How Retailers Are Operationalizing Analytics With New KPIs
Published on 12 Jul 2023
In the past few years, both customer orders (like "buy online, pick up in store") and supply-side problems (like bottlenecks and supply chain delays) have made retail more complicated. Traditional ways of measuring success in retail, like same-store sales and labor ratio-to-revenue, aren't enough in today's fast-paced world. These measures are more like scorecards than real-time alerts or insights that can be put to use right away.
A new crop of Key Performance Indicators (KPIs) is needed to keep up with the fast-moving events and changes in the retail world. Incorporating KPI analytics becomes essential for retailers to gain valuable real-time insights and make informed decisions promptly. By leveraging KPI analytics, retailers can monitor critical metrics such as customer order fulfillment rates, inventory turnover, supply chain efficiency, and more. These dynamic KPIs provide retailers with actionable data and performance indicators that enable them to identify areas of improvement, optimize operations, and respond promptly to changing market demands.
This study delves into how retailers are planning and allocating resources to implement these new KPI analytics tools to meet the ever-changing needs of the industry. By embracing data-driven insights through KPI analytics, retailers can enhance their agility and competitiveness, ensuring they remain resilient and successful in today's dynamic retail landscape.
How Things Are Measured
The idea that "what gets measured gets better" has been used a lot to explain how KPIs are used in businesses around the world. Since retail is a results-driven business, the "whatever it takes" rule has always been followed. But with the rise of omnichannel orders and different ways to process them, like BOPIS and direct-to-consumer delivery, retailers are increasingly concerned about the profitability of each order because costs are going up.
On the supply side, modern supply chains have become more fragmented, which requires stores to be more flexible in order to deal with bottlenecks, interruptions in supply, social and political events, and weather-related problems.
In this fast-paced and complicated retail world, leveraging KPI analytics is crucial to gaining real-time insights into operational processes and making data-driven decisions. While traditional financial data and transactional sales data (like "sales per square foot," "same store sales," etc.) have been helpful for making decisions, they mostly give information about how things worked in the past rather than in the present. KPI analytics, on the other hand, provide retailers with timely and actionable process metrics that help improve operational efficiency and address emerging challenges.
By adopting relevant KPIs, retailers can closely monitor factors such as order fulfillment costs, supply chain performance, inventory turnover, and overall profitability of different sales channels. These KPIs enable retailers to make agile adjustments and optimize their operations to meet changing customer demands, enhance customer experiences, and maximize revenue opportunities.
In conclusion, embracing KPI analytics allows retailers to stay ahead in this dynamic retail landscape by making informed decisions that are aligned with current market realities. It empowers retailers to navigate complexities, improve operational processes, and drive sustainable growth in the face of evolving consumer preferences and supply chain challenges.
Who wins in retail, and why
When comparing sales from one year to the next, Retail Winners have a different way of doing business than their rivals. They have different ways of thinking, methods, and tactics that help them consistently do well in sales. These Winners put a high priority on giving useful information, backed by KPI data analytics, to the executive team so that changes can be made from the top down.
As the retail industry moves toward operationalizing analytics, it's clear that Retail Winners is at the front of the pack when it comes to stressing how important it is for executives to make well-informed decisions based on real-time KPI data analytics, instead of depending only on information from lower-level managers or the field. Leveraging KPI data analytics empowers Retail Winners to stay ahead of the competition by providing executives with valuable insights into operational performance, customer behavior, and market trends. These data-driven insights allow the executive team to proactively identify opportunities and challenges, optimize strategic planning, and make informed decisions that drive overall business success in the dynamic and ever-changing retail landscape. With KPI data analytics as a guiding force, Retail Winners can effectively navigate the complexities of the retail market and achieve sustainable growth and success.
The immediate need for more flexibility
Sam Walton, who started Walmart, once said, "I can't say what would have happened to Walmart if we had stayed quiet and not stirred up competition. It would have only been able to do business in their own area." This competitive drive has helped the retail giant use its valuable information assets to strive for operational success. And Walmart isn't the only store that can quickly adjust to sudden changes in the market. For other retailers, the fact that these successful ones have a competitive edge is either a strong call to action or a possible danger. No matter what, it is the biggest threat from the outside that makes retailers look into new analytics and Key Performance Indicators (KPIs).
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