When it comes to increasing sales productivity on the merchandise floor, capital investments don’t always have to be big. A tweak here and there could add double-digits to a category’s sales.
That was one of the key messages from Alexei Agratchev, chief executive officer and cofounder of RetailNext Inc., the San Jose, Calif.-based in-store analytics firm. Agratchev said by setting a baseline, gathering and measuring data and then conducting testing on the sales floor, “a lot of low-hanging fruit” can be addressed with simple merchandising interventions that can bolster sales.
By way of example, Agratchev told attendees of a large chain store that was seeing a weak performance in its shoe department. The data measuring revealed the need for a small change that involved moving benches further from the wall displays so shoppers had an easier time trying on shoes. “It was a slight modification that resulted in a significant sales increase for the department, and the store,” Agratchev said.
The ceo said it was not unusual for changes like this to result in sales gains of between 5 and 20 percent. The approach is scientific, and similar to the principles of the so-called “choice architecture,” don’t require heavy capital expenditures. Moreover, the data-driven approach also improves the in-store environment.
“When consumers walk into your store, and they have a positive experience — that’s a huge win,” Agratchev said adding that RetailNext has invested $130 million in research and development to help retailers improve the in-store experience.
The ceo also said the analytics are scalable — from a department within a store to the entire store. It can include looking at foot traffic patterns (using heat maps), and shopper demographics (such as gender, age and where they live). These in-store analytics are part of the firm’s “people counting and conversion” as well as its “shopper activity” solutions.
“There is a lot of data that can be collected,” the ceo explained. “We can determine whether they live locally [or travel a distance] to your store. We can also tell how much time they spend in the store, and if they return.”
RetailNext offers shopper engagement tools, and mobile in-store analytics. Staff optimization is also on their menu of solutions. The firm also offers point of sales analysis, and tracks sales and traffic data by region and can dive deep into conversion rates as well as average transaction value — and sales per shopper.
Agratchev said since the firm was founded eight years ago, he’s learned that “no two retailers are the same.” And he added that no two stores — even in the same chain — are not the same. As other speakers noted during the summit, localization is becoming increasingly more important. So having data on a store level — and neighborhood level — can help inform merchandising strategies.
“One size doesn’t fit all,” the ceo said, adding that retail today occurs online, in the store and on a mobile device.
Agratchev said consumers have also changed, and the retail industry has not necessarily kept pace with that change. He showed a video clip during the presentation composed of shopper interviews. The vignettes revealed a broad range of consumer preferences such as the need for better presentations, service, sizes and choice. The shoppers craved exploration, and noted that retail lacked a “sense of discovery.” And several noted that shopping was no longer “fun.”
The ceo said the reasons consumers come into the store also varies. Their shopping journey may begin online, and their expectations when they go to into a store has changed. Agratchev said they may seek expert advice in a store, or just simply want to explore. When it comes to apparel and other categories, touch and feel become important factors. Convenience is often a driving factor to when and how consumers shop. And for many demographics, shopping plays an important social function.
As a result, retailers are being forced to react and transform themselves. Stores are being seen as merchandise showrooms while others are simply a place for “digital engagement.” Moreover, the brick-and-mortar store has become an important destination for the consumer — and families alike. And that puts a lot of pressure on companies.
“Today, retailers cannot compete on product selection and price alone,” Agratchev said. “You have to compete on the in-store experience.”