Dump that shirt that isn't selling well. Delete SKUs with low sales. Don't carry that product line because no-one's buying it. Jack your prices around because that's what your competitors are doing -- and in real time. Right? Well, the answer is a resounding: Don't do it! Here's why: It's every retailer's dream scenario to know what the consumer wants, forecast future sales and trends, stock the most productive inventory, charge the most competitive prices, sell the most product, and make a profit.
Today, that dream has become a reality.
With the use of dynamic predictive pricing analytics and the refinement of price optimization technology, retailers are tapping their own -- and their competitors' -- data -- and analyzing it and using it intelligently to optimize prices and inventory.
Using Predictive Analytics For Profit:
1. Predict trends: Retailers now can track and analyze the data to build a longitudinal record to see the data in a cumulative way to recognize trends and identify competitors' strategies.
2. Anticipate coming demand: Analytics provide information on sales-driving products, so retailers can more accurately predict how an item will sell in the future.
Example: If data indicates that the demand at Christmas will be for fashion apparel, toys, and certain consumer electronics products (which happen to have a gross margin of 50% or more), retailers had better "be prepared," because missing sales of these items would a big loss of potential profit.
3. Don't add or subtract products randomly. Using scientific data, retailers can identify products to add (or eliminate) from their inventory. Big Data analytics let everyone be more scientific about getting rid of products that are not selling so well and add new products that will sell better.
But, also, inventory decisions are not black and white. Even if a particular product is not selling very well, it may be the favorite of some of your best customers, and that's what brings them to the store. If customers can't find the product they want, they elect to shop elsewhere. So if you get rid of it, you not only lose the sales on that product, but you may lose the customer and everything else they might buy.
4. Identify Missed Opportunities: There are products in your inventory that you carry -- or should carry -- that would make great sales if you only knew it.
Example: A retailer didn't carry a certain tire because he THOUGHT his customers would find it cheap. However, after determining it was missing, and adding it to his inventory, that tire became one of his best sellers!
5. Supply chain timing and flexibility: In the "old days", it took time to order, produce, and provide, but now retailers are starting to look at things in new ways, e.g. finding creative solutions locally; or creating flexibility to produce certain products on short notice.
Example: Local apparel firms that created ways to get back in stock on short notice -- by having patterns, fabric, and ability on hand, to create the item quickly, locally, if there is a demand. As a result, these businesses are enjoying immediate, ongoing sales, satisfied customers, and tremendous success.
6. Personalization. Personalized shopping experiences. The trend is for the consumer to order items personalized, custom-fit, chosen to fit their lifestyle, etc. Also coupons aimed at the specific individual's style.
Examples: Trunk club and trunk shows (Nordstrom); RetailMeNot/Pickie; Tory Burch; Zappos, and many, many more.
Bottom Line For Your Bottom Line:
Use predictive analytics to find out what the customer comes in for (whether a best seller or not); what they buy and when; better match your supply with demand; make more accurate forecasts; establish a more flexible supply chain; identify golden opportunity products that you didn't see with the naked eye -- and then price predictively and profitably!