Wikipedia defines big data as “a term for data sets that are so large or complex that traditional data-processing applications are inadequate to deal with them.” No wonder small and medium-size independent retailers shudder when they hear this phrase thrown about.
So how does “Big Data” apply to lighting showrooms, our wonderful group of merchants that vary so much in size and resources? What information is relevant, and what can be done with the information?
Let’s Redefine It
How about we think of it as “useful/valuable information” that is obtained from digital and traditional sources and is accessible within your retail format. The hurdle is that there is so much information available. Your challenge will be selecting the information that most impacts your business and the Key Performance Indicators (KPI) you have selected.
The information you need to scrutinize almost any aspect of your business is in your ERP system (Enterprise Resource Planning), and if you are not computerized yet, why not? If you are committed to operating your business on information, then the expense of utilizing an ERP system that gives you what you need, when you need it, can be justified in labor savings and increased accuracy.
“Executable Information” was once only available to large companies with complex computer systems. The advancements in technology have made that same data – and more – easily accessible. Utilizing this information is not based on a company’s size, but on the human and capital resources that can be committed towards using the data.
Having a reliable system of recording and reporting information that impacts your business is essential. Showrooms will rapidly discover that Word and Excel are no longer suitable to manage their business today. Just think of the waste of resources in both time and money: completing labor-intensive tasks such as gathering information, sorting it, recording it by hand, formatting KPI formulas, and then inputting the data.
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Display space is limited and having data on product and vendor performance will help you better allocate that space and strengthen vendor partnerships. [/mks_pullquote]
Information is Power
When the goal is to improve your team’s performance – whether overall or specific – the information you gather can be used to create strategies, make better business decisions, confirm results of initiatives or projects, and discover unseen opportunities.
Another benefit of relying on data instead of intuition is that what you might have assumed has happened may not be accurate. Using the information that is available to evaluate what works – or doesn’t work – for a showroom is a valuable management practice. While it is distinctly different from the EQ (human side) part of your business, they both must work in unison for the best benefit.
When it comes to taking a chance on a new finish or design trend, intuition is a powerful and important driving force. However, when you want information on performance – no matter if it is about a product, place, or a person – data is king.
Using data-based decision-making provides a clear picture based on hard numbers. Getting the most from this process requires vision, preparation, and repetition in order for it to become a habit. Ultimately, the usage of data/information should lead to overall improvements in your showroom’s or sales team’s performance and efficacy.
Three Points of View
There are three ways to look at the information you have:
Reflective — looking at historical data, or simply what has happened in the past. This format is familiar to business owners and managers who are accustomed to reviewing indicators from last year, last month, or last week over last.
Understanding — examining why something is happening in the business. You are watching for activities that you would like to replicate, eliminate, or correct.
Foresight — spotting trends before they blossom. This can only be done by watching for the subtle changes that repeatedly occur. Foresight is observing what is happening now and asking the question, “What might happen if?” When that question is answered, it starts the wheels of strategy development in motion.
Information Makes Impact
If you have not identified the indicators that move your business, this is the time. The data points are related to their impact on sales, sales management, and products.
There are many aspects of performance that a business can be measured by and they will vary according to the business model. Here are a few performance indicators that work well in showrooms and, with a few minor tweaks, also with outside sales teams.
In the world of selling to increase your bottom line, you must measure the sales manager’s trinity: Average Sale, Closing Percentage, and Traffic. Improved sales happen by increasing these three fundamental metrics; you can only grow what you measure.
Customer Traffic
One of the bedrock data points that can influence every brick-and-mortar business is customer traffic. How many people come into your store? While this may seem Old School to some of you, many stores still don’t count their traffic or understand which details of a customer visit are important.
There are several ways to measure traffic. The simplest is a door counter: record the number of times the door swings open and closed at specific and consistent parts of the day. Each click provides you with a baseline number that is all inclusive and honest to work with and compare. The ultimate in simple data gathering puts the responsibility of tracking on the salesperson or the greeter. The detail of the information acquired is better because people can discern the difference between the postman, a single customer, or a herd of clients that are just one customer. The recorded data can specify the type of client, the results of the interaction, and provide feedback on the product, advertising source, or service.
In all instances, record traffic by the day and time segment. One of the benefits of recording the time is that the data will indicate high and low traffic times and that can impact staff scheduling.
Closing Percentage
Your closing rate is the number of sales made relative to the number of customers you work with over a time period. For example, one day a sales associate worked with 10 clients and sold two of them — this a 20-percent closing rate for the individual. On the same day, the total store traffic was 30, and the total sold was 8. Therefore, the average closing rate for the store is 26.67 percent. The data needed to improve a store’s performance is the average closing ratio of sales associates relative to the overall showroom performance.
Average Sale Value
Trying to increase a business by growing clients alone is costly and challenging. It requires an even greater investment in time than is already committed. When you sell your clients more at each transaction, there is a small input of additional time and no extra cost.
The data you need is the store’s sales volume or a number of sales for a given period. If you can look back and pull last year’s information by year and month, you will have a baseline for average sale.
When it comes to items per ticket, use the same math; the total number of items/tickets sold in a set period reveals the baseline average of units per order. Apply the same formulas to sales associates and compare the two.
Identifying Product Trends
Product data lets you key in on the performance of each category. Display space is limited and having data on product and vendor performance will help you better allocate that space and strengthen vendor partnerships. Another benefit is to identify trends in style and finish. Keying in on sold goods that were never on display is a significant segment of product evaluation.
Product trends are critical for retailers and can make the difference between a good year and a great year. Look for patterns. Maybe there’s a unique finish being ordered at a higher rate across a category; this may be a finish worth adding in other areas of the display. Or perhaps after discovering an increase in the sale of linear fixtures, you decide to expand the selection.
Another pattern you can examine is the frequency of out-of-stock items. Increased stock outs mean you are missing sales. This requires a change in the process of how often or how many of the items are re-ordered. A word of advice: ERP systems can spit out recommendations of what to buy and how much to buy. For some product groups this can work out OK, but in the world of trend spotting, a human touch is needed.
Inspect What You Expect
The linchpin to success when using data is sharing with your team what is expected of them and how the information relates to the implementation of plans and strategy. This requires that leadership follows up on all the initiatives in place. The staff needs to clearly know what the expectations are.
Data Is Your Lever
The famous quote from Ancient Greek mathematician Archimedes still applies, “Give me a lever long enough and a fulcrum point on which to place it, and I shall move the world.” Consider information to be the lever; you can accomplish a great deal with it.
This is a great and timely article that can help our entire industry.
Thank you Mark!