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Retail Sales Are Vanity. Retail Profit Is Sanity · The Resilient Retail Game Plan - retail insights, retail trends and best practices

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  There are shops out there missing vital signals from their customers that
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  will boost their sales and profits.
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  Nobody's done anything wrong, they just have never learnt
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  how numbers can guide them.
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  I'm really excited about today's guest because Stacey Dorrian and I started
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  working together 14 years ago, and I know she is the best person to talk
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  about data in a retail industry.
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  We met at Coast, which at the time was a chain of womenswear stores selling
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  occasion wear. We were the two senior merchandisers on the team, and we used
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  to call ourselves Thelma and Louise because it tended to mean we were
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  about to go over a cliff together.
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  Like me, Stacey has over 25 years' experience in the retail industry.
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  She started out in corporate retail at the Arcadia Group, and like me, she
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  came up through product merchandising, where she was managing sales strategies,
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  stock optimisation, and building profit. Over the years, she's dived deep into
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  all aspects of retail, especially data.
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  She's implemented systems in multiple organisations, helped set
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  up analytics in several businesses, both large and small, and she's just
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  finished a data career accelerator at the London School of Economics.
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  She also works with me on Stock Doctor. You can find out more about the Stock Doctor
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  programme and apply now at stockdoctor.net.
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  By the end of this episode, you'll understand why clean data is so
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  important and how growth without structure starts to get really difficult.
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  You'll know the four questions a business can ask of its numbers and how far up
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  the list a sales report will actually get you. And you'll hear what running on
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  instinct starts to cost you once your order quantities get past a certain size.
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  I've spent years telling product business owners that their numbers
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  are trying to tell them something.
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  Stacey is the person who can explain exactly what they need to be listening
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  to, and why it can sometimes be hard to hear what the numbers are saying.
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  With small businesses or startups, I think quite rightly, the immediate
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  need is to get set up operationally.
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  Like, we need to start trading our business, we need to start
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  making money, we need to start doing all of those things.
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  So a lot of the systems that they will implement are quite siloed.
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  They could be for one department or another, so you've got the e-commerce
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  team over here looking at Shopify, their data comes from Shopify.
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  You've got an operations team over here, potentially could or could not
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  have a system, so they're looking at
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  the ERP.
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  And then the finance team has got their system and their accounting tools, and
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  they're looking at their data that way.
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  So what tends to happen is then when the three, you know, or more
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  departments try to compare their numbers, there's a mismatch.
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  And I think, again, if you don't have that central kind of IT function, data function
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  that can amalgamate, make it make sense,
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  there can be discrepancies and disagreements across the business about
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  what your numbers actually are.
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  So yeah, I think with the smaller businesses, it's probably less structure
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  which can
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  then, you know, at the start is not as important, but as you want to grow,
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  being able to have that
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  insight and leads as to what's really driving your business becomes really
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  important, and then that's where you have to, you know, really get into your data
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  and start to organise it a lot better. One thing that I would advise is just
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  collecting the data, having it stored.
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  You might not have the skill set yet to be able
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  to manipulate it and drive the insights out, but actually having it recorded.
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  I'm fascinated by that actually, with some businesses, again,
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  smaller ones who have potentially you know, gone into some kind of
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  data project or system and then realised that they can't actually
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  get their own data out of the system.
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  That's another thing that, again, you're not thinking about immediately when you're
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  trying to set up operationally and, you know, get products out there and start
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  selling and doing all of those things.
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  But it's a key, key, key thing.
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  I think it's got a lot better now, now that we've got a lot of cloud
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  software and things like that.
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  But older enterprise kind of systems could lock you in, essentially.
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  This just goes to show how valuable your data is and how much you need
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  to be able to access it. Say you've got all that straight though, the
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  numbers agree and you can reach them.
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  What are you supposed to do with them next?
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  What I found — or what I felt, even while in the
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  trenches of merchandising — is that Excel was just not enough.
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  And for some smaller businesses that's all you have in terms of a planning tool.
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  If you want to go beyond that, there are tools out there but they become
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  expensive and, and therefore kind of prohibitive to a small, smaller business.
