Posts Tagged ‘Retail Insights’

How Small Businesses Can Listen to Customers

Monday, May 18th, 2015

listeningThere is a wonderful quote that “the plural of anecdote is not data.” Too often retailer and other small business owners get snared into believing that a story or two that rises from the hundreds of customer encounters every day is a full and accurate reflection of customer feedback about their stores or business.

Net Promoter Scores (see our earlier post: Net Promoter – the Most Common Retail Listening Tool) prevent that but they are just the beginning to really understand the Voice of the Customer. To objectively understand how you are perceived in the marketplace, find out:

  • What do your best customers love about you?
  • What most frustrates your unsatisfied (past) customers?
  • How do your customers think about you differently than your competition?

For most managers, the only way to uncover these emotionally charged questions is to hire an objective third party to uncover the answers. Focus groups and intercept surveys are the most robust methods – but also expensive. At Delaney Consulting, we administer online surveys and other methods for uncovering honest customer feedback. Because it is human nature to overreact to negatives and under-react to positives, an outside firm like ours can help a management staff accurately gauge the appropriate responses that are required to elicit the kind of customer support everyone wants. Use caution when relying on internal communication to accurately judge customer feedback. Rarely is accurate data unearthed solely through employee feedback of “what customers are saying.”

Next Post: Using Social Media to Listen to Customers

Why Category Definition is Critical

Tuesday, August 5th, 2014

Screen Shot 2014-03-06 at 2.31.25 PMFor retailers who follow a structured category management review, the first step is defining the category. The idea of defining a category each year may seem obvious – even redundant year after year.  But the truth is that customers’ tastes and habits change. A review of trends and changing customer behavior can catch newly emerging opportunities so that retailers and vendors can capitalize on new understandings.  For example, a retailer who habitually reviewed away from home beverage consumption as carbonated beverages versus bottled water could overlook the trend for aseptic packaged milk product consumption and water flavor additives.

The implications can transform a retail store depending on whether its management defines their category as DVD Movies or At-Home Entertainment.  In one situation, they are locked into optimizing the DVD category alone.  In the second, they can evaluate Gaming, Cable Television, Satellite Television, even bar ware!  Defining a category is all about drawing boundaries in the same way your customer does.  So, a customer will ask their family “Which DVD should we watch tonight?” less frequently than they will say “What shall we do tonight?”  Consider the differences in these category definitions: Glues and Paints versus Crafting Supplies, Water Fountains versus Water Features, Party Invitations versus Party Supplies. What should come to mind are the changes in product selection and merchandising in the store that will better anticipate customer needs for these categories.

Category definition needs to be grounded in customer insights that are gained from several sources: affinity purchases uncovered through data mining market basket transactions, primary customer observational research and self-reported customer behavior.  Frankly, affinity analyses can be misleading if retailers do not carry a wide enough breadth of product to be a full solution.  For example, if a limited assortment grocer did an affinity analysis on birthday cakes, it may discover that the customers also purchased ice cream, paper plates and candles.  It could, however, overlook that customers purchased the remainder of their needs (wrapping paper, cards, balloons and invitations) elsewhere.  Primary customer observational research is expensive and time consuming.  Self-reported customer behavior is notoriously inaccurate.

For most retailers, the most cost effective way to discover unbiased customer insights is to review the customer research of their top vendors along with customer research from emerging niche vendors. Niche vendors are usually the first to recognize and exploit new customer patterns. Established vendors less routinely recognize changes in behavior. Their focus on current product lines and customer segments can create blind spots.  Take, for example, the difference between established home cleaning mega-vendors and environmentally-focused cleaning vendors like Mrs. Myers and Seventh Generation in recognizing the growing demand for less chemically-intensive home cleaning products.

For retailers trying to glimpse the future and create a compelling selection that will meet the needs of future customer demand, actively sussing out customer and shopper trends through every resource available is an ongoing endeavor.

Category Management Planning

Friday, March 14th, 2014

candy rackMost forward-thinking retailers use some form of category management to evaluate assortments, make sales and promotion plans and execute those plans to achieve sales. This cycle usually occurs once a year – but it can be more or less frequent depending on the category’s volatility. The category plan reviews past plans and research, vendor input into future customer trends and forecasts, supply chain and financial input to verify true costs and concerns and incorporating the best investment tactics for the retailer to meet its stated financial and customer objectives. Most retailers have a framework or template for these category plans that help the top merchandising executives make trade offs and decisions about future business investments.  Nearly every category manager can find an unexploited niche that could yield some level of sales growth. But a unified category management process helps focus the organization on the top priorities.

