Given the number of individual moving parts in the retail value chain, advanced retail analytics has become an integral part of decision-making for retailers of all sizes. In this blog, we’ll look at a framework that can help retailers harness the power of data analytics to monitor important retail-related KPIs and build efficiencies across the value chain.
Retail Analytics Framework
The Retail Analytics Framework is a proactive model that helps group and analyze retail value chain data. The framework identifies two major focus areas in the value chain—upstream and downstream logistics.
Upstream retail logistics largely involves operations that prepare retail businesses for sales—like procuring goods and managing inventory—while downstream retail logistics focuses on the sales and shipment side of things. Ultimately, by optimizing upstream and downstream operations, retailers can improve their revenue, which impacts the third focus area of the framework—finance.
Upstream retail logistics
A major part of upstream retail logistics revolves around inventory management, which can be considered the backbone of a retail business. The underlying goal of good inventory management is to strike a balance between the amount of inventory coming in and going out. Overstocking your inventory can have a significant effect on your cash-in-hand, while understocking can compromise availability.
Retailers often face challenges when it comes to inventory management, like a lack of confidence in the amount of inventory to order and the inability to track losses and revenue drainers. However, with advanced analytical capabilities, retailers can track important inventory metrics to better understand customer demand, which results in smarter buying and storing decisions.
A metric that can majorly help retailers in this regard is the sell-through rate.
The sell-through rate metric presents a comparison between the amount of inventory sold by a retail business versus the amount of inventory shipped to them by the manufacturer over a period of time. It can help retailers gain insights into the pace at which products are selling.
The Sell-through rate by product report, given above, presents the sell-through rates of various products under one roof. It acts as a single source of truth for retailers to effectively monitor the sell-through rates of all their products.
A low sell-through rate means that the product is selling slowly and could be at a risk of being overstocked, while a high sell-through rate signifies a fast-selling product that’s at a risk of being understocked.
Watch our webinar on retail analytics to explore advanced analytical capabilities that help track important retail logistics KPIs in more detail.
Downstream retail logistics
Downstream retail logistics is where retailers get to interact with customers directly and better understand their behavior, so that they can improve their customer engagement and boost sales. To achieve this, retailers monitor their sales from multiple standpoints, such as sales in terms of people, products, and transactions. Among the first metrics that retailers look at when they start analyzing their sales is their overall monthly sales.
Monthly sales trend
With the monthly sales trend report, retailers can unlock three key insights—any patterns in sales, customer buying habits, and insights on sales targets to set for the future, which is one of the most widely used applications of this report.
With modern BI platforms, retailers can also forecast the monthly sales trend, which is an added advantage when setting targets. The forecasted values help retailers make more confident decisions on their sales targets, and help them validate their sales estimates.
Ultimately, the end goal of optimizing your upstream and downstream operations is for retailers to improve their financial performance. Analyzing important finance KPIs, like gross and net profit, can optimize your cash flows to yield better results and gain a competitive edge.
Gross profit vs net profit
Gross profit is the overall selling price subtracted by the cost of all the products, while the net profit accounts for all the expenses due to other costs businesses incur, like maintenance, salary, rent, and more. The Gross profit vs Net profit report helps compare these two metrics and provides insights on the total revenue remaining in hand.
Traditionally, retailers would have to create this report manually. However, with modern BI platforms, we can humanize data interactions and cut short the time to gaining insights. Ask Zia is the ML-powered AI assistant in Zoho Analytics, which allows users with even minimal tech know-how to create reports and get insights by simply asking questions.
The Retail Analytics Framework, when powered by advanced analytics, provides a well-rounded approach to effectively managing the retail value chain and optimizing performance in terms of upstream retail logistics, downstream retail logistics, and finance. Watch the complete webinar to learn more about the Retail Analytics Framework and advanced analytical capabilities.