Specialty Retail Blog

Making good retail decisions is about more than just gathering lots of data. It requires a gift to tease trends and insight from that haystack of data. How many transactions are there in your business each month? How many orders are placed each season? How many markdowns are taken? With the POS system collecting all this data, there are many opportunities for random patterns to appear.

Forecasting the result by finding the trend is what makes for better decisions and a successful business. Hindsight is 20/20. It is much easier to pick out the trend when you can work backward from the result. But that’s too late.

When retailers try to identify the trends, there is a tendency to put way too much emphasis on the immediate past and last year. Ask a menswear retailer how business is and his answer is shaded by how long it has been since he sold the last suit. Every retailer I know looks at sales and compares to last year to determine an overwhelming amount of data upon which his decisions are made. Often, these analyses are fueled by emotion and lack rigor and objectivity, leading to panic rather than planning.

This is especially true when it comes to buying decisions. When retailers buy without the knowledge the data is capable of providing, the decisions made at market turn to panic when all that merchandise shows up in the store. Then the task of digging out from the bad decisions falls to the sales staff! More often than not the bad decisions come in the form of overbuying and panic can be seen in the form of markdowns. The more inventory the higher the sales goals must be to turn a profit and pay for the goods. When those sales goals are higher than reality it leads to a situation where the sales staff cannot be successful. That then deteriorates into a stressful environment that affects customers, staff retention and the success of the business. The flip side is when the bad decision is to under buy the merchandise needed in a key classification. The sales staff is forced to sell when there is not sufficient selection or merchandise to sell. When you talk about stress, there is nothing more stressful for a salesperson than watching a customer walk out the door toward the competition!

Objective, statistical, and professional analysis of all the events and data points that occur during the month gives a much clearer forecast of the trends. Statistical analysis of the data based on classification information allows retailers to base decisions on a proper weighting of the signals the customers are trying to tell the retailer with each purchase. The objective techniques allow the analyst to separate the signal and trend from the noise and randomness. If the last suit was sold 10 minutes ago but it was the only one for the month, business is not necessarily great!

There are certainly different statistical methods and a huge variation in the quality of the analysts who can connect the dots into a useful picture. At Management One® we have a team of 10 professional planners that review and adjust each classification based on an accurate forecast of future demand for that classification in each location. There is a planner for every 5 retail consultants. Each consultant is trained to analyze the output from the planner to be certain the right decisions are made by his clients. A retailer that uses subjective or inferior analytical techniques must HOPE he can make the right buying decisions every season. In retail today, HOPE is not a great strategy.

Intro:

This guest blog from Amy Hanson highlights some great recommendations for keeping your POS system running while you are tending to your store. Great service is important from any POS vendor. Not only having expertise but having someone answer the phone and jump on your query quickly is important. Never just assume it will happen.  Talk to others that use the same POS to verify. Thanks to Amy for her insights.

Do-It-Yourself Tech Support?

By: Amy Hanson, One Step Retail Solutions

It’s the busiest time of the day in your store and customers are lined up to pay for purchases and the POS system goes down….every retailer’s technical nightmare.  At that moment, your do-it-yourself tech support kicks in and solves the problem…or not. Now you are no longer the owner or manager, but the IT person, the job you are least trained for. Why do we buy insurance for our car, insurance to protect our inventory from fire or water damage, medical insurance to help when we are ill, but insist on doing our own do-it-yourself tech support?

When buying software for your retail business, you are often prompted to purchase tech support or insurance. It is considered to be the prudent move, but will cost you upfront and may be a good chunk of change. And like any expense, you may be tempted to put it off or figure things out yourself. While most software has an increasingly intuitive (user friendly) interface (what you are actually looking at), the backend (you don’t want to know) is a whole other story.

