Retail Success Marries Art and Science
December 5, 2017
When given a choice it would be hard to categorize retail success as an “art” or a “science” because there are elements of both in it:
The science of retail
Following best practices and making sure your data driven decisions are reaping profitable rewards are all part of the science of retail success. Here are a few key metrics that help guide the equation:
- Margin: Higher retail margins (the difference between what you pay and what your customers pay) amount to greater profits, but take care that your margins aren’t so high that you lose customers to lower priced competitors.
- Turn ratio: Retail success means knowing which products are costing you money by taking up space that quick moving products could occupy. Find your turn ratio by dividing a year period of total sales by the average value of inventory on hand.
- Sell-through: Comparing the amount of inventory received to the amount sold in a one month period can be especially helpful when determining which products or styles are in demand. In general, a high sell-through percent may indicate you have too little inventory or are priced too low. Conversely, a low sell-through percent indicates excess inventory or prices higher than the market will bear.
- Inventory control: Knowing how much stock is physically present at your location and how quickly a specific product sells (sales velocity) helps you manage your costs and avoid out-of-stock situations. Sales velocity coupled with your cycle time, (the total time from order placement to fulfillment) will help you set realistic expectations for your sales and for your customers.
- Open-to-buy: A large part of the science of retail success is simply ensuring you have the right amount of inventory to support your sales goals. An open-to-buy plan helps retailers project how much money can be allocated each month in correlation with that month’s planned sales and markdowns.
- Employee management: Use data analytics to monitor the performance of your employees and reward those who go above and beyond.
The art of retail
Part of retail success includes aspects of your business that you can’t necessarily quantify with numbers, but have tremendous impact on how competitive you are at winning customers and how profitable your business is.
- Reaching customers: Pop-up stores and e-commerce marketplaces allow today’s retailers to reach more customers than ever before. With point of sale (POS) systems that integrate customer relationship management (CRM) technology, retailers can segment sales lists by customer interest, amount spent, or last purchase date, to better target promotions to the right people at the right time.
- Developing a skilled workforce: Beyond basic math and communication skills, your employees need to develop other skills to do their jobs well, like the ability to upsell and cross-sell and provide stellar customer experiences. Part of the art of retail is helping to identify the areas where individual employees could use targeted coaching to help increase profits and build customer loyalty.
- Merchandising: Today’s successful retailers are engineering experiences within their physical stores that leave a lasting impression. Whether using technology to engage customers or incorporating ways to experience a product before buying, the rules for retail merchandising are quickly changing, and businesses that adapt will have higher retail success.
If you attempt to operate your retail business purely based on science or purely based on art, it probably won’t reach its true potential — if it succeeds at all. TallySoft’s POS software, TallySales helps you master the art and science of retail. TallySales provides you with the technology that adheres to best practices and helps you make data-driven decisions. It also provides graphical prompts and functionalities that help your exceptional workforce craft exceptional customer experiences and deliver relevant offers to customers that provide you with a return for your efforts. Contact us to learn more!