Good Retail Blogs

Here are a few blogs for the retail industry we enjoy following and thought you might find helpful.

http://www.cordovaconsultants.com/blog/

http://blog.retail-is-detail.org/

http://retailleverage.com/

http://www.acceleratedanalytics.com/blog/

http://retailacumen.wordpress.com/

http://www.retailwire.com/index.cfm

Poor Weather Causes Out of Stocks

According to the WSJ, the snowstorms that blanketed much of the country in the past week caught apparel retailers in short-sleeves.

Most clothing chains have very little winter clothing left on their racks, the result of tightly managed inventories and better-than-expected holiday sales.

But, with nearly 70% of the country covered in snow, store shelves are mismatched to the weather: filled with new spring fashions that frigid customers aren't in the mood to buy. The lack of appropriate dress could cost retailers some momentum after improved holiday and January sales periods, said analysts.

An employee at a Gap store in downtown Washington, D.C., said the store had been sold out of cold-weather hats, scarves and gloves for over a month.

Macy's Inc. said, it’s My Macy's merchandise localization program, which lets buyers modify merchandise assortments based on local needs, helped it avoid shortages. A spokesman said Thursday, that the department store chain planned for fresh flows of coats, gloves and hats in February and March in cold-weather markets. "Macy's continues to have ample supplies of cold-weather merchandise," the spokesman said.

This is an interesting example of how using EDI 852 and analyzing POS data may have been able to help avoid out of stocks. Although the fashion supply chain tends to have long lead times, if retailers and vendors had been more closely watching the weather and local demand signals, they may have been able to either reallocate inventory between warehouses and stores, or perhaps place additional orders.

How much do retail out of stocks cost?

A recent RIS article  titled, “How Much Are Out-of-Stocks Costing You? Much More Than You Might Think”, By Greg Buzek, provides more evidence that retail out of stocks are costing vendors huge lost sales.  Buzek quantifies the scope of the loss; “A retailer that invested in completely fixing its out-of-stock problem, would gain a solid competitive edge. The average retailer could increase same store sales 3.7%, by converting all perceived out-of-stocks into transactions. Specialty soft goods could have the biggest potential win: solving out-of-stocks would boost their same-store sales 7.1%, while department stores would see a 4.2% jump.”

The good news is we have seen dramatic improvements in in-stock performance by active store and item level analysis.  The methodology is pretty straightforward:

1. Determine the lead time from order to product arriving at a store.  Let’s say this averages 2 weeks.  This is your minimum on hand weeks supply to avoid a stock out.
2. Next calculate the average weekly sales velocity for each item, and each store.  Yes, you must know the average sales velocity for each peg or shelf position.
3. Calculate the weeks supply on hand for each item and store by dividing the current on hand inventory by the average sales velocity.
4. Filter the results to show only those items with less than the 2 weeks supply on hand.  These are the stores you need to make sure you place an order immediately to avoid a stock out.

This type of analysis is not hard to do, but if you don’t have the proper tools it can be very time consuming.  But, it’s well worth the effort.  If you can improve your in stock performance by even 2%, you stand to gain significant sales.

Next Article: Increasing Sales By Managing Out of Stock Inventory

Retail sales improvement requires careful forecasting

The WSJ reported retail sales Rose 3.3%, showing signs consumers are returning to stores.  This is a great sign for the retail market as it seems a turnaround may be in the works.  Macy’s posted a 3.4% increase, Saks reported 7% and Costco 8%.  As demand begins to increase, vendors need to keep a careful eye on the supply chain.  Retail buyers have been operating on low open to buy for over a year, so inventory levels may be below where they will need to be to satisfy demand.  Vendors using EDI 852 data for forecasting need to make some careful adjustments to their forecasting model to not be caught by surprise.  Here’s why.  Forecast models use historical demand as the foundation for current year predictions, but last January was a terrible month for retail sales, so a simple look at comp year demand will give a misleading result.  To correct for this, vendors should be considering not only last year’s demand, but also the prior year’s demand and the current period trend.  By combining these three numbers, vendors will have a more accurate model and hopefully not get caught by surprise.  But even with a good forecast, we expect sales to be unpredictable for the foreseeable future, so vendors must carefully watch demand and inventory levels by analyzing the EDI 852 data weekly or even daily and making push order recommendations to their buyers.

