Using Retail data for Forecasting Demand and Merchandising Planning

June 13, 2011

Many vendors have started to using EDI 852 data or retailer portal data for sales and retail merchandising but so far only a few are using EDI 852 data for forecasting of demand. But the reality is that vendor inventory at stores is often too low to meet demand and the rates of out of stocks have been increasing. It’s not a big surprise that retailers are maintaining less inventory in stores in this retail environment, the cost of excess inventory is simply too high and open to buy dollars are at an all time low. But with proper forecasting of demand a vendor can help the retailer to better manage inventory and avoid out of stocks. The great benefit of EDI 852 for merchandising planning is that it is store/SKU level data. Since a typical retailer is forecasting demand at a category and market level the variability in the rate of sales among stores in a market can be large.

A more accurate model for forecasting of demand is to start at the store/SKU level calculating an average rate of sale for the store/SKU and then based on the inventory on hand at that store a weeks of supply. When the weeks of supply for a store/SKU has been calculated the vendor can compare against the lead time to replenish the store and work to put a true demand driven supply chain in place. This model, while more intensive for the vendor to manage usually creates a far different picture of inventory needs than simply market level min/max replenishment.

Advertisements

Create The Perfect Store Walk Report for Your Merchant

June 10, 2011

The strategic importance of walking a store with your retail merchant has been growing dramatically in the last several months. Retailers like Home Depot and Wal-Mart are putting a strong emphasis on merchants spending more time in stores so they can see firsthand the product presentation and get the pulse of what is happening at stores. We have been told some retailers require merchants to spend a minimum of three days per week out of the office walking stores.

This creates a great opportunity for smart suppliers using point of sale analytics and reporting to drive high quality store walks and get the merchants to focus valuable minutes on their products on store walks. The purpose of this article is to explain how you can grab as many of those minutes as possible.

First you need to create store walk report. The Accelerated Analytics store walk template includes the following elements:

· Total store sales performance in dollars including rolling 52 week sales and prior 52 week comp, YTD sales and prior year comp, MTD sales and prior year comp.

· Store ranking based on total sales performance compared to stores in close geographic proximity. If the retailer has BYO’s or Markets like Home Depot use those, if not then use state and city. We find it is best to present the ranking in terms of X out of Y.

· 8 week sales trend

· Top 5 SKU’s and bottom 5 SKU’s based on unit sales.

· For each of the top and bottom SKU’s we include an image of the product along with the SKU and description so the merchant can easily identify the product without having to go and read tags. For each SKU we also provide all the key metrics about that item including: rolling 52 week sales, YTD sales, last 8 week sales and comp year performance for each. We include current on hand, weeks of supply and sell-thru. Finally we rank that SKU based on sales performance among all the suppliers SKU’s sold in the store.

After you have create a store walk report the next task is to get with the merchant so you can review and enhance the report based on additional metrics they want to see when walking the store. By doing that you not only end up with a report that is customized to their needs but you also get their buy-in to use the report. Essentially you have created an indispensible tool for them and they will want to use it. After the report is created touch base with them frequently to find out what stores they will be visiting and when and then either send them the report for those stores or offer to tag along and bring the reports with you.

Our Accelerated Analytics (visit web site) customers have even taken the store walk to the next level using our iPad mobile access. They are walking stores with the merchant, iPad in hand, and viewing the report in real time as they walk the isle.

Many suppliers have become familiar using point of sales reporting and analytics that is based on EDI 852 or retailer portal data but taking it to the next level and creating targeted reports like a store walk report is where the value is really seen. With a great store walk report you can provide your merchant with the critical information they need and differentiate your company. It’s a power tool that you need to add to your arsenal.

