last word
Improving Margins with Data
By Erinn Morgan
Can the details you gather from everyday sales help you increase your margins—and your bottom line? A recent study conducted by Jupiter Research indicates you can.
While the study targeted online retailers, Jupiter retail analyst Patti Freeman-Evans says the results can be applied to all retailers. "We've seen people begin to use the data and information they have from their retail website to improve their margin performance," she says.
INCREASING GROSS MARGIN
"We have also seen that retailers using this online info can realize a 10 percent increase in gross margin," Freeman-Evans says.
This is significant, especially in a market where margins are getting squeezed due to higher shipping costs, increased marketing needs, and more competition. She notes: "Being able to affect your gross margin in a meaningful way is huge."
Currently, Jupiter Research shows that average gross margin is 28.4 percent across all online retailers. "Brick-and-mortar retail is lower because online retailers have some different opportunities," she says.
ATTAINABLE INFORMATION
The kind of information these retailers are using varies from visitor conversion rates to average sale size. The point is that all of this information can be used to better target your products and marketing efforts.
"Some of the data these retailers used online is actually attainable offline," says Freeman-Evans. "Things like turn, average order value, conversion rate (how many walk in and how many buy), and how many repeat customers you have."
This enhanced tracking can be applied to optical retailers as well. "How many people get really far down the path of considering a purchase? How many have glasses on their head and then just leave? What factors are affecting this behavior are things a store can, at least anecdotally, track," she says.
The key, however, is to develop a process to use your info. "Create a hypothesis and go out and measure and test the new possible way of doing things," says Freeman-Evans.
| Tracking Numbers |
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| You don't need a consultant to obtain some sound information about your business. The following can be tracked for any period of time by staff or computer. ■ AVERAGE SALE AMOUNT. Better yet, compare year-to-year for given months. What are your prime purchase periods? Have they changed? Are purchase amounts rising or falling? ■ INVENTORY TURN RATE. Track it by category to see buying trends or by pricepoints to ensure your mix is in line with your customer demographics. ■ CONVERSION RATES. How many walk-ins actually buy? How many get close? How many turn around at the door—if that number is high, it's time to rethink your look and layout. If you're in an optometric office, another key rate is the percent of Rx's filled in your dispensary. ■ REPEAT CUSTOMERS. Keep an eye on computerized records. ■ TRAFFIC PATTERNS. Do customers shop your store from left to right, from front to back? Are there out-of-the-way areas that don't get traffic? Do some displays get more attention than others? Once you know what draws and what doesn't, you can consider adding new areas of interest or placing key product in higher-traffic areas. |
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