7 critical questions traditional retailer metrics can't answer
At the most basic level, retail is a simple business about selling products for more than the retailer paid for them. Historically, retailing was based upon selling from shops. And, even when retailers open virtual stores, the core metrics have been mostly focused on sales, revenue, margin, growth, and market share. In today's omnichannel marketplace, the customer is now the new POS – Point of Sale. They determine where they purchase, how they pay, and where they collect. Retailer systems and metrics were not designed to track "flow" to the consumer. Traditional POS systems are no longer enough when trends shift to "click and collect." Today's retailers are facing new business questions that will require new data, metrics and benchmarking.
Why this is important: You can't manage what you don't measure. Retailers have always measured sales at a location. With today's customers, how those purchases occur and flow in omnichannel paths is just as important as the final sale receipt.
Core retailer metrics are based on a legacy of "stores selling things"
Bricks and mortar stores evolved as the "place" to sell things. Historically, they have had a "till" and most still have cash register. The purpose was to collect payment, make change, and to record the transactions and data required to run the business. Today's stores have much more sophisticated electronic POS systems that enable electronic payment. Retailers' POS systems enable and track all the way down to the SKU level to enable inventory replenishment, as well as detailed analyses of what is sold in the "market basket."
Online ecommerce evolved as a "virtual store" selling things. While the shopping experience is digital online, it is interesting that websites still use the term and icon for a "shopping cart." The online term "checkout" still reflects the experience of waiting in que to checkout at the cash register in the physical store. In many ways the POS system for online is not all that different from bricks and mortar stores. The new dimension is shipments.
Retailer scorecards have been historically focused on sales and share
Today's POS systems have been integrated into larger enterprise systems for managing retail operations, inventory and financials. Yet, it is interesting to note how much of retailers' core metrics are still focused on "stores" selling products. Whether it be physical stores or online, scorecards are heavily focused on sales, revenue, returns, and net profit. And to benchmark performance, retailers use their metrics to analyze trends and growth: year over year growth, same store sales and comparisons to same week sales as last year.
But, if retailers only track their own performance, they can be blindsided by the market and competition. So, most retailers subscribe to third party sources or associations that track total volumes of goods and market consumption. They also use this data to analyze distributor data to map shipments through various channels. The end result is that retailers can quickly benchmark their growth against competitive indices, and track their market share at the country and local levels. All good and still very important. So, what are they missing?
Retailers are missing core metrics when the consumer is the new POS
The omnichannel consumer by definition shops in more than one place across time. Not only do they determine where and how they shop, they also determine where and how they will pay. Even more importantly, today's consumers are expecting (and receiving) multiple combinations of choices of purchase and delivery:
- Buy online, ship to home
- Buy online, collect in store
- Buy online, collect at locker or another location
- Buy in store, take home
- Buy in store, delivery at home
- Buy in store, delivery at commuter station or other location
Over a very short period of time, the definition of "sale" has become very muddy and confused. If a customer buys online, and collects in store … is that an ecommerce or store sale? If a customer searches online, finds a product in store, visits the store, but buys on their mobile phone and ships it from the store home … how is that measured? In most cases the retailers own systems and the third party sources only report online vs store sales – none of the purchase dynamics or point of receipt.
Why today's retailers require new omnichannel data and metrics
POS systems are necessary, but not sufficient for omnichannel retailing success. Without being able to measure consumer purchase and delivery flow, retailers can't see the critical paths, or measure ROI on omnichannel investments. For example, if retailer sees double digit, YoY sales growth for online, they need to know if that's "good" and why. A retailer needs to know if the online sales growth is due to the investments to improve the online experience, or is it part of the new click and collect capabilities with stores?
Does it matter where a sale happens? One could argue that a sale is a sale. However, the costs associated with a given sale are quite different if it is completed entirely on the web, versus online purchase with collect in a store that has a different costs for stock, staff and store operations.
Beyond just the costs of different flows, research has been consistently showing major positive gains for omnichannel. Omnichannel customers shop more often, buy more, and can be as much as 47 percent more profitable than consumers who just shop one channel. So while the complexity can be more operationally expensive, the multiple paths creating consumer choice can be much more profitable, create loyalty, with more repeat purchases.
7 critical omnichannel questions retailers need to be able to answer
Tracking retail sales has and will always be important. Sales are the final outcome. However, sales counts do not provide insights into the paths and factors that culminated in a sale or a return (negative sale). In order to know where to invest and how to best leverage omnichannel factors to optimize growth, retailers need to know and measure much more!
Today, every retailer is competing in an omnichannel world whether they acknowledge it or not. Consumers are choosing and driving their own experience, and purchase. Every retailer should be able to answer the following business questions:
- How many consumers search your business on their mobile device?
- How many mobile searches ultimately result in sales for your stores/online?
- How many customers search your online website from within your stores?
- How many purchase online and collect in store, or at a locker?
- How many customers purchase at a store but chose to have it delivered?
- How many more customers purchase with free delivery, or one day delivery?
- Are omnichannel customers more, or less profitable? … By how much?
The "store" has evolved to become a shopping point, a point of customer experience, and a distribution point. To be able to strategically leverage the omnichannel consumer experience to grow sales, retailers need to know much more than the percent of final tickets sold online versus in stores. We have reached the age where the customer is the store! We now need the data and metrics to track the paths and core metrics.
Topics: Consumer Behavior, Customer Experience, Customer Service, Department Stores, eCommerce, Marketing, Merchandising, Mobile Retail, Omnichannel / Multichannel, Online Retailing, Point-of-Purchase / POP, POS
Chris Petersen Chris H. Petersen, PhD, CEO of Integrated Marketing Solutions is a strategic consultant who specializes in retail, leadership, marketing, and measurement. He has built a legacy through working with Fortune 500 companies to achieve measurable results in improving their performance and partnerships. Chris is the founder of IMS Retail University, a series of strategic workshops focusing on the critical elements of competing profitably in the increasingly complex retail marketplace. www