When I was somewhat younger, my father (database programmer) had a personal computer, which was still novel at the time. I got it in my head that I could help him by “cleaning” his computer. I went through the files and deleted anything that had not been used in a year, like the files that were all the way deep in the recesses of this computer and weren’t even accessible by the desktop – I seriously thought this was a good idea. I may have been young but anyone else untrained and clobbering around in software may spend WAY too much time, only to dig themselves deeper into a hole of problems and glitches.

A software solution has something similar to “chi” or “mojo”: if things get thrown out of balance the whole system can go down or suddenly features will start working incorrectly.

I had a long talk with one of our top System Consultants and got a new perspective on the advantages of purchasing that Tech Support contract.  Here’s what she said:

-              Clients who have avoided getting support for one reason or another and then have a problem in the store are frequently desperate, upset, frustrated and often production has been slowed or stopped. (You all know the damage that can be done to a retail store out of commission unexpectedly for even just a few hours, i.e. lost sales, lost confidence and theft).

-              With do-it-yourself tech support how you may handle issues is entirely dependent on your own personal technical skill. Software specific skills are hard-earned, and professional tech support staffs have literally years of experience and training. More importantly, most software companies require certification, continuing education and periodic recertification on that exact system/software.

-              Software support contracts are like insurance; you invest in advance of problems coming up. If you should rapidly need assistance, without a contract you will rely on your currently available funds. This can add time to getting your issue resolved and you’ll pay a lot for a single “emergency” incident.

-              With a Support contract, you will take advantage of the typically bundled discounts.

-              An issue that may take a certified technical support professional 10 minutes to resolve could take a member of your team hours with no resolution = time wasted, man-hours down the drain.

-              Business software is a sophisticated system and point of sale is no exception. Even a trained programmer can occasionally cause damage to a system. For example, hours may have to be spent by a trained professional after an attempt to even switch a solution to a different computer.

-              Often the software developers only accept suggestions for future product enhancements from a certified technical specialist; this shows them that the request is coming from a paying customer that is truly their “target user”. This also applies to any valid bug fixes. In other words, if you are not on a support contract, you have little to no input to the developer.

-              You will be dealing with a person certified in that exact system you are purchasing. As noted above, there is a definitely value in receiving support from someone certified in the exact software or program you are experiencing an issue with.

In a world so heavily reliant on computers, it is important to invest in and protect your vital tools to ensure their continued well being. Much like a car needs to be tuned up; computers need professional care from time to time. If you were looking to install a new engine, you could have the car in the garage for several weeks while Uncle Ernie works away at it to save a few bucks, or you could bring it to a professional who can rapidly get the car back on the road and avoid future unnecessary repairs or damage.

So, do-it-yourself (or with Uncle Ernie), or do it with a professional. Your choice.

One Step Retail Solutions provides multiple point of sale (POS) and technology solutions to independent retailers. We help you select the correct application that will fit your business.

By Evan Wise

Retailers tend to be social and relationship people. They know that measurements are important but they enjoy focusing on the activities more associated with people and merchandise. The unhappy result is that important aspects of the business are not improved since they are not measured.

The start of much retail measurement begins with a POS system. Not every POS system will do the same job of measuring. Before you invest in a POS system, make absolutely certain that the system will gather the right measurements to guide the improvement in your business. At Management One® we have a history of working with many systems and can share that experience with clients.

Gathering the right information depends on feeding the right data into the system. Some systems are easy while others are more convoluted. When retailers do not enter orders correctly or have sales, layaways, special orders, trunk shows etc. that are not measured correctly, we often find retailer error is the likely cause, but the difficulty of the system can be the root cause. Too often retailers are sold a system without the proper training! Training cannot be totally frontloaded. You can only learn so much before you need to play with the system.

Ongoing training is the key. If the training is frontloaded, much is often lost in the barrage of information. When staff gets too little training up front or the focus is on the wrong skills, they start to stab and jab and valuable information can be lost or put in the wrong accounts. That can cost extra dollars to fix to get the database correct. Getting this balance of training right is critical to success. Ongoing training is important as you are open to learn more as time goes on. Keep in mind different people will learn at different rates but they will all be using the system. How will the training allow these people to learn at different rates? Is the POS training available at later junctures? And when new employees are hired, how are they to be trained?