Taken in its entirety, the process is called a Category Review.  In the review the category is defined, its role within the company or store is defined, its sales and potential is assessed and a specific budgetary goal is set. With the goal in mind, discreet tactics around adding or reducing products, changing prices, changing promotions or changing merchandising are developed to meet the goal. The costs associated with the changes are approved and the organization implements the plan. From a top down approach, it is a proven process for capturing and sharing the best information about how to succeed in the category to remain competitive.

Retail Inventory PULL Model Explained

Tuesday, March 11th, 2014

Screen Shot 2014-03-06 at 1.44.40 PMIn a Pull operating model, the stores can select which products and how much they will carry. This is typical in most co-op models (like True Value or independent grocers) or franchises like Hallmark stores. The store management selects among the breadth of products offered by the wholesaler(s) and decides what they will carry, where it will be merchandised and how much to carry.  Replenishment is at the discretion of the store through store-orders. To automate the store orders, the sales data may be transmitted to the replenishing warehouse and automated orders are created to maintain a minimum store inventory level. Vendors who call on these retailers typically devote substantial sales resources to call on stores or store groups to influence new item selection, pricing, promotions and order levels.

The benefit of a Pull operating model is that the decision about product selection, quantities and timing should be so close to the customer as to better anticipate true sales rates. Thus, a store owner in Minneapolis can postpone receiving garden supplies until May while a store owner in Dallas can have them in February. Store management can meet niche product requests and better manage the inventory in the store for the actual store conditions.

The drawbacks are that there is little financial control in place to prevent poor decisions from scuttling store performance and stores can vary wildly in their presentation to customers. Inventory bulges and shortages can crop up unpredictably across the system. Vendors can wield control through relationships that may not be in the best interest of the retailer’s financial system. Purchases can be made without reaching full volume discounts. There is more unpredictability in the financial performance of the entire system. Vendors can multiply as each store finds their own source for common goods – and power buying opportunities that come when vendors are consolidated are bypassed.

Retail Inventory PUSH Model Explained

Friday, March 7th, 2014

Screen Shot 2014-03-06 at 1.45.19 PMIn a Push operating model, products are selected by buyers, a forecast is developed for anticipated sales, products are sent to the stores to supply that forecasted demand and if the products are replenished, they are replenished from headquarters or an HQ system. The most common example of this is in fashion retailing where new lines are sent to stores in a single wave or possibly two throughout a season. In a push model, it is critical that the buyers are very capable of predicting sales trends and forecasting sales rates by store. One of the benefits of this model is that store operators do not have to be deeply trained in product attributes to select their own assortment. Typically, stores cannot determine what products they receive or how many cases they will be shipped. Store operators receive the product and merchandise it as direct by headquarters. In this model vendors are typically limited to influencing the corporate location and consumers. Vendor sales representatives would waste their time trying to influence store managers as they have no control over purchasing.

The benefits of this model are the benefits that come with centralized control. Purchases are made at volume discount levels, stores are uniformly managed and merchandised and vendors are held to standards of delivery. Financial control is more predictable as forecasted sales are managed within a corporate budget.

The drawbacks of this model are the risks involved with having an entity that is so far removed from the end customer making critical decisions. The buyers may not understand the competitive situation in the market or the regional taste of the customers. Furthermore, the forecasting model has to be tremendously accurate to eliminate out of stocks and over stocks at the store level. Store conditions for Push models can deteriorate quickly with loaded pallets on the sales floor some months and empty shelves other months. There has to be a fast response feedback loop from the stores to the central location for this model to be efficient.

Cash FLOW is King in Retail

Friday, January 31st, 2014
Retail Cash Flow Cycle

Retail Cash Flow Cycle

Even the best retailers can find themselves in a cash crunch. Cash flow is the single biggest issue retailers face. Profitable companies can find themselves without access to liquid cash. As a retailer, getting your hands on cash and keeping cash flow moving through your business can mean the difference between managing through tough economic times and closing up shop.  Critical retail measurements like inventory turn and profit contribution are early indicators of a healthy cash flow cycle.

The best possible cash flow situation is when there are purchase deals that are longer than sales cycles.  For example, let’s say a paper vendor offered you a payables program where a $700 purchase needed to be paid in 90 days. Your price markup takes the retail price of that wholesale purchase to $1,000.   If your stock sold in 60 days, you would have a positive situation where you sold your goods before you had to pay for them, You would gain 30 days of “float” in your cash flow where you could earn interest on the full sales price of the paper ($1,000) before paying out the wholesale price to your vendor ($700.)

Now imagine the same scenario where the 90 day purchase took 120 days to sell.  Even though the profit rates or margins is the same 42% markup rate, the first situation is far better from a cash flow point of view.

Smart retailers review their financing terms from vendors, control their inventory (stock) and rely on management reporting to maintain visibility to their cash flow.  As important as managing the outflow of cash is managing the cash coming into the organization.

