Retail is a competitive business—arguably one of the most competitive. Products are often commoditized, barriers to entry are frequently small, and seemingly everyone has an idea on how to build, communicate, and deliver a better value proposition to shoppers.
Making better decisions in business starts with having sound data on which to base those decisions. But data alone isn’t always useful. Without easy ways to organize it and shed light on real opportunities, retail leaders are often left with “data overload” and “paralysis by analysis.” When data is coupled with insights, on the other hand, it becomes actionable—therein lies its true value.
Being a retail warrior with over twenty years in the business, I’ve found value in engaging performance models that use information from the past to help define and reshape the future. An actionable model that I helped develop, with the intent of giving retailers the tool to drive performance across stores, is RetailNext’s Retail Performance Quadrant, below:
The Retail Performance Quadrant is a simple two-by-two matrix. On the vertical axis is Conversion, or the percentage of store visitors (based on traffic) who actually make a purchase. On the horizontal axis is Average Transaction Value (ATV), or the average amount of those purchases.
In the upper right quadrant of the matrix are the Super Performers: chains, regions, districts, departments and/or associates with high conversion rates and high ATVs. Those with high conversion but relatively low ATVs are Converters, and lie in the upper left quadrant. The bottom right sees Opportunists, those with low conversion rates but high ATVs. And lastly, the Upsiders sit in the lower left, saddled with both low conversion and ATVs.
As you can see, a retailer could utilize the Retail Performance Quadrant to compare relative performance of the business, from a macro level across regions, all the way down to a micro level with store-specific results. For our purposes, lets take a look at an example from a retailer with multiple stores in a single district.
First, the retailer establishes baselines across the chain for the period of time being measured, usually using the median ATV and conversion. Stores are then overlaid on the grid based on their individual performances. By combining the overall performance of the retailer with the individual store performance, the stores are segmented into their respective quadrants.
With data overlaid on the model, a retailer can more easily strategize to improve store performance. Some specific suggestions for each quadrant category include the following:
- Super Performers (best of the best on both metrics)
o Benchmark and identify best practices
o Utilize as coaches of Upsiders
o Identify opportunities for special recognition
o Collect feedback on system and reporting processes
- Converters (high conversion, low ATV)
o Establish shopper loyalty
o Identify opportunities to upsell, including multiple items and alternative products
o Analyze store replenishment and other back-of-house processes
o Utilize as coaches of Opportunists
- Opportunists (high ATV, low conversion)
o Align staffing
o Adjust focus of traffic demand
o Identify “magic hours” of success and of opportunity
o Utilize as coaches of Converters
- Upsiders (low conversion, low ATV)
o Redirect store focus and apply best practices
o Establish sales per shopper (SPS) goals
o Train on conversion and emphasize selling skills
o Institute more frequent performance reviews (weekly)
The Retail Performance Quadrant allows a retailer to understand the strengths and weaknesses of individual stores across their chain. Its flexibility also allows for sorting of stores based on relevant company attributes—non-mall vs. mall stores, for example, or specific types of stores, etc. With easy visibility into the information it provides, the tool is fundamentally designed to continually advance the benchmark of companywide performance.
As a powerful tool to begin working through data and identifying areas of likely performance improvement, the Retail Performance Quadrant is one of my favorites. It gets retailers to shift their focus from the status quo to the possibilities that might exist to improve both the customer experience and store performance.
For more information on the Retail Performance Quadrant and other RetailNext solutions for your business, please contact your account representative or email@example.com.