Analyzing Home Depot Market Sales

Over the past month or so, we have been rolling out new sales analysis for our Home Depot vendors on market performance.  Vendors to Home Depot using EDI 852 know buyers often want to receive sales analysis at a market level.  What we often find, however, is the analysis conducted does not take into consideration the number of stores in the Home Depot market.  To conduct a proper POS analysis of Home Depot markets, you really have to take into account the number of stores in market.  For example, Home Depot market 48 has 80 stores, while market’s 138 and 160 have one store.  By summing the units sold from the EDI 852 to a market level and then dividing by the store count in that market, you can get an average sales per store for the market.  This metric is very useful in comparing the performance of the markets in a meaningful way.  In addition, you can use the SKU count in your plan-o-gram to further compare the performance of the stores at a market level.  You might also consider a store level sales analysis, so you can rank your stores by sales volume A to E.  This lets you not only compare the store against the average sale in the Home Depot market, but also against its sales volume peers.  POS sales analysis by Home Depot market can yield some very actionable results, give it a try.

Use twitter to keep up to date #edi852

Follow news on EDI 852 and retail pos analysis on twitter. You can find us @rainmakergrp or #edi852.

Lesson on the Golf Course

I went golfing the other day and got paired up with a guy named Henry. During the course of the afternoon, I came to find out Henry is a very successful business man who spent part of his career in insurance and now owns more than a dozen hotels in ‘retirement’. To me, retirement means nothing but golf and sitting on the beach, so I’m not sure Henry is ‘retired’, but anyhow. He shared an interesting story with me.  He was having lunch with another very prominent business man, which if I wrote his name 80% of you would recognize. Henry asked him, “What is the key to your success?” This man considered the question for only a brief moment and said, “Oh it’s very simple”. “If a job is worth doing, then I hire someone to do it, if it’s not worth doing, then I don’t do it at all.” I was struck by how profound and simple that was. He had created a simple method for deciding how to focus his energy where it counts the most and avoid becoming entangled in the day to day details. I was thinking about this in relation to our business and was struck by the fact that many vendors that come to us for EDI 852 and POS reporting, are only doing so because their buyer told them they needed to, or because an executive at their company thought it might be a good idea. They are not committed to analyzing and using the data to improve their business. On the other hand, we have vendors who dig into the details of the data every week and find out of stock issues and sales opportunities. They are making the most of the data and the results show in their growth and inventory GMROI. So, the bottom line is this; if you are considering EDI 852 / POS data analysis, don’t stick your toe into the water, jump in all the way and make the most of the data, and your business will improve.

Home Depot Cuts Jobs, Focuses on Supply Chain improvements

According to an article in the WS,J Home Depot is cutting 1,000 jobs.  CEO Frank Blake was careful to note the cuts are not due to business performance or economic concerns, but rather a reorganization of the business. The article contained a couple interesting insights into Home Depot’s business: they expect to add an average of 1.5% annually to their retail square footage, or about 20 stores in 2010; and they will focus spending in 2010 on improving supply chain and existing stores. Also interesting in the article, is research from Harvard University’s Joint Center for Housing Studies suggesting remodeling activity will bottom out in Q1, 2010 and then begin to increase. If that prediction is accurate, it could be a good sign for Home Depot.

Store Sales Analysis

The primary purpose of a store analysis is to identify the stores which are making the largest contribution to total sales. When the highest contributing stores are identified, an analyst can study the characteristics of those stores, including SKU assortment, demographics, promotions, min/max on hand, and make recommendations on how other stores can be improved to enhance performance. An important objective of a store analysis is to grade stores by performance into major categories, to save time and focus out of stock and forecasting on the highest contributing stores in future analysis. The data provided in an EDI 852 document provides all the necessary information to conduct a store sales analysis.

Buyers often have a store list with categories defined A,B,C,D based on sales performance. However, the buyer’s categories are typically assigned based on the total sales for a given store or total sales for a product category. This may result in a different performance ranking than the analysis on your specific SKU’s. Because plan-o-gram decisions are made based on the retailer’s store categories, you may find that an A store for your items is considered a B or C store based on total sales. Request a list of store categories from your buyer and compare to the categories from your analysis. If there are variances, we recommend you meet with your buyer and discuss adjustments to the plan-o-gram based on store performance for your SKU’s.

Why should you conduct a store sales analysis using your EDI 852 data?
· Identify variances between the retailers general store grade and the actual store grade for your SKU’s.
· Understanding a store's performance relative to its peers allows you to focus your attention where it is most needed.
· Identify the best allocation of promotional dollars
· Work with the buyer to put the right plan-o-gram in each store
· Retail replenishment decisions are usually made based on their store grade, if it’s not correct for your SKU’s, there is a problem you can correct
· Compare store grades across retail partners in the same geographies so you can identify new expansion opportunities.

