Applying Competitive Pricing Analytics Can Lead to Higher Profits for Retailers
Wouldn't it be wonderful if retailers could determine best sellers, figure out what prices worked, know what consumer want, identify trends, and forecast future sales?
Well, they can.
Data analytics, including the information from competitive pricing and assortment intelligence solutions are the secret ingredients to understanding the data that can make a retailer's dreams come true. Here are just a few of the ways retailers can put their data analytics to use:
Determine which products to add (or eliminate) from your assortment
It makes sense to get rid of products that aren’t selling well and add new products that you think will sell better. With data analytics, you can be more scientific about what to add or subtract from your assortment.
But wait! Don't throw out the low selling product just yet.
Even if a particular product isn’t selling very well, it may be the favorite of some of your best customers. If you get rid of it, you not only lose the sales on that product, but you lose the customer.
And that’s bad.
When customers can't find the product they want, they elect to shop elsewhere. Data analytics help you determine what to keep and why.
Discover "home run" products you may be missing
There may be products you carry -- or don't -- that would make great sales if you only knew it. Marshall Fisher calls them "home-run products" in his book, The New Science of Retailing.
In the book, Fisher gives a good example of an auto-parts retailer that sold many parts for Honda Accords, and also a lot of brake pads. However, for some reason, the retailer didn't specifically carry Honda Accord brake pads.
After realizing this through data analysis, the retailer added Honda Accord brake pads to his assortment, and almost instantly saw an increase in sales and profits.
Plan better for demand you know is coming
Your data analysis will allow you to identify, plan for, and maximize high times. A good example is when data indicates that a coming Christmas season would see big demand for fashion apparel, toys, and consumer electronics products. That's the time to stock these products and capitalize on the demand.
In fact, Fisher even explains, "These are products that have a gross margin of 50% or more, so, missing the sales opportunities would be extremely expensive."
Become speedy and flexible
When you can’t find out what the demand will be, it’s crucial to have plans in place for replacing popular items quickly.
For instance, Fisher describes apparel firms that found creative ways to get back in stock on short notice by having the following available:
- Generic patterns
- Generic fabric
- Ability to create the item quickly and locally
As a result, these businesses enjoyed tremendous sales and success.
If you track and analyze your data regularly, such as by using competitive pricing intelligence, you'll have an ongoing longitudinal record of the facts, and the feel for what's happening. Seeing the trends in a cumulative way, not only allows you to plan and be better prepared to deal with what's coming, but also gives you clues to your competitors' strategies as well.
With the use of analytics, retailers can accomplish the following:
- Cut down on excess supply and have a more flexible supply chain
- Know what customers want to buy – even if it’s a low seller
- Better match supply with demand
- Make more accurate forecasts
- Balance the right inventory levels