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HomeINFORMATION & INSIGHTS
Drilling Down To Uncover Your Best Opportunities
By Dee Warmath, VP, Retail Insights
In these economic times, retailers and manufacturers are pursuing every opportunity. On one hand, they seek efficiencies in their operation through simplification and consolidation. Quite often this means centralizing or moving the decision-making process away from the selling situation, which reduces the intuition or intangible elements that typically make retail decisions brilliant. Despite the potential downside, this trend moves from being a good idea to an imperative during challenging times like these.
On the other hand, retailers and manufacturers continue to seek meaningful and unique market opportunities, although these opportunities are not as readily apparent as they once were. The continued need to grow sales in a saturated and now declining landscape is forcing those retailers and manufacturers with foresight into more granular views of the world. That’s because, particularly in today’s bleak environment, opportunities are not always apparent at the national level. To find the bright spots – and there are bright spots – you need to drill down to get closer to the individual situation.
Research suggests that the top sales and marketing business strategies for driving company success are category analytics, trade promotion management, and marketing analytics. Store Level data from NPD helps retailers and manufactures be proactive in addressing these strategies and it uncovers other measurable ROI insights for tactical localized actions.
Local market dynamics can differ radically from what’s happening at the national level in several ways. For example, the importance of product categories to success in one market may look very different than in another market. In May 2009, the athletic footwear market showed the running category represented just over 61 percent of the West region’s business, while it accounted for nearly three-quarters of the South region’s business. The customer’s willingness to pay, or the competitiveness of your prices, may also vary at a local market level.
Additionally, what’s selling in one market can look quite different from what’s selling across the country. Overall, a given brand may be ranked number one. By region, however, that brand’s standing may be very different. For example, a brand ranked 15th in the total U.S. may be 9th in the Mountain region. Or a brand ranked 20th in the East South Central region could be 8th overall. Such variations may be influenced by differences in distribution, consumer preferences, presence of competitive brands, and even elements such as climate.
Factor in distribution, and the picture can shift again. Distribution, both in terms of number of stores and the quality of stores, is a major factor in how you perform by market. If your product is sold in half the number of stores as your competitor’s product, or if you are a retailer who has half the number of doors as your competitor, of course you will rank lower in the marketplace. But what if you were in, or had, the same number of stores? Are you, in fact, generating more sales per door than your competitor? Then the question becomes how well you’ve performed against competitors, taking distribution out of the equation.
Another important measure is the quality of the doors you have or that you are in. This measure allows you to equalize your performance based on sales expectations, given the volume of business being done around you. At a total sales level, for example, we might see one consumer electronics brand’s performance in two markets: Market A, where they are doing $500,000 in business, and Market B, where they are doing $5 million. On the surface, we might conclude that Market B is the better performer. But what if we knew that Market A had $10 million in total category sales while Market B had $200 million? Now we see a different story. Market A is actually a much more productive market for that brand than Market B. This is because the brand is selling at a rate of $50,000 per million dollars of consumer electronics sold in Market A, while the brand is only selling at a rate of $25,000 per million dollars of consumer electronics sold in market B.
All of this means that while today’s marketers may need to seek efficiency through consolidation and centralization, they should also focus on creating opportunities to view the world from new and different angles and mine for growth in regional and local market variations. While these two efforts may appear to be in conflict, the key is establishing marketplace views that allow you to spot potential opportunities at various geographic levels, and identifying quickly which level optimizes efficiency and impact.
Smart decision-makers will seek this optimal point through an analysis of several levels – national, regional, market, and store – while maintaining an understanding of the cost of action at each level, particularly in the areas of new product introduction, pricing, and promotion investment ROI analyses.
The retail world has fundamentally changed, and there is a new imperative for profitable growth. The information now available to retailers and manufacturers at regional, market, and store levels represents the new frontier. The question now is which pioneers can best use these new tools to strike gold.
To learn more about NPD’s Store Level data and how it can help your business, contact Charles Camaroto at 866-444-1411 or email contactnpd@npd.com.