How Retailers Can Get the Most From Their POS Data
It’s been a tough year for the retail industry. Even before the devastating impact of a shutdown economy due to COVID-19, the whispers of an "apocalypse" were rampant with many retailers, and wholesalers in particular, feeling the effects of Amazon.com, direct-to-consumer (D-to-C) growth, and the shrinking mall on their bottom line. In the current environment, retailers will need to find ways to do more with less — be it less employees, less time or less money. For many retailers, the answer lies in something they already have on hand — their own point-of-sale (POS) data, which can provide crucial insight into not only how sales are performing on a weekly basis, but can pinpoint future trends and benchmarks and help with merchandising and pricing. The problem retailers face is fewer merchants to analyze the business. With deep cuts in executive staffing, retailers will be relying on the merchandising expertise of their wholesale partners more than ever before.
The beauty of POS data is that every wholesale brand has it. Collecting POS data is a crucial part of a merchandiser's job, but one that can take days to capture, normalize and make sense of. Smart wholesalers that are able to synthesize and analyze POS data can make the difference between just reporting basic sales and using that data to react to current opportunities and plan for the future. However, there's little value in collecting data if it’s not used to better understand trends and insights and drive business decisions.
What Data is Collected
POS data includes a wide variety of information related to unit sales, dollar sales, colors, styles and sizes that can give insight into velocity and profitability. Once analyzed, this data can provide business intelligence to merchandisers such as product affinity and which items are frequently bought together, which can inform bundling and product recommendations at checkout; overall trends by product; and insight into which products are being returned, exchanged or refunded. And in a world where omnichannel is becoming a business imperative, being able to bridge the gap between online, D-to-C and department store sales data becomes a valuable tool in seeing what's working and what's falling flat.
Here are three areas where POS data can help retailers and wholesalers inform the right merchandising, product mix and tough business decisions to improve their bottom line.
Order Cancellation
With many retailers cancelling their second quarter orders and significantly cutting back on third quarter, brands need to understand what to do with their remaining inventory that will still deliver value. They will be grappling with questions such as if it’s better to hold the inventory, cancel it or sell it to discount brands, and how each of those choices will impact the bottom line for their brand.
Before any brand can make that decision, it needs to do a deep dive into the analytics to understand how each scenario may play out. Brands may need to look into geographic/state breakdown, style breakdown and more to understand benchmarks so that they can hopefully get the best outcome for their business from an unfortunate situation.
Future on Order
Future on orders for summer and fall have been greatly impacted with many brands finding themselves with excess inventory that got clogged up and was not able to sell. There are a number of ways to deal with the inventory, such as utilizing off-price channels, cancelling or delaying future production, holding current on order for six months to 12 months, or offering deep discount incentives to entice retailers to increase buys. Bottom line: brands will need to work hard to fight for every dollar they can. This will include identifying pockets of opportunity, pricing their products correctly, and making sure they maximize their replenishment opportunities all while managing their internal stock positions to be as efficient as possible. None of this can be accomplished without having a deep understanding of what the data is predicting to arm you with the insight to make data-driven business decisions.
Improved Offerings
Once the industry gets used to the new normal in retail and can stop and catch its breath, brands will need to understand their product performance at a more sophisticated level than ever before. It will be more important to ensure SKU development is efficient, that their offerings are on trend, and that offerings are tailored to regional performance as different regions will likely see very different levels of foot traffic, consumer confidence, and product velocity as each state opens for business. Data will need to be analyzed on a micro AND macro view to really understand what's happening and what may occur with trends, performance and overall sales.
The current economic issues impacting retail create an even stronger need for merchants to partner with the wholesale side of the business. With many retailers needing to furlough their merchants and employees, we're in a time of needing to get the most from existing resources in the most efficient and effective manner. Brands can't afford to operate with the old Garmento attitude of cut to order, ship and repeat. Most of those companies are gone, and what’s remaining are wholesalers that take a data-driven approach to running their businesses and putting their data to work for their brands.
Chris Borduas is managing partner of Tillerman USA, a company that provides market data, style performance reporting, predictive analysis for brands and suppliers.