Retailers: Get Out of Showroom Denial

Tuesday, August 27th, 2013
Lego's front windows now hold a "Gallery"

Lego’s front windows now hold a “Gallery”

For every retailer, pricing is a critical (if not central) focus on dominating their competition.  But even in today’s mobile technology world, many retailers are in showrooming denial.  It is faster and easier than ever for your customers to compare prices in real time.  Recognize that shopping has changed: shoppers continue to peruse stores but purchase online for a number of reasons: better pricing, home delivery, wider selections of colors or sizes.  The sooner retailers accept this is happening, the sooner they can take steps to overcome this new business pressure. BEcause this new way of shopping isn’t going away.

First, the retailer itself needs to clearly understand how they compare to the competition.  That means looking at hard data to see an accurate comparison of prices, delivery policies and assortment.  Then, the retailer can decide if it will match the prices of online retailers on a year-round basis.

Second, retailers need to make it easy for customers to comparison shop as well.  It may make you quiver, but it works.  Consumers have a knack for finding deals – so they will appreciate it if you make it easy for them to do so.  If you will price match or you have the best deal you can give your shoppers confidence that they are getting the best price and make them feel good about their purchase.

Third, build a process and a system for making price comparisons a part of your standard operations.  Tools and services exist that can scour pricing data on Key Value Items and other critical products to make sure you are aware of price changes in the market as they happen.

Fourth, don’t make competitive pricing a race to the bottom.  Understand what else makes you great (service, selection, location, easy returns, etc) and make it a key part of every customer transaction.  Help your shoppers understand that there is more than prices that makes you great to keep them loyal.

A Mystery Shopper Program Can Point Out Blind Spots

Friday, July 12th, 2013

inventoryHow do you REALLY stack up?
Recently a client with three stores asked for help to create a strategy for the next 5 -7 years. They routinely talked to their customers and employees; there was even a customer survey two years ago. They concluded:

1) They were the best among their competitors. As evidence, a local business group had selected them to lead a conference round table on leading retail practices.
2) The two main obstacles to improving store traffic were poor locations that were selected over 25 years ago and lack of convenient parking.
3) Their customers were high-end shoppers who did not mind paying more for the high degree of customer service they prided themselves on.

Nevertheless, they felt pinched by new competitors opening nearby and lower profit margins as more sales skewed to discounted goods on promotion in their product of the month program. After listening to management’s point of view, I set up a mystery shopper program to see what customers actually experienced in their stores.


The findings uncovered that the stores were beaten in critical areas:

1. Customers were commonly ignored for up to 15 minutes upon entering the store.
2. Inquiries about products were met with direction to the product location but any additional conversation quickly revealed a lack of product experience or knowledge.
3. Store associates were more surly and unkempt than management observed.
4. Prices were competitive but not enticing, locations were convenient and product selection was appealing – but high-end customers were happy to drive further to have cheerful, knowledgeable staff help them make their purchases.

Think you can’t be fooled? Think again. The management team was on site six days a week. Their interaction with store associates had become so close that they no longer saw the lapses in service. Management rewarded task completion like putting away deliveries, making bank drops and completing the work schedule more than helping customers. At least, store associates believed there was more retribution for not completing tasks than for not assisting shoppers. And customers could grasp that in a single store visit.

Up next: how to create a simple Mystery Shopper Program any manager can administer.

Making Sales Forecasts A Game

Tuesday, April 16th, 2013

Draymond GreenWant more accurate forecasts?  Here is a low cost and FUN way to capture the benefits of crowd sourcing to improve your sales forecasts.  When you need to place your inventory bet on new products or promotional sales, consider creating a contest!

Give your store managers, store associates or inventory analysts the chance to give you their best guess at what sales will be for an upcoming new item launch or holiday sale. Do it over and over.  Give an award to the person or team that is closest to the pin.

Then dive in and analyze: Who is consistently near the actual?  Find out how they estimate.  Then integrate their approach into your “official” forecasting techniques.

This method has been positive for many organizations who decided to loosen up their Father-knows-best approach and dive into Moneyball results.  Plus, it creates an authentic “let’s make work fun” activity everyone can embrace.

Where ya been, Flora?

Friday, February 15th, 2013

Flora DelaneyReaders of my weekly blog posts will note that I have been absent from the site for nearly 9 months.  In that time I have continued my ongoing work with both retail and marketing communication clients and started a secondary business that has kept my attention for nearly 70 hours a week!!  But I am pleased to report that the birth process of that new business is over and I have settled into the management phase of running multiple businesses just like I have balanced running multiple clients over the years.

More importantly, I have had the chance to work with a variety of both small retailers (3 stores) up to multi-branded national retailers (over 2,000 stores)  and have reignited some first-hand observations about the similar issues and complexities all retailers face.

So, I am glad to be back. Get ready for more retail advice, insight and maybe even some solutions re-appearing here on FloraDelaney.com

It’s good to be back!