Convenience stores are analyzing scan data to better determine what items to carry, how to optimize penny profit, improve promotions and target customers more effectively.
By Lisa White, Contributing Editor
For 17 of John Tomlinson’s 19 years as director of merchandising and purchasing for Duchess Shoppe, he relied on sales rep data to determine what items were selling, or based his buying decisions on the products being shipped to each location.
After incorporating a scan data analysis program two years ago, the Englefield Oil-owned retailer, which operates 119 convenience stores throughout Ohio and West Virginia, can now more accurately determine how individual SKUs are selling, which helps the director in his planning.
“When we first started, I was concerned all of the data would be overwhelming, but we’re having fun with it,” said Tomlinson. “It’s a great system, and so many entities of our company are using it.”
Chris Beem, the retailer’s chief financial officer, and Jason Collins, head of information technology, used a software program from Professional Datasolutions (PDI) to help take Duchess Shoppe’s information optimization efforts to the next level.
In part, the program allows the company to run sales reports to determine how many units have been sold, the number of stores the product is sold in, gross profit, gross margin and other useful information.
“When we do soda resets, for example, I can see that we sold 1.2 million bottles of regular 20-ounce Mountain Dew and Ohio is the biggest market for this product,” said Tomlinson. “Or in the beer category, I can see exactly what is in 40 of our 119 locations and determine actual sales and profits, if we expanded our offerings to more stores.”
Cenex-Zip Trip, a chain of 70 convenience stores across Washington, Idaho, Montana, Wyoming, North Dakota, South Dakota and Minnesota, has used a scan data analysis program since the company began scanning products at least a decade ago.
PDI/FocalPoint reports are run via the Enterprise system, which can customize scan data based on the information needed. The results are what the chain bases its decisions on.
“It is our daily routine and determines what stays and goes,” said Jon Fleck, Cenex-Zip Trip’s marketing manager. “Prior to this system, we used canned data, but this included useless information.”
The PDI program has helped the chain better optimize its penny profits, by identifying best-selling items that the c-store chain can then promote, spurring positive revenue gains.
“Retailers that are not using scan data analysis have to rely on the information they’re receiving from suppliers,” said Fleck. “Supplier data only shows what products suppliers are selling to the stores as opposed to scan data, which reveals exactly what items each location is selling. In other words, it’s utilizing valuable out-the-door info, rather than in-the-door info.”
Retailers also are discovering that scan data analysis can be effective in better targeting customers.
Rutter’s Farm Stores, a York, Pa.-based chain of 63 stores, uses both syndicated and internal transactional- level scan data to improve its customer engagement. This is utilized in conjunction with its loyalty program, which rewards consumers with discounts on fuel, products and services.
“Scan data helps us better identify, target and reward our key consumers with offers that influence desirable behaviors,” said Derek Gaskins, the chain’s chief customer officer. “Our loyalty program improves our customer understanding, and with this knowledge, we can better meet our customers’ needs with improved merchandise assortment, resonant offers and precise targeting at the right time.”
Before, Rutter’s Farm Stores relied on syndicated data and industry trend data exclusively. While it provided insights into products, services and industry trends, it was often too generic, with no direct implications.
“We enhanced the quality of the analytical data by aligning the consumer with the transactions,” said Gaskins. “This gives us actionable insights into who our best customers are and helps us better meet their needs.”
He recommended retailers who are implementing a scan data analysis program first marry up the customer with the transactions, and then break consumers down into relevant segments based to improve data mining.
Identify which consumers are driven by key drivers, such as value, quality, service or other attributes, so marketing efforts can be improved.
“Scan data can help c-stores better understand their customers, category drivers, geographical markets and competitive landscape, and identify the key drivers of store profitability,” said Gaskins. “Moreover, consumers are seeking brands that understand their needs best, and tend to reward them with lifelong loyalty. The brands that best understand their consumers, and create targeted merchandising and marketing strategies are able to most effectively differentiate themselves from competitors and drive enduring profitability.”
The main advantage of implementing scan data analysis for Duchess Shoppes has been the ability to make decisions on product mix based on sales and profits. This allows the chain to budndle offers and merchandise more items more effectively.
“We can see more detailed information on the top and bottom 10 products or get broader insight with the top and bottom 400,” said Tomlinson. “The program has enabled us to reduce our cigarette SKUs from 400 to 250, which is major, and we’re using the data for all our center of store resets in each section. Numbers don’t lie and help us make better decisions.”
Using its program, Duchess store managers can see exactly what products they have and the items they should order each week as well as receive daily reports on transactions.
“We’re hopefully going to add cigarettes to our scan data analysis program so we can match up our sales for automatic ordering,” said Tomlinson.
With 70 stores located in seven states, Cenex-Zip Trip’s scan data analysis program has been beneficial to new managers in determining SKU rationalization.
“Managers can feed the information they need in terms of cigarette or tobacco orders, run scan data for 6-12 weeks and look at daily averages to figure out inventory,” said Fleck. “We consider dollars and profit, which reveals what items are in the top 90%, and ensures we have the right mix.”
Scan data and penny profit analyses are particularly effective in economizing when there’s a competitive mix of items.
“Our industry has millions of transactions per day across tens of thousands of stores,” said Gaskins. “This big data can easily be mined for relevant insights that will help retailers grow sales, profits and establish lifelong consumer loyalty.”
Retailers are finding that analyzing scan data can provide the means for more targeted promotions at the store level.
Rutter’s Farm Stores seeks to quantify and improve on its promotions over time, so analyzing scan data is critical to accomplishing this objective.
“We analyze our sales promotions on a pre, during and post basis to determine how successfully we engage with key consumer segments,” said Gaskins.
Results are measured after a promotion, since the stick is critical to determine overall campaign success.
“Promotions tend to be fleeting, especially when the intent is to induce demand,” said Gaskins. “Measuring the results after the promotion helps us determine overall success and if consumer behavior was ultimately impacted in a meaningful long-term manner.”
With its scan analysis program, Cenex-Zip Trip also has the capacity to look at items being scanned in all 70 stores that may do well in only 60 locations.
“It may be a reset from a distributor that put in an item that’s not moving,” said Fleck. “If a store is not selling one of our better snack items, we need to know about it so we can react and move in something that does sell.”
Retailers not taking advantage of scan data analysis programs may be selling themselves short, literally.
“Those not utilizing scan data analysis are not optimizing their sales,” said Fleck. “It’s SKU rationalization, that’s the bottom line.”