A POS system is useless without the proper training. So is the data it provides without someone who can analyze it and explain what the data is telling you. Many retailers spend a lot of money on their POS system and are diligent about entering their data, but then they are too busy working on buying and selling to look at the data. Consequently their buying and selling actually suffer because they are guided by guessing instead of the guidance the information could be giving them.

So how do you begin to grow your business through the use of measurements? Start by setting goals. Get everyone measuring their own performance by agreeing on the goals that must be reached. Show them how to measure their success and have them post their progress on the wall! For example, accurate sales forecasts become great sales goals. Measurements like maintained markup, GMROI or buying to OTB levels become great measurements and motivators for buyers.

As an owner, manager or GMM, you are responsible for the success of the business. Getting all the parts optimized will create the success that is your responsibility. Your job is to make sure the success is measured and real. Your job is to make sure everyone contributes to the success. Develop the plan; work the plan and then achieve the plan!

I am in the midst of switching from a Blackberry phone to a Droid.  I like fruit and I don’t know what a Droid is.  Obviously my phone is now smarter than I am. I can do anything I want to on my “phone”, however it is as frustrating to get used to a new phone as it was to get used to a new computer when my last computer crashed.  Initially I was frustrated when the phone buzzed and rang for an incoming call.  All I could do was stare at it in amazement like a spectator at a fire.  I knew something important was happening but I was powerless to do anything about it.

After my daughter gave me some lessons and I did the homework and took the tests, I could then turn on the phone and get to the home screen. Being so empowered, I decided it was time to make a call.  On my old Blackberry, I hit the speed dial key and the phone began ringing — one button and I was talking. I figured a smart phone might have the call already ringing before I made the decision to call. HA!

These are the steps I had to take on the new Droid: Press the button to turn on the phone. Swipe the lock to open the phone. Go to the phone icon. Go to the contact list. Find the person. Hit the green phone button.  What is so smart about that phone?

It can do so much more but the problem is it doesn’t do what I need nearly as efficiently as my old phone.  For all this inconvenience I pay more each month for a “data charge”.  The phones are free but over the course of the contract, I am paying three times what the phone costs!  Not a price increase but a data charge. . . Brilliant!

Give me a couple months and the frustration will become just another day and I will get used to the many swipes, punches and curses needed to do what I need it to do.  Of course with all my new apps,  I will be able to find Orion in the sky and quickly tell you how many calories I consumed last month.  Please don’t call me though, as I really can’t answer the phone.

Retailers may have some very helpful allies in places they would least expect to find them.

This article seeks to highlight some useful, but typically ignored synergies between science, engineering, business and retail. Karl Popper elegantly described the purpose of science as a process which generates predictive theories.  Science, economics and all kinds of business applications rest critically upon a common need; the need to accurately forecast a complex and dynamic future.

While the goals of science, economics and business are worlds apart, the actual process of forecasting is common to each. Similar challenges in forcasting allow lessons learned in one discipline to be applied in another.

Here, we’ll look at what forecasting insights can be gleaned from raindrops and market drops to help make our retail profits a little more stratospheric.

The most basic, even instinctive, method of forecasting involves guessing what will happen. Humans naturally learn to link certain events together. A midwestern corn farmer might say “knee high by the fourth of July.” If the crop isn’t tall enough by the given date, the farmer knows in advance that the crop has gotten a bad start and will therefore yield a weak harvest. Other times, the process is more intuitive, what we call “gut instinct.’ A person might “have a bad feeling” about some situation, even if he’s unable to explain the rationale behind it to another person. Recognizing patterns is something people do without even trying. It’s nearly impossible to look at a word written on a page, for instance, and not “read” it.

