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| eNewsletter | Issue 1 |
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Featured Article
The Science of Uncovering Retail Opportunities
Business intelligence takes a scientific approach to the problem of digesting all of this information. We start with the premise that the comparison of two or more data points represents a possible opportunity to gain an insight. Insights lead to action. Actions enable a feedback loop. Finally, feedback brings knowledge. As knowledge builds, so does competitive advantage. The more feedback you can gain about your actions, the more knowledgeable you'll be. The more detail you have, the more knowledge you can gain. The mastery of detail is a fundamental business requirement, especially in an industry like retail. However, information systems do not seek out opportunities. They usually present summaries or spill detail. The summarized information obscures opportunities that are only visible at a low level of granularity. That's why buyers and allocators, people charged with inventory responsibility, walk around, even today, with 500 page reports or the equivalent spreadsheets. But who has time to look through hundreds of pages of reports? The 500-page report may not be at the level you need to find the nuggets of information that you can take action on to improve your business. REAL-WORLD STORYMy friend is a buyer for a mid-sized specialty chain with 500 stores in malls across America. Let's break down her responsibility from information standpoint. With the help of her planner, an associate buyer, and two assistants, one of her critical roles is that of inventory manager. Her products are quick-turn and fashion driven, so she typically manages inventory for two active seasons, is buying for a third, and planning for a fourth. In each season, she has more than 200 styles in at least 20 assortments or collections. The typical style has at least three colors and comes in a range of sizes (average 5). That means that, at any given time, the number of SKU-Store combinations for each active season exceeds 1.5 million. This figure does not include another 500,000 vital aggregates that reveal opportunities to respond to inventory problems, or pricing issues. These include: classification summaries, price point summaries, assortment summaries, color summaries, and size summaries broken down by geographic markets and individual stores. That's 2 million weekly summaries. Each summary involves at least half a dozen data points: sales in units and dollars, inventory in units and dollars, margin, sell-through percent, and weeks of supply. Each new week in the season brings another 2 million summaries, each with 6 data points. These weekly benchmarks are important because that's the only way she can truly distinguish trends at the regional or chain level. If my buyer friend and her colleagues actually spent ½ second on each combination each week, they'd need to work more than 500 hours just to keep up with the detail. NO TIME FOR LUNCHTo make it worse, buyers spend their time with vendors, responding to problems, processing important transactions such as purchase orders, planning for the next season, and dealing with their management. Do they have time for opportunities? No. Is it any wonder that merchants are typically time-starved and seem overwhelmed? They always seem to be working on yesterday's problems or the promise of next season. They spend almost no time working on the opportunities which are hiding in the details of the business. Printing out this volume of detail is out of the question. So my friend relies on a few summary reports that her IT department publishes each week. These reports were typically designed many years ago to measure performance, not identify opportunities. During the week, she can look up individual styles on her work station to get current information. But, while that is responsive to external influences (vendor or store telephones seeking information), what if she never initiates the query? SEIZE THE OPPORTUNITIESWe've developed an opportunity modeler that is part of the next release of QuantiSense. The first step is to identify the opportunities. Here is a partial list that would be appropriate for my friend, the buyer.
The next step is to determine how the business intelligence tool will measure each potential opportunity and what filtering logic would isolate real opportunities from potentials. This logic is highly dependent on the seasonal continuum. For each opportunity there are four filtering rules as follows:
 As opportunity-candidates are identified, they are evaluated for scale and relevance. The opportunity-candidates with the greatest impact and most relevance are alerted to the user. Often these situations require some further digging. Each situation is "playbook" that the team can investigate, take consistent action, and get further feedback as the results are determined in subsequent weeks. "SWEAT THE BIG STUFF"If an individual buyer must deal with 2 million summaries each week, we recommend they focus the top 50 opportunity candidates - about 10 a day, balanced between introduction, early, maturity, and decline. At ten minutes each, that's less than 5 hours of work. A good business intelligence application can pinpoint cases where merchants have an opportunity to take action. Retailers need a powerful tool to look at the details just the same way astronomers need telescopes and microbiologists need microscopes. Business intelligence offers the best answer as a tool. But as we go from site to site, we are constantly astonished when we see powerful BI engines reproducing the ineffective reports developed in the pre-BI era. The secret is in combining the best ideas from process engineering and overlaying them on top of business intelligence. About the Author: |
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QuantiSense delivers data warehousing applications specifically for retail chains. Using data loading components that integrate quickly with other systems, QuantiSense packages analytics for Merchandising, CRM, Finance, and Store Operations. Within 100 business days, the QuantiSense solution personalizes dashboards, alerts, workflows, and reports, enabling users to improve bottom line business results. |
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You've heard it for years: Retail is detail. Every retailer's weekly mountain of information represents an enormous challenge for anyone in retail management. And every new week brings a new historical perspective.