stores. For example, you could monitor 10 years trends, which details what people buy, from where and when they buy it. There are some extra bits to bring in to the algorithm, such as bank holidays, sports events (Euro 2016, for example) or even the Queen’s birthday. By using predictive analysis retailers can plan and forecast their sales, cash flow and required stock levels.

Knowing your past helps shape your future

Ok, so while using predictive analytics rather than gut feel sounds simple, consider this example:

The data available to you is initially retrospective, which means that whilst the last May bank holiday may have been a scorcher and footfall was great, this year is predicted to be a bit of a washout. Therefore, your customers may be sofa shopping rather than in-store – so make sure you have the right balance of free stock between on and off-line.

Depeche mode in the supply chain

Can using predictive analytics prove to be the elixir to retail success – what about the weather factor? The weather is often cited as one of the causes of sluggish retail sales, particularly in the clothing sector. We know the weather is a pain to forecast but can’t retailers look at ways of reducing its influence and using it to their advantage?

Retailers need to create and continually iterate a fluid and fast paced business model; supply chains should be designed to meet the stock demands quicker. How fast you can move from conception to display could be just the competitive advantage you need to win over your retail rivals: changing ranges to suit demand (and the weather!), in just a few weeks rather than months, could help reduce overbuying stock and diminishing your margins.

Customer demand

Recently, I watched a television programme about an independent clothes store based in the North of England. It recognised that one of their fast-selling “hot” lines was women’s black leggings and whilst these were selling very well, customers would often ask for a brown variety.

Following a clearly documented increase in customer requests, the management decided to invest in brown leggings. Interestingly, in its keenness to capture and capitalise on this demand, the retailer decided to manufacture the stock in the UK as delivery was quicker. It meant taking an initial profit hit but the stock ended up drawing people in to the store to buy other items of clothing besides the leggings.

Recipe of a master

I also recently experienced how incorrectly using data for decision making can lead to a reduction in the bottom line. Over a bank holiday weekend I visited a restaurant, only to be told on arrival that it had run out of several of the dishes on the menu. Plenty of people turned away at the door – and the sales opportunity was lost.

If only it had used data analytics to help forecast demand and order in the correct volumes of food supplies to match!

The data fuel to make your retail business fly

I have heard people say that data is the fuel for your business; clearly, using unleaded, diesel or red is vital for the business machine. If you choose to use data analytics to aid decision making, ensure your finance function is involved – we love analysis and what-ifs.

A forward looking finance function should have the skill to be able to expertly analyse data and help you understand what it really means. It should also be able to hypothesise scenarios, using data, which will enable stronger, more informed, decision making.

If you would like further information about how data analytics can benefit to your retail business, then please get in touch with the Wilkins Kennedy Retail and Wholesale team.