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The Math of Profitability in Retail Using Retail Optimization Cloud by De Novo De Novo© 2013
| Date post: | 25-Jun-2015 |
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The Math of Profitabilityin Retail
Using Retail Optimization Cloud by De Novo
De Novo© 2013
What is Retail Optimization Cloud
Software solution for Retail Chains based on “Software as a Service” usage model:
o Forecasting Demand & Sales with high accuracy even within the limited sales history
o Forecasting Including Seasonality, Long- and Short-term trends, multiple predictors
o Automating Store Replenishment, Warehouse Ordering
o Generating Extra Revenue From Assortment Optimization
o Defining retail prices with the most beneficial margin impact
o Planning the promotion activities and predict the promotional impact to the sales
o Visualizing Sales and Stock Data, Interactive Analysis
The key sales and margin influencers in one cloud solution + SaaS pricing = Almost Immediate Payback
ROC service help you to realize your full sales and profit opportunities
How ROC influences sales
Key Math & Analytical Engines in a Single Cloud Solution
Time Series Analysis
Statistical Analysis
Automated Sales History Cleansing
AssortmentElasticity
of Demand
PromotionalUplift
Prediction
Price Elasticity of Demand
Mul
tiple
Pr
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Fo
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Powered by HADOOP technology
100% Web and Mobile
Business Cases and Screenshots
Retail Optimization Cloudby De Novo
Trend and Seasonality in Sales
Generic Historical Sales doesn’t always answer to this question. Trend – brown line
Summertime is the period of seasonal rise of sales for Drinks
Last Christmas Sales were at $1.150 mln (yellow line).What sales would you anticipate during incoming Christmas?
+ 40% in seasonal sales, + 10% in regular sales
Using Sales Forecast forStore Replenishment and Warehouse Ordering
+ 40% in seasonal sales, + 10% in regular sales
Can you check how does your ordering system support your sales?How much will you order before the seasonal peak?What stock will you have after the seasonal peak?
These are the weekly sales of SKUs in a single product group before the Xmas
If you were a buyer in a retail chain…What your order quantities on these SKUs will be for incoming Christmas?
+ 40% in seasonal sales
Increase Your Sales While Ordering Based On Trend And Seasonality
Including both long and short term trends
+ 40% in seasonal sales+ 10% in regular sales
What Does Retail Sales Tell About?
Green line – sales anomalies: hot weather,spike in sales of water and drinks…
+ 10% in sales
Blue line - the historical sales of water and drinks.But how much the sales could be?When and where did you miss the sales?
Red line - missed (lost) sales. Why?
What Else About The Retail Sales?
Analyzing past and predicting future promotional sales upliftAnomalies in sales: abnormal sales drops and spikes at SKU-level
+ 10% in sales
Sales Increase Potential
Group-level forecast is higher, then consolidated forecast at SKU-level
What it could mean?
Expanding the assortment could mean increase in sales
+ 40% in seasonal sales + 10% in regular sales
What Is Your Stock-Days Cover?
+ 100% in stock turnoverExcluding the presentation stock (the facings)
How do you estimate your stock-days cover?Do you use past of future sales (forecast)?
How do you estimate your stock days before the seasonal spike?Can you predict what stock will you have after the seasonal spike?
Focusing On The Most Profitable Tasks
200+ automated recommendations
How do you plan your promotions?
+ 50% in promotional sales
Do you take price elasticity of demand into account?How do you estimate the promotional uplift in sales?
Price Elasticity of Demand
Цена
Сп
ро
с
$4.99 855 qty
Best price
$5.59 550 qty
What if increase?
Competitorincreasedthe prices
SKU SalesSKU Forecast
Weincreasedthe price forsome SKUs
Weincreasedthe price forother SKUs
• Comparing forecast vs. actual sales is a basis for estimating price elasticity of demand
• Price elasticity is calculated based on both group-level and SKU-level sales
Assortment Elasticity of Demand
80% of customers will buy the similar shaving gel if they don’t find the one they usually buy
80% of customers will buy nothing if they don’t find the shaving blade they use for their shaving razor
Some product groups are only selling well if their assortment range is wide enough
+ 10% in regular sales
How do you calculate your safety stock?
Automated estimation of the forecast error
+ 100% in stock turnoverExcluding the presentation stock (the facings)
Wrapping up…
Rise Retail Sales With ROC
ROC, Key Points of Influence
Assortment
Ordering
Promotions
Sales Analysis
Store Operations
Ensuring the goods are on stock in time and on quantity needed
Increasing sales, stock turnover, on-shelf availability;
Decreasing man effort, missed (lost) sales
Realizing the sales potential in various product groups
Optimizing shelf space
Increasing sales and margin
Increasing customers’ service level during promotions
Increasing the stock turnover
Increasing sales and margin
Improving out-of-shelf and inventory phantoms control
Improving in-store operations, increasing customers’ service level
Analyzing and understanding the key influencing factors driving your sales: promotions, advertisement, prices, competitors, weather, assortment elasticity
by
What You Can Achieve with ROC
In Seasonal Sales+40%
In Stock Turnoverexcluding the presentation stock (the facings)
In Regular Sales Due to Increase of On-shelf Product Availability Level
+100%
+3-5%
In Promotions Sales With No Prejudice to Margin
In Regular Sales Due to Optimizing Assortment Ranges by Groups and Stores+5-10%
+50%
+20-40% In Total Margin Due to All The Factors Above