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  What I was really interested in is a little bit more of what I was
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  saying, in that we need to go — in order to be successful in business
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  and using your data, we need to go beyond the what happened. A sales
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  report will tell you what happened last week, what happened last month.
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  Different people within your team, or even if it's just
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  yourself, might have your why.
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  So it might be, well, we put a promotion on last month, that's
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  why the sales, you know, went up.
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  The bit that is kind of missing is the prediction part.
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  So what could happen next?
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  So learning from your data, so that's where you can start to get
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  into a bit of like the machine learning predictive analysis.
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  And then the prescription, which is, okay, now that we know the what
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  happened, the why it happened what could happen, what would we do next?
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  And I think the tools that I was really interested in were things
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  like Python, where you can start to introduce machine learning on your data.
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  Prediction and prescription, the top two rungs, need something underpinning
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  them. They need the data that is feeding in to be correct, which is where Stacey
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  starts when she looks at a small business.
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  There are two things she sees going wrong, and they're connected.
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  So the first one I would say — and it is really important — is not understanding
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  cost, and not understanding their costs.
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  So,
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  what I have seen when you kind of dive into the data with some of these
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  smaller businesses is that they're not recording their cost of goods anywhere.
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  They're not necessarily recording the cost of certain activities like marketing
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  and all of those sorts of things.
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  And then there's also alongside that, which I completely
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  understand, is the obsession with sales, the pure sales number.
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  Drive the sales, and I absolutely get that because that is what, you
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  know, most people go into business.
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  Well, they go into business because they've got a passion and an
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  idea, but obviously they need to make some money, so sales becomes the thing.
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  And if you're not recording your costs, then you're not
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  looking at profit necessarily.
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  And I know that we used to have this between us, Catherine —
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  we used to have the, the saying which is out there, what was it?
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  uh, sales is vanity, profit—
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  Sales is vanity, profit is sanity.
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  There you go.
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  So you can end up, if you've got a product that's selling
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  really, really, really, really well but has a tiny margin — that can look great.
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  It can look great top line, but actually by the time you've sort of
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  eventually put through all of the costs, including things like shipping costs
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  and, you know, warehouse and storage costs, you can end up in the negative.
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  But because you're only looking at sales, you're going to keep going back,
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  potentially trying to find, you know, selling that same product, repeating it,
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  or finding something very similar without understanding that underlying part.
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  And I guess then that has a knock-on effect to cash flow for
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  smaller businesses, which is key.
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  You know?
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  Like, it can be a killer if you run out.
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  I did this exercise once with a woman who made children's clothes.
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  She was selling plenty of them, but that was never the problem.
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  Once we'd worked through the cost of everything, she was
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  making about 50 pence an item.
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  She'd been wondering why she felt like she was spinning her wheels and never
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  getting anywhere. That was the answer.
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  It had never been a sales problem.
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  It was a profit problem.
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  And this is more common than you might think and harder to spot for
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  retailers who might well be selling hundreds or even thousands of lines..
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  One business that's got 8,000 SKUs, another one nearly 13,000 SKUs, which,
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  you know, has happened over time.
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  They're not selling them all right now, but they've all got some
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  kind of sales history against them.
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  To be fair to the smaller businesses, they do have an instinct.
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  They kind of know — like, they can tell you that style there is my
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  one bestseller, or, you know, those five things are my bestsellers.
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  But from a planning point of view, and having a framework about how
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  you can steer big pots of money, you know, in a timely fashion, you do need
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  to have that hierarchical structure.
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  And I think, again, like you said, once we've put that into place, you
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  start to have the light bulb moments.
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  So one of my clients — I shared with them the percentage mix of sales. I think
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  I basically introduced something like eight different departments,
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  across the 12,000 SKUs or whatever it was, and then we could start to see
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  actually the turnover relative to space.
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  Mm-hmm.
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  There were light bulbs going off for them all over the place
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  because they were staffing certain areas that were not driving
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  sales.
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  And it had just grown over time.
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  And I think, again, because of not looking at the data in that structured
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  way, it was kind of like, "Oh, well, that's a bestseller, and then that's a
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  bestseller, and then that," you know?