Additional information and detailed instructions are available at http://www.acceleratedanalytics.com/download-whitepapers/

Top Questions About Point of Sale Data Analysis

Vendors are working hard to understand how to best use retail POS and inventory data, which is made available via EDI 852 or a web portal. Here are five very common questions vendors ask as they work with our team to put a data analysis solution in place.

What is the difference between EDI 852 and data available on my retail customer's web site? The most obvious difference is the format of the data. EDI 852 is a standard document template, but it is encoded using line identifiers and other language necessary for computers to make sense of the data. EDI 852 must be parsed and translated to be of any use to a business user. Data available in a retail portal is typically either presented on screen or saved into a text or spreadsheet format. These files do not require translation and can be opened in a variety of Windows programs. A second difference is the level of detail available. An EDI 852 document always includes units sold by UPC but it may not include on-hand data. And receiving store level EDI 852 data is often an additional selection and cost. Most retail portals will provide detailed store level data files, or presentation of detailed data on the screen. Finally, and most importantly, EDI 852 values for each UPC can be different than the values reported in a file available on the portal. This can be due to different reporting periods, different source and/or additional source system data, or a different method of handling of returns.

If I can choose between EDI 852 and a file from my retailers' portal, which one should I choose? This decision comes down to a few factors. First, does the retailer charge a fee for sending data via EDI as opposed to accessing the data on the portal. Second, does the EDI 852 data provide less information than the portal. For example, as noted above, some EDI 852 files do not include on-hand or store level data. Finally, research the data accuracy of the two sources and choose the one which will best support your decision making process.

What types of reports should I be using? There are three reports that form the backbone of retail POS data analysis: item sell-thru by store, inventory on-hand by item and store, and top selling items. From these three reports you can create a library of very useful decision support tools segmented by geographic region, product category, and by retail partner.

Why should I consider an outsourced service for POS data analysis? For most vendors, working with POS data falls outside their IT organization's typical scope of expertise and tools. Simply put, there is a fairly large volume of data which requires translation, scrubbing, and organization into a sophisticated data warehouse. The data does not fit into most organization's ERP, forecasting, or accounting system so the IT department is faced with building a custom application. Then, end users need a simple and quick tool to access the data for analysis and decision making. An outsourced service can deliver the necessary engineering and software tools in a very short period of time without an expensive investment. And outsourcing provides a cost effective monthly expenditure which aligns with your cash flow instead of a large capital expense.

Why can't I just use a spreadsheet for analyzing POS data? Spreadsheets have many limitations when it comes to analyzing POS data, not the least of which is simple row and column limitations. But more importantly, there is a significant amount of work required each day or week to accept, transform, format and analyze data in an Excel spreadsheet. Time which your staff can avoid all together by using more sophisticated tools and/or an outsourced service. In addition, spreadsheets are generally not well suited for team based collaboration on data. Each time a spreadsheet is opened, the user has the opportunity to change/edit data, which can rapidly deteriorate the quality of the data and cause significant duplication of effort.

To stay current on EDI 852 topics, follow us on twitter: @rainmakergrp and visit our blog.

6 Big Ideas for a new decade in retail

This blog post is worth reading http://retailprophet.com/blog/?p=550

Gross margin return on investment (GMROI)

GMROI is one of the most important metrics in the retail/supplier world because it allows you to understand both the velocity with which your inventory is turning and the return you are getting on your investment. GMROI is a measure of inventory productivity that shows the relationship between total sales and the gross profit you earn on those sales in conjunction with the amount of dollars invested in inventory.

GMROI can be expressed as either a percentage or dollar multiple. Many retailers calculate GMROI at a product family or department level, but it can also be calculated at an individual item level.

GMROI (%) = gross margin (%) x [sales / average inventory at cost]

where gross margin (%) = (sales - cost of goods sold) / sales

and average inventories at cost for one year = add ending inventory at cost for every month of the year plus the ending inventory at cost for the previous year and then divide by 13.

Analysis software which automates the calculation of GMROI at an item level, and then allows the user to input exception monitoring based on business logic, is ideal. This setup provides significant time savings and proactively alerts a user to problems.

How to get a buyer to accept a forecast recommendation

Moving into 2010, most retail economists are predicting a continuation of the “do more with less” retail buying strategy. This will mean high fill rates, accurate forecasting, and proactive out of stock analysis will be critically important to maximizing sales.

I would like to begin a discussion on the best practices for getting a replenishment manager to act on a SKU forecast recommendation. Here are a couple thoughts to get the conversation going.