Of course, this kind of guessing is one of all kinds of human flaws and limitations. It lacks the dispassionate rigor of an actual scientific experiment. Just knowing that the crop isn’t high enough tells a person nothing about what caused its short stature. Even worse, it offers no clues to fix the problem. Gut instinct is difficult to transfer from one person to another. It creates dependence on a person, rather than a process and it’s horribly subject to the constraints of a single person’s memory and intellect. Using only gut instinct is better than nothing, but even at it’s best it is imprecise and prone to error. Stock outs sometimes and markdowns others is the result.

Of course, some of these problems can be solved by using past trends and performance to predict future results.

This approach is a little more precise and predictive if the system varies the same way it has done in the past. We’re no longer relying on the feelings of one individual and emotions are checked somewhat by stubborn little numbers. But it’s still less than ideal.

The professionals that spoke on climate research at a talk I attended recently amazingly faced the same problems that we faced in trying to predict future sales and performance for retailers. They started, as we did, using statistics.  Statistics and trends are useful in a somewhat stable or controlled environment. In statistical terms its changes can be depicted by a bell shaped curve or some other known distribution.   When climate change was affected by increasing CO2 the statistics based on the past could no longer predict the future.  Retail , also, is a constantly changing environment. When the recession hit, trends based on past performance were completely invalid.

The solution the climatologists brought to bear to help understand our dynamically changing environment was to make mathematical models of how the system worked. Over the years the model for climate change was modified to include surface temperatures, then atmospheric makeup including CO2, methane, and other gasses. Moisture content, then ocean temperatures were added. Then solar radiation coming in and out was added and so on. As each new variable was added to the model, a more accurate prediction was possible.  The true test was to back test to see if the model predicted what happened in the past. The final test is to see how accurately it predicts what happens in our actual, uncertain future.

We went through similar trials and tribulations to develop our Winning@Retail™ software. It contains both analysis of past performance using statistics and mathematical models  that account for the effects of the economy, local buying habits, inventory levels and much more to get an accurate prediction of future sales.  With each new variable added to the model the predictions improved.  Several independent tests have measured our ability to predict sales at 94% or better.

Just as knowing the future of climate change can help us prepare for the coming challenges, knowing future sales allows us to identify the right inventory levels and predict cash flow in the business.  If we don’t like the outcome, we can use the models to chart a new course based on a solid forecast of coming trends. Rather than just seeing a bad crop coming several months ahead of the harvest, we can consider how to nourish a business so that it continues to be fruitful and productive. The use of predictive models is the best approach to inventory planning.  POS systems and many spreadsheet approaches use statistics to project the past into the future.  Their susceptibility to sudden shocks and changes causes waste, errors and inefficiency, often when they are most painful.  The better your data and analysis, the better the predictions and the better the results will be.

If you’ve ever flown a major airline, you’ve probably been frustrated over the variations in the seat prices. How can the airlines sell basically the same seat on the same flight to a business traveler for $600 and a student for $200? Why should it matter if you stay over a Saturday night at your destination or if you fly there and back the same day?

One answer is marketing. Airline personnel spend a good deal of time and money figuring out who their customer is, how to market to him/her and what he/she will pay. They know whether the passenger is traveling for business or pleasure and they know who exactly is a frequent flier of theirs. What does this have to do with you if you are an owner of a small to mid-size business?

A lot! You should have as much similar information about your customers as possible. Does your database let you know if customers buy for business or leisure? Do you know if you are a preferred business for their needs or not? Have you ever figured out how much each customer spends at your store each year? When? And on what?

You should already know the easy stuff about your customers such as their birthday, size, color preference, family information and work information. If you are going to be more effective than competitors at attracting customers, you must know even more about them.

Turn your sales staff members into detectives and have them find out the key information about your customer base. Give them a way to record the data. Implement a strategy to use the information to improve your CRM and your personal marketing campaign. Armed with an arsenal of information on your individual clients, you should be able to customize the customer’s shopping experience at your store!