The U.S. Retail Market - The competition for the consumer’s spending $ in the U.S. Retail market has become more like a war than a business…and the casualties are mounting. The Pet Products business is a particularly intense battleground with over a thousand manufacturers, dozens of distributors and 200,000 retail outlets, plus the internet, fighting for a bigger share of $42B in Pet Products Spending. Pet Distributors are in a particularly difficult position, caught between the demands of both the manufacturers and the retailers, but still one step removed from the true “drivers”, the consumers…and their $42B. To survive and prosper, distributors must have a detailed understanding of exactly what is happening in their business. You can get this understanding through Strategic Data Analysis.
What is strategic data analysis?
Almost everyone is familiar with Strategic Planning. It is a well-accepted process and gives a great overview of your business from the 30,000 ft level. Strategic Data Analysis takes it a step further - or perhaps a step deeper, down to ground level…where the battle is being fought.
Data analysis is nothing new. It is common practice and is truly just “structured” common sense. However, Strategic Data Analysis is different in that the person performing it has an in-depth knowledge and understanding of the industry gained through “street” experience. This knowledge guides the analytical method and results in more targeted and effective recommended actions.
“Street Experience” – John Gibbons’ consumer products “street” experience” began over 40 years ago with sales to independent retailers, then progressed up the management ladder. Since 1992, he has had national level responsibility for sales and/or marketing. To his great good fortune, the last 27 years have been spent in the Pet Industry. Looking back, he can proudly to say that 40+ years of analysis, strategic planning and execution have consistently produced an increase in annual revenues.
Why dig deeper into the data?
…Because the “Headlines don’t always reflect the true situation”. Let’s take a specific example that you can relate to... According to the latest release on Consumer Spending from the USBLS:
PET SPENDING IN THE U.S. IS $63.38B – UP $2.58B (4.2%) FROM A YEAR AGO
This is great news and reflects the continued, consistent annual growth of the industry. But where did the growth come from? Let’s look just one level deeper.
Obviously, the headline doesn’t tell the whole story. The industry is doing well overall but there are issues. Now, assume that these are product categories in your own business, not industry segments. Wouldn’t it be a good idea to dig even deeper than we did above to know exactly what is driving each category up or down…so you can maintain the positives and fix the negatives? That is what Strategic Data Analysis does and why it should be an integral part of every business plan.
What items are truly your best sellers?
Product Sales Analysis and Ranking – Which products are your best sellers? Traditionally, this is looked at in terms of ranking by units sold, total $ sold and profit $. This is very valid but we want to answer the question: Which products should be your best sellers? To do this, we will drill deeper into the data.
You have thousands of items in your warehouse, which ones are “earning” their space?
Category Management – Like all of us, consumer products must “earn their space” - at retail and in your warehouse. Using the sales analytical methods outlined above, we can compare the performance of:
The key attributes can vary by category because they reflect the consumer purchase “decision tree”: Are interactive dog toys still growing? Are small dog products still hot? What about slow feed bowls? How many attributes do you need to analyze a category? Usually, it’s a minimum of 4. Initially, they must be “hand loaded” for each current item and future additions. Where is the data kept? There are invariably open “fields” in your database. This is a lot of work but once it is done you will be able to accurately identify key buying trends to help give direction to your immediate and future product mix decisions.
b. An Added Benefit – Most, if not all of your retail customers have a POS system to track sales and facilitate replenishment. Since the product attributes are tied to both the UPC and your unique item number, you can “marry” the data from the two systems and help your customers do their own category management. This will improve their business…and set you apart from your competitors.
What is the bottom line on your key customers?
Customer Profitability – Thus far we have focused on products because they generate the sales and profit for your business. However, the money actually comes from your customers. Which ones are the most important to your business? It’s easy to rank them by sales $ or even gross profit margin $. However, you should put together a customer profitability report, at least for your major customers, detailing which accounts for both the fixed and variable overhead associated with each customer. This is about the bottom line. You don’t want any bad “surprises” here.
How do you get more sales from all this analysis?
Weighted Gap Analysis – You’ve analyzed your business from top to bottom. You know what is performing and what’s not – from the category level right down to the individual sku. What do you do with this information? In any battle, the troops must have specific objectives. The Gap Analysis puts it all together to identify your product goals by customer and then prioritize them by the “weight” of the retailer’s overall sales. These targets are very specific, so you can easily monitor progress and results.
Can everyone “Do the Math”?
Business Math – Did you do the math? Business decisions are only as good as the information that they’re based on. That requires good data based on good math. Here is a follow up question:
Do you know how to do the math? Do the key personnel in all departments know and understand the key business math functions? Even if they don’t apply them every day or even at all, math provides the method to measure the well-being of your business…which affects everyone in the organization.
A customized interactive training session is available covering these topics and more:
If Category Management is the Least Favorite Product Mix Task, What is in Second Place?
Forecasting usually comes immediately to mind!
Forecasting – A simple goal: Maximum fill rate, minimum inventory. It’s easy. You just need to be able to accurately predict the future. The best way to predict future behavior is generally by looking at the past. However, you do have to factor in any changes in circumstances. This function is truly all about math. It certainly can make a difference in profits. Consider this example. You make a regular margin of 30% on a product. The manufacturer has a 10% off deal. You place an initial “buy in” and sell a 2 months’ supply at 15% off (26%). Now you have a “buy out” order. On this inventory you will be making 37% profit, 23% more. How much should you buy? You need to consider the product usage rate, warehousing and ROI, but the answer is there. You just need to do the math!
Logistics – It starts with initial conversation(s) to determine needs. The strategic, tactical consultation will be accomplished in a variety of methods. This may include a combination of phone calls, internet conferences including screen sharing, retail surveys, at “home” data analysis and even personal visits or on site presentations. Just as each PIDA member is unique, the logistics of the program will be uniquely tailored to provide the member with the end result in the most efficient and effective manner.
Cost – No charge for initial talks, up to 1 1/2 hours. Once a plan is agreed upon, an initial retainer of $1000 will be charged against an hourly rate of $100. Subsequently, regular invoices will be generated with an accounting of hours worked.
The billing will be for actual hours worked.
The PIDA member will not be billed for:
Reimbursable expenses include:
The Goal is to work with you to strategically analyze your data and find immediate, real world actions to improve the sales and profitability of your business, but more importantly to provide you with any necessary skillsets and tools for you to continue the process on your own in the future. To be truly effective, Strategic Data Analysis must be an ongoing part of your business plan.