• Carefully analyze fill rates and ensure all orders are completed on a timely basis before approaching the buyer with a forecast recommendation. It’s basic ‘blocking and tackling’, but if your fill rate is below expectations, the buyer is not likely to accept a recommendation for more inventory.
• Whenever possible, use actual comp period historical sales demand as the basis for forecasting current year sales. Conservative forecasts built on actual sales history have higher credibility and less chance of error.
• Concentrate your analysis on A stores and position your recommendations to the buyer on 100 or 200 ‘test stores’ to start.
• Carefully document the ‘before’ and ‘after’ performance so when you go back recommending an expansion beyond the test stores, you have a positive business case.

Please chime in and add your thoughts and experiences.

Brighter Days Ahead for Retail in 2010

Retail economists now predict solid growth for 2010. The International Council of Shopping Centers projects annual sales will increase 3% to 3.5%, the biggest jump since 2006. "It's a story of the turning of the corner for the retail industry," said Michael Niemira, the group's chief economist. "We are probably now outside of the recession, and getting the first slow recovery."

"There is more stability and more visibility," Macy's Chief Executive Terry Lundgren said in an interview. "Last year, it was like we were all falling off a cliff, grabbing for vines to catch on to something, because we couldn't really see what was happening."

The less-is-more strategy is expected to continue well into this year as merchants cautiously move forward in light of continuing high unemployment and a recent spike in energy prices that is reducing consumers' disposable income.

Maintaining high fill rates and carefully watching inventory on hand will be critical for success in 2010. EDI 852 provides the raw materials necessary to analyze sales and inventory on hand, however vendors will need to be diligent in analyzing and working with replenishment managers to ensure out of stocks do not occur.

Take action now:
1. Identify your A and B stores by sales volume.
2. Perform an out of stock analysis for A and B stores for your top SKU’s.
3. Review your fill rate for these stores/SKU’s and take any corrective actions necessary.
4. Work with your replenishment manager to ensure order min/max will support expected sales and avoid out of stocks.

Additional resources:
· Detailed instructions for store analysis and out of stock analysis can be found here
· Tools for analyzing EDI 852 can be found here

Avoiding Out of stocks

Brrr, it’s cold outside. I live in south Florida and we have been experiencing record low temps for well over ten days now. Last night it got down to 28 degrees at my house! I know-28 degrees would be a welcome heat wave for many places in the US right now, but down here this is a record cold. The cold temps have resulted in stock outs of space heaters at Home Depot stores in central Florida. "The majority, if not all, Home Depot stores in Florida are out of stock of space heaters," said Craig Fishel, a spokesman for the company. The company continues to sell them online. We blog all the time about how to use POS and EDI 852 data to avoid stock outs. It’s not very complex, simply look at the current on hand inventory and the current rate of sales, and weeks of supply can be easily calculated. This stock out was pretty easy to predict; weather forecasters have been predicting the abnormally cold temps for 10+ days. More than enough time for buyers to work with their suppliers to bring in sufficient inventory to handle the upcoming demand. I wonder how many lost dollars have resulted?

Next Article: Increasing Sales By Managing Out of Stock Inventory

#edi852

Started a new category on Twitter for EDI 852 research and information. Follow rainmakergrp and watch for #edi852 to stay up to date on all things regarding point of sale data analysis, and specifically EDI 852. Topics will include how to best use EDI 852 for analyzing retail sales performance, on hand inventory forecasting and replenishment and how to turn the data into actionable plans for your buyer.

Using EDI 852 data to audit Planogram Compliance

Many of the vendors we work with have a specific planogram they agree to with a buyer on an annual or semi-annual basis. After reaching an agreement with the buyer on the planogram, the vendor estimates sales and then creates a production forecast based on the number of facings and estimated sales. The problem many vendors encounter is that with multiple planograms, each with a different SKU assortment at thousands of stores, auditing the execution can be a challenge—so much so that most vendors do not conduct a detailed review on a regular or even semi-regular basis. If the planogram is not executed properly, sales are lost, the vendor can end up with extra inventory, and ultimately the retail buyer may conclude incorrectly that the vendor’s products are not performing well.