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  And it kind of just grew.
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  So I think, yeah, while it sounds like quite a dry subject to put in
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  hierarchy and structure, actually what it does is it gives you the insight
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  to then make strategic decisions about managing your shop floor how you're
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  going to buy certain ranges, seasonality.
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  All of those sorts of things become so much more visible and therefore actionable.
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  Information for action.
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  Here's another great example of what not knowing your numbers can cost you when
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  you're spending money on staffing a part of the floor that wasn't earning it.
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  This was a cost that was invisible until the numbers were arranged to highlight it.
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  And I think as the businesses grow, the gut decisions
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  become even more expensive.
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  You know?
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  It's like you're going from investing, I don't know, 100 units
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  of a line to 1,000, which is big for some of these smaller businesses.
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  And
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  you need to be very sure about what you expect your return to be.
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  So it comes back to that whole thing of the, you know, the predictive
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  and the prescriptive — unless you've got your structure
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  in place to kind of give you that insight, those decisions can be harder.
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  I think there's also that kind of element, as you say, about the gut that
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  can — if you ignore the data, you're actually essentially ignoring customers.
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  Because what you're doing is you're sort of saying, "You
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  know, I personally love this."
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  Mm.
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  "I personally love this." And it, you know, that's great
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  because I don't wanna take away from these smaller businesses.
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  A lot of them have come from a passionate place.
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  They absolutely have, and they do know their product.
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  But as you start to grow and you start to get more and more and more customers,
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  you're getting signals.
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  and, you know, it's how you, how you react to those signals.
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  Some signals are not the right ones, and they're not right for your business.
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  So if your numbers are a mess and you wouldn't know where to begin,
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  here's where Stacey would start.
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  Just get to know your data.
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  Just, just start.
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  Just understand, okay, what are my best sellers?
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  And if you know what your best sellers are for the year, then what
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  were your best sellers by each month?
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  Those sorts of things.
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  Like, start to understand, seeing if there's any pattern that moves across
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  your business in a time frame — in a seasonality way, I mean.
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  The other thing I would say is understand your costs.
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  Costs are so important.
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  And if you could, you know, spend some time really sort of working out how
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  you can get those things updated, I would say that that's really
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  important because, again, it kind of helps so many decisions down the line.
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  And then finally, I would say, again — oh, this one sounds, like,
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  really dry and boring, but it's to do with Stock Doctor, so it's, like,
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  inventory, inventory management again.
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  I feel like, again, for smaller businesses, inventory's
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  not necessarily recorded as well as it could be, and that has a tendency to
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  be in the background and then suddenly become a critical issue and, and start
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  to affect cash flow and things like that.
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  So I would say, don't be intimidated by Shopify.
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  I know some people are, because it can all look a bit like graphs everywhere
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  and all of those sorts of things.
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  But just sit down with three questions that you want to understand
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  and just interrogate your system and see what it can tell you.
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  It's about getting the foundations and the frameworks in place.
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  Foundations and frameworks — that's where she lands, and it's the difference
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  between a business you're running and a business that's running you. Here's
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  what I want you to take away from today.
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  The gap between you and a much bigger business usually isn't talent, and
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  it usually isn't effort. It's that somewhere in that business, there's
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  a person whose whole job is keeping the numbers straight, and in yours,
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  that person doesn't exist yet.
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  It's fixable, and it's fixable in the order that Stacey just gave
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  you, looking at your best sellers, your costs, and your stock.
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  Stacey called this kind of thing dry a couple of times in this episode, but do
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  it anyway. After all, there is nothing at all dry about making more money.
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  One final thought.
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  If that list made you think, "I know I should, and I know I
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  won't get round to it," that is exactly what Stock Doctor is for.
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  A seasoned professional like Stacey, or even Stacey herself, goes into your
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  business, cleans your data, and does all the number crunching for you. Find out
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  more and apply today at stockdoctor.net.
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  Thank you so much for listening.
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  Don't forget to follow or subscribe wherever you found this, so you
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  can be the first to know about each new episode, and leave a review
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  or comment to let me know what you found useful about this episode.