Down-and-Out Retail Heavyweights: How In-Store Analytics Change the Game
By Tim Callan, timcallan.blogspot.com
With store closures and falling revenue threatening major retail chains, maximizing store productivity is more important than ever before. While it’s been proven for many years that website analytics can drive dramatic improvement in online retail environments, so far most brick-and-mortar retailers are engaged in only rudimentary measurement.
E-commerce analytics help merchants discover the best user experience for shoppers, such as the design choices that make it easiest for shoppers to select and qualify the products they want to purchase. This analysis reveals upselling practices and other opportunities to increase the average ticket value at purchase time. It also facilitates customer affinity, increasing the number and frequency of return shopping trips. The bottom line is that online analytics discover and remove obstacles to purchase and lead to a more favorable shopping experience.
This invites the question of why these practices are so ubiquitous in online retail environments and yet so absent from many brick-and-mortar retailers.
Marketing consultant Alex Goldfayn recently prescribed a six-point plan to improve Best Buy’s outlook. While “better store layouts” and “better blue shirts” are thought provoking ideas with good potential, I’d like to propose a strong seventh plank in Goldfayn’s performance enhancing platform: In-Store Analytics.
Just as web analytics can mean the difference between profit and loss for online retailers, so too can in-store analytics tip the scales for physical retail chains. By combining sources such as the store’s point-of-sale system, in-store video feeds from those ubiquitous ceiling cameras, time and staffing software, RFID tags, Wi-Fi trackers, intelligent shelf pushers, and more, a robust in-store analytics installation should measure on the order of 10,000 data points per store visitor.
The resulting insights can show retailers how to optimize their store layouts, hours, staffing, promotions, signage, and really anything the imagination can cook up. Retailers who use in-store analytics routinely report sales increases in the double-digit percentages. In fact, luxury pen-maker Montblanc recently described achieving a 20% sales increase by simply paying close attention to its tracking system, which guided the company to move best-selling items to another part of the store.
Unfortunately, Best Buy saw a 30% decrease in net income last year. What would that have looked like if the electronic-retailing giant had been able to increase revenue by 20% across its stores? When you consider that most of the company’s costs are fixed, that certainly could be enough to wipe out the decline entirely. Similarly, would Sears have needed to close more than 100 stores if it could have increased performance by 20%? Not only might many of these stores themselves become profitable, but increased profit in all the other stores could have made the whole chain’s financials look entirely different.
And so we return to the question of why these practices are so pervasive in online retail and so lacking at brick-and-mortar retailers. The answer is that the digital nature of e-commerce made the measurement tasks very straightforward from the get-go and eliminated physical considerations entirely. In the physical world, the engineering tasks are much more challenging and as a result have lagged the web by a decade or more in terms of availability, practicality and ease of use. Just as in the late 90’s all but the largest and most sophisticated online retailers were using little to no analytics in their sites, such is still the case for most physical retailers today.
As e-tailing leaders such as Amazon gear up to open brick-and-mortar stores, it’s only a matter of time before in-store analytics become a widely understood best practice in the retail industry. The good news is that these analytics have progressed to the point where solutions are reliable, versatile, robust, and easy enough that you don’t need a Ph.D. in math to use them. Successful retailers will take advantage of these new capabilities to improve the bottom line, often at the expense of competitors who are less willing to stay current.
And just as it happened in the online world, what starts as a “secret weapon” for some forward-thinking retailers today becomes a must-have tool for the mainstream tomorrow.
Tim Callan is CMO of RetailNext, which provides real-time in-store monitoring and analytics. An industry veteran with more than 15 years in marketing leadership roles for enterprise software and SaaS-based companies, Tim was responsible for the creation and propagation of the “VeriSign Secured Seal,” an e-commerce staple that grew to be the world’s most recognized online trust mark and is currently displayed on more than 100,000 web sites and viewed upwards of 750 million times a day. He has a marketing and technology blog at timcallan.blogspot.com and can be followed on Twitter @TimCallan.