Improving Wal-Mart Retail Link Data Analysis

May 27, 2011

Wal-Mart’s Retail Link* web site is a rich tool providing vendors with a well of data for analyzing sales and inventory. The problem for many vendors is that Retail Link provides data but storing the data, calculating metrics and providing users with analytics and reports can be a time consuming chore. Just this week I have spoken to three Wal-Mart vendors who have dedicated staff to the task of running Retail Link reports and turning them into reports for other users. From our research working with many Wal-Mart vendors we have calculated data manipulation and reporting averages 18 hours per week for most Wal-Mart vendors. On an annual basis that is nearly 1,000 hours of administrative time spent just preparing data for analysis and reporting. In addition to the administrative time there is a data storage issue most vendors encounter. Since the data is UPC/store level data most vendors do not have the ability to store each weekly data file at the store detail level. As a result they lose critical detail as well as the ability to calculate key metrics like inventory weeks of supply on hand, or comp year performance comparisons. If your organization is spending administrative time preparing Retail Link data for analysis consider for a moment how much more efficient it would be to eliminate that work and instead focus your staff on data analysis. What stores are performing poorly, what stores are performing above average, do you have the correct amount of inventory at each store? These are all questions your analysts should be analyzing but instead they are spending half of their week preparing data. It’s a simple matter of efficiency and resource assignment.

*Retail Link is a Wal-Mart software application is not affiliated with the Rainmaker Group.

Home Depot EDI 852

May 26, 2011

Home Depot vendors gain a critical advantage using Accelerated Analytics for point of sale data analysis. Home Depot vendors have the opportunity to use EDI 852 data to analyze their business and be very proactive in working with their merchants. A standard Home Depot EDI 852 document contains units sold, units on hand, and dollars sold for each SKU and store. By storing this data each week and cross referencing the Home Depot store list a vendor has the opportunity to understand store and SKU level selling trends and inventory consumption. The Home Depot EDI 852 data provides all the necessary ingredients to calculate key metrics like: inventory weeks of supply on hand, average rate of sale by store and SKU, and if you add your cost information you can arrive at GMROI as well. It has been our experience Home Depot merchants expect a high degree of data analysis from their vendors and it has also been our experience they are very supportive of vendors who use the data to make recommendations on how to improve the business. The key to success is selecting a service provider like Accelerated Analytics that can help you store the data each week, calculate key metrics, and make the analysis and reports available to your sales teams in a timely fashion. Accelerated Analytics also provides advanced analysis like GMROI by plan o gram which is critically important in working with your merchant. Armed with this data we have seen vendors dramatically increase sales and optimize inventory levels.

Promotional Displays – Do they work?

February 17, 2011

Many vendors use displays at retail customers to drive higher visibility and increased sales. A floor pallet or wing stack with product is a popular display program. These programs are often offered to the retailer at a discounted price and usually require the vendor to absorb both the discount and the cost of preparing the display. The objective is a short term boost in sales that hopefully creates long term repeat buyers. The question is do displays work?

We have been studying this exact question for a number of clients who sell at Home Depot, Wal-Mart, and Lowe’s. Unfortunately the impact of displays can be very difficult to analyze for the following reasons.

· The SKU’s on a display are usually the exact SKU’s that are available on the shelf and as a result it is not possible to uniquely track a display sale vs a regular on shelf sale. You can look at the sales before the display shipped and after it shipped and calculate the change in sales, but it’s not an exact science.

· Shipping of products is increasingly going through a distribution center and not directly to the store. As a result the exact store and delivery date of displays can be difficult to track without significant extra effort and coordination with the retailer.

· The retailer often exerts a significant amount of influence on store selection and the timing of when the display will be shipped. While this is understandable it can be detrimental to the vendor and unfortunately sales. Not all stores warrant a display and for many products the timing can have a large impact on sales.

· The execution of the display can be uneven across stores since many store managers have a great deal of latitude on where the display will be located. In addition store managers have latitude on the length of time a display will be available and when the display is broken down and the inventory put into the regular shelf position.

What can be done to increase the measurability and effectiveness of displays?

· The most important action a vendor can take is to use a display SKU that is different from regular on shelf items. This is the ideal solution, but in reality this is very hard to do because retailers do not like to have new SKU’s and most especially if the item is a short term sale.

· Work with the retailer to design display programs that can be accurately tested. There are several variables you can work to control: store quality, location, timing, display type. The key is to create test programs which have these variables controlled so you can track their success. For example you might choose 50 grade A (high sales) stores in two geographically similar markets and ship a display to them in the spring. Then ship the same display to the same stores in the fall. This provides the ability to understand if time of year impacts the rate of sales. You can then create a program that changes a different variable and test its impact. Operationally this can be challenging because often the retailer must approve the display store list and timing but working together there is an opportunity to explain the benefits of testing and the cost realities born by the vendor that make the test essential.

Rainmaker will be positing additional thoughts on displays in the future and welcomes your feedback and insights.

