Quick Retailing Lessons From America's Favorite Pastime

In 2003, author Michael Lewis released the bestseller, Moneyball. It recounted the story of Billy Beane, the general boss of the Oakland A's. The book accredited Beane with adopting an approach to baseball management that relied more heavily on statistical analysis than scouting reports. That is to say, Beane was far more interested in the metrics of the game than any given player's potential for hitting home runs or stealing bases. By most standards, his approach was outstandingly successful. And it offers several valuable lessons for shops.

Independent merchants have a tendency to have a keen grasp of their stores' day by day sales and profit. However, they rarely apply severe statistical research to their key metrics. In this article, we'll take a cue from baseball and explore the metrics you should be following for your retail shop. I will also explain a way to use those metrics to spot and track trends, and plan your inventory around them.

vital KPIs to Determine

On the surface, the most 'observable' metrics to trace are the quantity of shoppers who walk through your doors and the level of sales throughout the day. Unfortunately, both numbers are akin to home runs and bases nicked. While critical, they yield really little understanding of what drives your store's profit.

You should identify the size of your average purchase order, number of items in each exchange, and the number of transactions as a proportion of your foot traffic. However, even these metrics are just scratching the surface.

Attempt to identify if explicit assortments or classes are failing to contribute as a share of sales and profit. Are your margins deteriorating? Are you being made to mark down certain items in order to move the stock? Is your inventory in certain classes failing to sell through as customers go for lower-priced alternatives?

Your ability to adjust to changing dynamics within your retail store is dependent on having the ability to analyze your numbers and track trends. Only then are you able to identify trouble spots and plan in an appropriate way.

Identifying Trends And Strategizing Inventory

Like baseball players who log season after season of predicted performance, plenty of your assortments will be evergreen sellers. Week to week sales numbers may change barely, but fluctuations will usually be restricted to a predictable band (i.e. Floor and ceiling).

On the other hand, sales of some of your assortments and product categories might vary wildly. This is particularly true for premium items during a bad economy ; customers frequently abandon them for lower-priced equivalents. The key is to track these trends so you can tweak your inventory.

Review your vendors' invoices to identify cost increases that are reducing your margins. Also, track your turnover and sell-through rates for each inventory class. A declining sell-through rate can speedily force you into a position where markdowns become your sole usable option for moving the merchandise. Markdowns are expensive because they erode your margins. As demand fades for express items, reduce your stock and allocate your capital toward assortments for which demand is increasing.

Keep Your Eyes On Your Store's Numbers

As an independent retailer, your survival is basically contingent upon your capability to adapt to changes in your market ( e.g. Purchaser preferences, seller costs, and so on. ). Too many independent retailers avoid taking a quantitative approach to their business. As a result, they fail to build benchmarks, which leaves them unable to spot critical trends that impact their bottom line.

Get into the practice of tracking the metrics that lie beneath the surface of your retail business. Just as Billy Beane helped popularize statistics research in managing baseball groups, learn how to closely research the numbers that can have an effect on your store's profit. By doing so, you'll be able to not only survive, but flourish among your competitors.