It’s no secret many retailers struggle with overstocks, revenue and profitability. However, some retailers are able to significantly outperform their peers.
In fact, DynamicAction’s top retail customers sold more than 90 percent of merchandise at full price during the 2015 holiday season, while also increasing profit an average of 51 percent. Their secret is harnessing the power of connected, actionable data, - while also understanding the new data-driven merchandising benchmarks that can enable retailers to excel.
What are these benchmarks? Here’s a closer look:
Profit per View
There is perhaps no better gauge of online merchandising efficiency than understanding profit per product view. The metric offers guidance as to where retailers can direct exposure to maximize profit, and establishes boundaries for how retailers should determine additional spend to drive views via paid marketing channels.
Inventory, Not Viewed
Did you know that the top-performing retailers are getting customer eyeballs on 84 percent of the products on their websites? However, that also means 16 percent of products are not receiving a single view. If you ask merchants how much inventory they have that is not being viewed, they are likely to reply “none” or “very little.”
Yet when connecting the data across inventory and web data views, retailers quickly realize that processes do break down, human error can slip in and they indeed have inventory in warehouses and stores with no product views. And if customers aren’t viewing the merchandise, it certainly isn’t selling.
Percentage of Full Price Sales
Markdowns are costly. In fact, markdowns resulting from overstocks cost retailers $471.9 billion annually worldwide. For many seasonal retailers, even a modest gain in the percentage of full price units sold will result in meeting or exceeding plan. By closely monitoring this metric, retailers can course-correct and increase full-price sales by delaying a markdown date, increasing a product’s exposure, altering the degree of markdown or doubling-down on specific categories and brands.
For top retailers, 86 percent of the products that customers are looking at on their websites are in stock and available for purchase. Merchants, who are poised for success in 2016, are not simply looking at an inventory ratio of what is in stock versus out-of-stock; they are closely monitoring the experience of their customers.
Views Availability helps you determine the availability of products that your customers are seeking. To deliver an exceptional customer experience and maximize your ability to sell, it’s imperative to have in stock the products that customers are viewing, searching and demanding.
On average, 83 percent of the products (particular sizes, colors, etc.) a retailer has to sell are available for purchase. However, merchants that are running a lean, efficient organization are taking Views Availability a step further. They ensure that they are in stock for the sizes, colors, materials and styles that their customers are seeking, while keeping as little unnecessary inventory on hand as possible. Through a keen understanding of your stock in relation to the SKUs that your customers seek, retailers can sell more and deliver a great experience, while carrying fewer sizes, styles and SKUs in the warehouse. This decreases overhead, increases operational efficiency and doesn’t detract from a customer’s experience.
Marketing Cost per View
With finite marketing budgets, merchants and marketers need to work together to ensure that precious marketing spend is focused on assisting merchants achieve their targets. Are they wasting marketing budget by sending views to products that are out-of-stock, highly fragmented or that will sell through without paid exposure? With a thorough understanding of marketing cost per view, merchants and marketers can work in concert to maximize marketing spend.
The above is just a sampling of our recently released guidebook that highlights the new trends and performance benchmarks defining success in today’s data-driven retail. It also lays out the critical questions executives should be asking their teams – and the answers they need – to achieve these new metrics. For more ideas, download a free copy of our Merchandising Manual 2016, “The New Reality of Retail: How Top Merchants Will Thrive in 2016.”
Finally, the results of our Global Merchandiser Scientist Contest are in … And our winner is Fiona Lloyd of Jimmy Choo! She will be enjoying a 2-night luxury spa experience for two at the award-winning luxury hotel & resort, The Belfry Hotel. Congratulations from all of us at DynamicAction!