Promo strategies for seasonal products

January 11, 2011

If you have a seasonal product is it best to run promotions during the core selling season or during the down season? I’ve been analyzing this exact question for a customer this week and the data can make a case for both approaches. On the one hand it seems like running a promotion like a rebate or floor display during the key selling season makes sense. In that case the promotion is timed to when the consumer is likely to purchase your product. Or at least be thinking about it. On the other hand if the consumer is likely to purchase your product during the key selling season anyhow perhaps managing inventory and avoiding out of stock is the right strategy. If promotions are aimed at the non-core selling season when demand is historically low doesn’t that provide the opportunity to increase sales? It’s a difficult question and I’d be interested in hearing Brand Managers experiences and insights.

Heading in the right direction

January 5, 2011

Retail-sales consultant Retail Metrics Inc. predicts that the 30 national retailers it tracks will this week post a 3.4% gain in sales for December at stores open for at least a year. That is atop a 3% gain for December 2009.

Overall, the National Retail Federation trade group forecasts that retail sales in November and December increased by 3.3% this year to $451 billion.

The positive gains made this holiday season appear to be sustainable. In December 2010 and already in the New Year our customers are engaging us to help with detailed custom data analysis for line review preparation. This is always a good sign of an improving economy. It means business leaders are ready to compete. They are looking for opportunities and making sure any weaknesses are explained along with a plan for improvement. Underlying all of this is very careful point of sale data analysis so that plans and recommendations are fact based. We have been carefully analyzing products across retailers identifying trends in product sales, geographic trends, pricing variances, etc. It’s amazing what EDI 852 can tell you if you have a good database with several years of history. Dig into your EDI 852 and get ahead of your competition.

Retail sales hop 1.2%, pushing hope for the holidays plus 5 simple strategies to raise your sales

December 10, 2010

The Commerce Department reported that October ’10 sales for the retail industry jumped 1.2 percent from the previous month, the most important gain since March. The rise was driven by a 5 per cent spike in auto sales, which analysts said was particularly encouraging because it showed consumers were ready to tackle big-ticket purchases. Moreover, September’s sales gain was revised upward coming from a 0.6 percent increase to 0.7 percent.

Still, consumers remained choosy about where they spent their dollars. Home furnishings stores and electronics retailers each suffered a 0.7 percent drop in sales. Department shop sales also declined 0.7 percent, while health-care stores dipped 0.1 percent.

Instead, consumers returned to restaurants and bars, sending sales up 0. 3 percent. On-line retailers, that have held up much better than their bricks-and-mortar counterparts, registered a 0.8 percent jump. Shoppers also bought more clothing, a 0.7 percent boost.

Excluding autos, retail sales rose a decent 0.4 percent, in spite of the mixed performance across sectors. Retailers are hoping that this momentum will fuel the all-important holiday season.

As outlined by a survey by the National Retail Federation, an industry trade group, nearly 11 percent of consumers have finished the vast majority of the holiday shopping, up from just a lot more than 9 percent a year ago. The group predicted shopper’s average spending would inch around $688.87 in 2010, a 1 percent increase over a year ago.

The NRF’s annual holiday survey found that more shoppers are expected to get gifts for family and friends – and also themselves. The quantity of consumers who said they planned to indulge themselves rose eight percentage points to 57 percent in 2010.

The forecasts, coupled with the brand new October data, paint an image of consumers treading carefully on their way back to the mall. Economists say that spending is unlikely to rebound with no corresponding improvement in the employment market.

The unemployment rate remains stuck at nearly 10 %, data released from the Bureau of Labor Statistics showed hope. Mass layoffs have declined in size and frequency. And private-sector employment rose 0. 3 percent during the third quarter, in comparison with last year, the 1st increase since 2008.

How may you increase add-on sales throughout the Holidays?

Below are a few solutions to boost the units per transaction, and increase the average transaction as a result.

If you want this, you should buy that – Creating feature areas within your store that have a number of major stuff you need to push for holiday surrounded by complimentary products helps sell more than just that one item. Use signage and have the workers talk with customers to assist them to know how these products interact.

Stuff the Stockings – I still push stocking stuffers for holiday as customers will almost always be looking for those unique, fun little goods that round out their holiday gift giving without breaking the bank. Create an entirely stocking stuffer display and make it interactive, just like a stocking stuffer smorgasbord to acquire customers to get one or more additional items.

