Before executives at The Spinx Co. roll out a sales promotion to their 75-plus convenience stores in the Carolinas, they carefully review current point-of-sale (POS) sales data. “We’re able to pull all sorts of data by store, by category and by items,” said Bryan Zeiger, category manager for Spinx, who relies on the reports when planning promotional offers.
The Greenville, S.C.-based company depends on Focal Point by PDI, a Web-based business intelligence system with numerous templates, to gather and record details of each transaction. If preparing a bottled soft drink promotion, for example, Zeiger can generate a report on the top 10 items that customers purchase when buying a 16-ounce Coke. If he sees that one item is purchased most frequently, he may choose to bundle it with the Coke, and “it will be a stronger promotion,” he said.
Not long ago retailing decisions were made using observation, gut feel and just plain guesswork. But thanks to the collection of scan data, store operators now have the ability to assess consumer buying behavior, create impactful promotions, manage customer loyalty programs, eliminate out-of-stocks, replace slow-moving merchandise with new products and even reduce the number of gas drive-offs.
And while larger convenience store chains are more frequent users of scan data analysis, there are opportunities for even small operators to collect and use their own sales information to better manage as few as three or four stores.
Flash Foods, the Waycross, Ga.-based convenience chain with 176 locations, began scanning store merchandise more than a decade ago. Over the years, the company has used several systems to analyze scan data. Today it relies on Pinnacle Corp.’s Enterprise Performance Management (EPM), a Web-based business intelligence suite, to gather store information, and which also includes the MicroStrategy Reporting Suite to create analytical reports, a tool described as “user-friendly” by Jenny Bullard, chief information officer for Flash Foods.
[callout title=”The First Scan”]In 1974, NCR Corp. became the first company to demonstrate scanning by showcasing the revolutionary technology at the Supermarket Institute convention. Two months later, on June 26, 1974, a 10-pack of Wrigley’s chewing gum became the first product ever scanned in a retail environment. The event occurred at a Marsh Supermarket in Troy, Ohio, and involved an NCR scanner.
The system records every transaction-related activity from individual items sold to voids, cash drops and fuel purchases. “All the information is collected at the store level and pushed up to the data warehouse every five minutes,” said Bullard.
The system even knows if a gas pump receipt dispenser is out of paper. “We are able to determine when the paper runs out and when a new roll is put back into the dispenser,” Bullard explained. “We see this as a customer-service issue, and part of the store manager’s bonus is based on customer service.”
Flash Foods sends weekly and monthly scan data reports to the company’s district managers and supervisors, who are each responsible for as many as 10 stores. If there are issues, such as customer service or out-of-stock merchandise, the supervisors can discuss them with the store managers and determine how to tackle the problem. “We have information at our fingertips that we never had before,” Bullard said.
More informed Choices
Scan data analysis gives store operators more control over merchandise both in and out of the store. Recently, Zeiger prepared Spinx store sets for 2011 and the reports were abundantly helpful in decision making. “In the past, we said, ‘We think we’re selling this, so let’s keep it in the set,’ but now we know we’re selling this,” he said. “Before, there was a lot of guess work and instinct.”
Timely reports also allow Spinx to better manage individual categories on the store floor, Zeiger added. “Even a few months into a set, we can say, ‘These four items have little or no sales and these four items are coming in. It makes sense to switch them out.’ We’re able to tweak a set whenever we want to,” he said.
At Flash Foods, scan data analysis helped the chain greatly reduce the incidence of gasoline drive-offs. Not only is the system far more accurate in recording drive-offs than the traditional system of employee reporting, it knows what time of day, at which stores and at which individual pumps the drive-offs occur. “We started to require prepayment on those specific pumps at those times of day,” Bullard said. “Gasoline drive-offs dropped 50% in one year.”
Scan data gives the company greater insight into customers enrolled in the Rewards in a Flash, the chain’s loyalty program. “We can drill down into our loyalty data and see what our loyalty customers are buying,” Bullard added. “We’ve found that a loyalty customer’s transaction is $1-$2 more (than the average customer’s) every time they visit the store.”
Rutter’s Farm Stores, with 56 outlets in Pennsylvania, uses PDI’s FocalPoint, along with other tools, to record transaction data and make business decisions. But one of scan data’s best uses is helping management better negotiate with suppliers.
In the past, suppliers delivered sales statistics to retailers, but now retailers are bringing their own numbers to contract talks.
“That is much better than having external parties telling you your data,” said Scott Hartman, president and CEO of Rutter’s. “It is much more accurate and timely, and you can drill deeper.”
Zeiger agrees having your own store sales data is indispensable when negotiating. “We bring facts to the table, and it gives us leverage,” he said. “In the past, it was definitely more one-sided. It really depended on how suppliers pulled the data (they shared). Now, based on our numbers, we can say, ‘That is correct or not correct’.”
Rutter’s has professional analysts on staff to dissect the data the stores gather. “Ours come from outside the c-store industry,” Hartman said of the company’s analysts. One was formerly an analyst examining Medicare fraud.
“We’re not worried about them knowing the business as much as being able to interpret the data,” Hartman said. “Marketing knows the intricacies of the products, suppliers and deals. The analysts provide them with the views.”
At Spinx, “We are our own analysts,” said Zeiger. “It’s a little challenging learning the system, but once you get the hang of it, it’s self explanatory.”
All three agree scan data analysis gives progressive operators an edge. “It’s moving the industry into being more efficient and making us better marketers,” Hartman said. “But a lot of companies are gathering it and saving it. Not as many are peeling back the onion as well as they could or should. There is still a 90% opportunity sitting out there for the industry.”