Let Data Mold Your New Business Model

Data for business model

March 9, 2017—

Home furnishings retailers can use insights about their customer base gleaned from consumer data to help their stores change and evolve their business models.

At the National Retail Federation’s Big Show earlier this year, leading retail executives and analysts implored retailers across industries to take advantage of the information at their fingertips or suffer the consequences.

Rod Sides, retail, wholesale and distribution leader for Deloitte, (a company that provides audit, consulting, risk management, financial advice and tax services to more than 75 percent of the Fortune 500 retailers) noted the United States economy is growing at roughly 2 percent a year—a figure that approximates the retail industry. “In a slow-growth pattern like this,” Sides said, “overall retailers seek to grow by taking business away from each other.”

Sides also said the store journey is changing as is the role of the store itself. As many home furnishings store owners already know, customers long ago stopped being introduced to furniture by going to the store. That introduction is increasingly taking place at home through online research. The actual trip to the store is part of the fulfillment stage of the buying process: Either the consumer is picking up an order placed online, or they’re going to the store to see the product in person, even though they already made their purchase decision.

For many customers, those trips to the store are only moderately satisfying. According to Deloitte, only 47 percent of surveyed customers report being satisfied with their in-store experience on the logistical, taking-care-of business level; just 41 percent report being satisfied on the emotional level. “Expectations of the store experience are being set by the consumers’ digital experience,” Sides told retailers attending the Big Show. Those great expectations, he said, can often lead to disappointment.

The rewards for solving this problem, Sides noted, are considerable.

Remember that 2 percent annual growth in retail? Stores that differentiate themselves—both with product and a better experience—are reporting a 13 percent cumulative average annual sales growth.

Passionate loyalty

One retailer home furnishings stores can look to for guidance is GameStop, which appears to have cracked the code as far as understanding its customers and cementing their loyalty. The retailer operates about 7,000 stores in 16 countries and has some 50 million members in its loyalty program worldwide.

GameStop president Mike Mauler uses the data his company generates through its loyalty program “to get a better profile of who our customers are.”

The program, he said, “is not about points or perks. It’s about understanding customer data and using that knowledge to shape our business model.”

Mauler cites what gamers refer to as “loot”—themed merchandise tied to the imagery of games or fantasy entertainment: Game of Thrones shot glasses, for example. Mining sales data, GameStop’s customer base—65 percent of whom are female and family shoppers—let the company know that the eight feet of shelf space devoted to loot in a typical GameStop store was not enough. In response, the company has launched a chain of stores called Zing that are devoted solely to loot, which represents sales of $500 million annually. By the end of the year, Mauler expects there will be 80 stores.

That same strategy of mining your store’s data can tell home furnishings retailers what product is selling and at what time of year.

Transforming the customer base

The Vitamin Shoppe, which has been in business for 40 years, is in the process of changing its customer base—or, to be more accurate—the customer base is transforming itself. From being a minority preoccupation, concern with good nutrition and exercise is now a “national obsession,” said CEO Colin Watts.

In response to changing times and the changing needs of its customers, The Vitamin Shoppe looked at data from its sales nationwide and concluded it needed to transform its appearance and business model.

Watts said sales data suggested the store was too intimidating with its endless shelves of pills and powders. The stores now feature meeting places for one-on-one and group consultations, sampling stations and other features designed to help sales staff understand how they can help their customers.

“We have become a destination store,” said Watts. “We have three times the number of first-time customers and 91 percent of them say they would recommend it to friends and family.”

Watts believes that same strategy can be employed at a home furnishings store—any retailer really. “Are you overwhelming your consumers with too much product? Are you giving them the personal attention they might need in selecting a mattress? Somewhere they can test the mattress or sofa on their own?”

Sides believes only the top home furnishings retailers are taking advantage of the large troves of available data and maximizing its full potential.

“Most retailers are using the tip of big data’s iceberg,” says Side. “That’s good because that’s a start, but there’s so much more that can be used.”