Sample products – Whenever they check it out, they are going to buy it. Make sure you have products available for testing everywhere and use signage, or have your employees interact to get customers to attempt different products. The chance for a sale rises significantly when you can place the product inside customer’s hand.

A warm drink is the way to get them to stay – offering a warm beverage like coffee or apple cider gets customers to linger longer. It provides them time and energy to scope out much more of your store as they walk around enjoying their beverage. And this means they could find more gifts than that they planned on, resulting in increased sales.

Wrap the Cash Wrap – You’ve created a number of different ways inside your store to get your visitors to buy more, and the cash wrap may be the final opportunity. Make sure you have impulse items at the cash wrap that customers can grab and go. Products under $20 usually perform best. Bonuses for items that may be sampled as well as 8-10 of these available for purchase.

So you? Exactly what are your favourite sales techniques to increase Holiday sales?

Posted by Cornelia Ortega.

visit Cornelia’s blog.

August 18, 2010

 

I’m making a prediction – Scan Based Trading (SBT) will gain popularity 2011 and will emerge in categories not typically engaged in SBT.  In an article today in the WSJ titled “Retailers Are Sold on Frugality” Wal-Mart, Home Depot and Lowe’s are predicting the upcoming holiday season may be poor.  They believe consumers remain very cautious about spending.  The good news, if there is any, is that retailers have successfully cut expenses during the downturn [see figure 1] so most are making a profit despite lower sales.  The bad news is they are doing that by tough price negotiations with vendors, more reliance on part time workers, and generally lower spending across the board. 

 

“How in the heck can you increase earnings with tighter revenue?  The answer is that we [Home Depot] expect some expense relief.”  Chief Financial Officer Carol Tome.  If you are a vendor to a major retailer – take note of that quote.

Back to SBT.  Scan Based Trade relationships with vendors have been around for a long time but they have traditionally been reserved for fast moving food and consumer goods.  Things like bread and milk, etc. However savvy financial executives at retailers have realized moving from a traditional purchasing model to a SBT model removes inventory from their balance sheet, reduces their labor and shipping and therefore dramatically increases their bottom line.  Let me give a real world example.  Rainmaker processes data for an SBT program at one of the largest drug store chains in the US.  This retailer is in the process of moving their entire book dept from a traditional model to SBT.  In the past the retailer had millions of dollars of book inventory on their balance sheet but today they have no books on their balance sheet and their vendor handles all DSD shipping, in store merchandising, and carries all the inventory on their balance sheet until sold. When the book goes through the cash register the sale is split between the vendor and the retailer.  The retailer essentially provides shelf space and the vendor handles the category from start to finish.  The vendor benefits because they have more control on merchandise assortment and planning and they get paid faster.  With daily sales and payments based on the actual sales the vendor no longer has to wait for 90 days to be paid on a traditional invoice.  The retailer wins because their balance sheet is dramatically improved, their labor is reduced, they avoid mark downs, etc, etc.

This is a huge paradigm shift, SBT in the book category is revolutionary.  Think SBT will never apply to your category – think again.  I’ve had conversations with retailers and vendors about moving cosmetics, electronics, clothing, and hardware to SBT.  It’s not a question of if, it’s simply a question of when.  Start thinking today about your organization can support and even recommend SBT to your retailer and you will be way ahead of your competitors.  Trust me your CFO would like to be paid daily instead of net 90.

Have you heard of “Blue Ocean” strategy?  If not I highly recommend looking up the Harvard Business Review article and you will see how SBT is a blue ocean strategy for your business. 

I’d like to hear your thoughts on the challenges/opportunities for SBT in your category.

JCP Bets Big on IT

May 4, 2010

JCP is boosting IT spending again this year even as it cuts back on other capital spending.  JCP spent $139 million on technology last year (23% of cap ex).  The focus will be on supply chain improvements and growth in eCommerce.  JCP expects the Internet to deliver $1 billion in sales over the next five years.  I’ve heard CIO’s comment before that CEO’s don’t ‘get it’ when it comes to technology but this one certainly seems to get it… “This is the next generation of how to make things better, and how to be a better competitor,” says Chief Executive Myron E. Ullman III. “People who are going to survive are working on this.”

Technology certainly can be a way to reduce expenses through greater efficiency but is technology a viable business growth strategy?