The good news is that with some effort the EDI 852 data provided by the retailer can be used to audit planogram compliance. Here’s how. Create two planogram files; one file will list the SKU’s that are included in each planogram, the second file will list each store and the planogram assigned to the store. The layout for the first file should be SKU # | SKU description | POG Name 1 | POG Name 2 ,with as many distinct planograms as you have. The second file should be Store # | City | State | POG Name. Using these two files and the EDI 852 sales data, you can load these into a database and then analyze compliance, where compliance means that a store has the intended SKU(s) on hand, or has sold the item(s). If either of these conditions are true, the SKU is “active.” (Depending on where you are in the roll out process and how quickly your SKUs move, you may need to consider more than one week. For example a 4 week average of OH and sales might be appropriate.) For any store that does not have all SKUs “active,” calculate a planogram compliance percentage by dividing the active SKUs / planned SKUs. Then sort the final table descending by planogram compliance percentage. This provides the top down action list you need to go back to your buyer or replenishment manager and address execution issues.

Retail buyers and replenishment managers are busy. They don’t have the time, or in most cases the tools, to ensure proper execution of your planogram. You do not want to get to review time and find out that poor execution on the planogram caused lost sales.

Note: If you want to take planogram compliance to the next level, you can also include the minimum inventory OH for each SKU in the first file described above. That will allow you to not only check if the SKU is “active” but also if the SKU is properly stocked at the stores.

Nordstrom to Spend $45 Million on Tech Upgrades in 2010

Nordstrom recently announced its plans to invest approximately $40 to $45 million in technology upgrades next year, maintaining its level of IT spend year-over-year.

Over the past year, the luxury department store has been heavily focused on evolving its multi-channel business.  This focus has clearly paid off, since the luxury department store most recently reported in its latest quarter that sales for its online Nordstrom Direct business increased 16.4 percent.

The department store also has recently updated its inventory platform, so online orders could be fulfilled from the stores or any Nordstrom location.|

According to Blake Nordstrom, President and Director, Nordstrom, "This continues our ongoing effort to improve our customers' experience by providing them with greater access to more of our inventory whenever and however they want to shop."

Nordstrom continues, "For the customer to go online and be able to leverage the entire inventory throughout the company represents tremendous opportunities. There's significant learnings that are coming from this about our allocation of inventory and, again, our supply chain, but we view it as a real positive and view it as another confirmation on behalf of the customer in the feedback that they're giving us that this multi-channel strategy is super important to our future growth."

The Conference Board: Consumers to cut back on gift spending

NEW YORK (Nov. 23) According to The Conference Board, U.S. households are expected to spend an average of $390 on Christmas gifts this holiday season, down from last year's estimate of $418.

"Consumers are approaching the holiday season very cautiously," says Lynn Franco, director of The Conference Board Consumer Research Center. "Job losses and uncertainty about the future are making for a very frugal shopper. Retailers will need to be quite creative to entice consumers to spend, both in stores and online this holiday season, as consumers most certainly will expect major markdowns and bargains."

The top spenders will be New England households (Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont) who intend to spend an average of $534. Lowest Christmas spending will be in the Mountain region (Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, Wyoming) where consumers intend to spend $332 on Christmas gifts.

Only 26% of all households intend to spend $500 or more on Christmas gifts, down slightly from 27% last year. Among other households, 35% plan to spend $200 to $500, down from 37% last year, and 39% are planning to spend less than $200, up from 35% in 2008.

Consumers will also approach online holiday shopping very cautiously, holding off on big ticket items and holding out for major incentives like free shipping and discounts, according to The Consumer Internet Barometer, a separate survey produced quarterly by The Conference Board and TNS. The Consumer Internet Barometer surveys 10,000 households across the country and tracks who's doing what on the Internet.

"Even as the economy is starting to show signs of improvement, consumers are taking a cautious approach to their purchase decisions, focusing on lower ticket items that clearly communicate value," notes Bridget Armstrong, head of Consumer Sector at TNS.

Budget-friendly items appear at the top of consumers' online holiday shopping lists. The top categories include books, apparel/footwear, toys/games and movies/DVDs. The most preferred shopping sites are those operated by online retailers such as Amazon.com. Retail stores and catalog operators such as Walmart.com or BestBuy.com are a close second.

About 90% of online consumers cite free shipping as a major incentive. More than two out of three said special deals and offers not available in stores as well as coupons and discounts would encourage them to spend more.

POS analysis for strategic value

Several recent meetings with vendors has highlighted a growing trend - POS data analysis has been and continues to be an operations imperative, but vendors are increasingly finding strategic value in POS analysis. EDI 852 forms the foundation of the analysis with UPC and store level sales and on hand.  But looking beyond sell thru and tradition metrics, a savvy vendor can use the data to present to a buyer planogram compliance and even sales plans based on localized assortments. How many of your competitors do you think have that level of sophistication to present to a buyer? This is a great time to look beyond the regular use of EDI 852 / POS data and become a strategic resource to your buyer.