When you purchased your front-end scanner, chances are you heard how much you would learn from the transaction data it gathers. And yes, that point-of-sale system is collecting data—sales by hour, by day, by SKU, by category, by register; basket sizes, time of day, transaction types, inventory aging, product velocity.
But do you use it all? Some of it? Any of it? Have you turned it into information—ideas and trends you can use to improve your business—or is it just bits and bytes of data, piled up like so many gumballs in a machine?
If you?re feeling sheepish, you?re not alone. Most small retailers don?t do much with their data. They?re too busy keeping the business running to sit down and crunch the numbers.
?It?s left to the end of the day, after they?ve mopped the floors and done payroll,? says Danny Warshay, vice president of business development at LoyalTec, a marketing company in Cumberland, R.I. ?It?s a luxury to do that kind of data analysis.?
If it makes you feel any better, big retailers don?t do much better, and neither do suppliers, experts say.
?The food business is a very unsophisticated business in the use of data, and it?s really appalling,? says Mark Lilien, a retail technology consultant in Brooklyn, N.Y. ?Whoever does it well is going to be the market leader.?
To compete successfully in the future, naturals retailers will have to shake off any residual fear of technology, suggests Linda O?Hara, a consultant and one of the founders of Living Naturally, a technology and marketing solutions company in Venice, Fla.
Several tech companies that focus on naturals are working together to break through that resistance, in the hopes of helping independent stores stay in business. ?It takes a lot of effort to help the retailer learn that [technology?s] a useful tool for them, and how to use it,? O?Hara says. ?We help them understand that it?s just as important to them as their price gun or the solution they use to clean their floors.?
And data mining—analysis that turns data into information—is one of the best ways to eliminate that fear.
LoyalTec?s data mining technology allows even tiny stores to differentiate themselves from the competition by finding and rewarding their best customers, Warshay says. The application is an add-on to existing POS systems. As it learns your customers? purchase patterns, it pays for itself by luring people into the store with relevant, measurable offers, rather than giving them discounts on stuff they would buy anyway, or, as Warshay puts it, ?training people that your prices are too high? by teaching them to wait for deals.
?People don?t use the data they?re gathering,? Warshay says. His favorite war story involves a flier from a major New England supermarket chain praising the Warshay family for being terrific customers. ?[This chain] knows a lot about what our family buys,? and yet, he notes, the flier didn?t reflect that knowledge. ?We keep kosher. I rip open [the flier] and the first thing staring me in the face is a coupon for jumbo shrimp. They just totally blew it.?
LoyalTec?s product flags regular customers whose purchase-frequency pattern has been interrupted. When a weekly shopper hasn?t shown up for a month, that ?pattern violation? triggers action, because, as any marketing student knows, it costs five times as much to recruit a new shopper as it does to hang onto an existing one. ?We send you a postcard that says, ?We miss you.? If you?re a vegan, we?re not going to send you a promo for cheeseburgers,? says Warshay.
Living Naturally intends to integrate LoyalTec features into its product set, O?Hara says. ?You can see what that customer is actually doing. The return on investment is quite easy to calculate.?
One of the easiest ways for a small naturals store to turn data into information is to sign up with SPINS, the San Francisco-based market research company that has focused on the naturals business since 1995.
?We?re crucial to people being able to leverage their information,? says Amy Jacobsen, director of business development. ?The easiest way to do that is to let us manage it for them.?
Participating stores send their UPC data once a month to be added to SPINS? database of large and small chains, co-ops and independent stores and, soon, vitamin retailers and specialty/gourmet stores. Manufacturers and other clients pay SPINS to tell them what?s selling where, which enables SPINS to provide its retailers with pre-crunched data at no cost to them.
SPINS requires its retailers to share data only with SPINS, and agrees to keep store-level data confidential. Service representatives work with retailers to figure out how to download and send their data. ?As long as [retailers] can export data, we can accept it and hand it back to them using formatted reports,? Jacobsen says.
These include sales organized according to the SPINS hierarchy of 50,000 individual SKUs in more than 70 categories, plus 20 different product attributes, 430 ingredients and 81 consumer health concerns. SPINS participants also get a suite of store-level reports, including key business metrics, pricing, items not carried and ?opportunity gaps.?
Learning how to get the most out of a POS system has to be approached in stages. Most retailers don?t get beyond the deer-in-headlights stage, says Richard MacKillop, founder and chief executive of the POS supplier OrderDog. ?They just kinda sit around and stare at it.?
OrderDog?s new iPOS system, now installed in more than 40 stores, is designed to ease retailers up the learning curve, MacKillop says. Understanding that a busy store manager will probably not take the time to read the manual, OrderDog?s customer service reps call customers regularly to update them on features.
?We?re selling a service, more than software and hardware,? MacKillop says. At installation, retailers want to know how to do basic stuff like check out customers and place orders. ?Six months later, they?re asking entirely different questions.?
Both OrderDog iPOS and the SPINS database are available on the Web, so any function—checking reports, tracking sales, placing orders—can be done from any computer. This appeals to owners and managers whose computer work is often done at home, late at night.
?They say, ?You mean I can log on at home and see my sales??? MacKillop says.
Even noncomputerized stores can tap into data to sell smarter, says consultant Danny Wells of Vacaville, Calif. ?Almost every major distributor will give you a velocity report to tell you what?s selling.? If hot sellers in your region aren?t moving in your store—or maybe aren?t even on your shelves—grab your pick and shovel, because you?ve got some data mining to do.
Natural Foods Merchandiser volume XXVI/number 11/p. 14, 18