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Brick & Mortar retailers either transform or die

There is no doubt that in order to maintain and/or accelerate the growth of a retail business in the coming years, it will be necessary to implement a deep digital transformation, which goes far beyond the launch of an e-commerce store and increase the presence on networks. social.

What until now many understood as Digital Transformation, has been insufficient. As proof of this, we continue to see a large number of traditional store networks that year after year close their physical operation, despite having invested a large amount of money in opening their e-commerce and advertising in digital media.

The growing trend of digital retail continues a solid growth trend.


Many large retail chains continue to close physical stores that fail to meet corporate goals or pay their debts. Some of them explain this trend by alluding to their corporate strategy of migrating their operation to the digital world, while others have simply not been able to retain their customers, who continue to decide to buy in other stores. Among the most representative in the USA in the last 2 years we have:

  • American Eagle: will close up to 250 stores in Shopping Centers (Malls) until 2024.

  • Banana Republic / GAP: will close 350 stores until 2023.

  • CVS: closes about 300 stores per year

  • Macy's: 10 stores closed in January 2022.

  • Starbucks: closure of 400 stores.

  • Victoria's Secret: closure of 50 stores.

As a result, more and more people are losing their jobs. Concerned entrepreneurs have begun to understand that to survive and continue to grow, a Digital Transformation is not only necessary, but rather a Commercial Transformation.

The most frequently asked questions from our RETAILERS clients:

  • What category, brands and products should I sell per store?

  • Where to locate them in the store?

  • How much space to allocate per category, brand and product?

  • How to organize the planogram or product display?

  • What to communicate from the external side of the store?

  • What to communicate by internal sector of the store?

  • What kind of mechanics and promotional incentives should be used?

  • How to guarantee an excellent omnichannel shopping experience?

All of the above, considering three additional critical elements:

  • Throughout the year there are important seasons and dates that affect customer demand and therefore, the execution in the store must allow space for adaptations by season.

  • Some stores are located in geographical areas with different consumption habits and therefore, the execution guide must consider the characteristics of local demand.

  • Manufacturing companies have their own category and brand strategies, which are sometimes not aligned with the Store's strategy.

The good news is that there is a solution and it is never too late to implement it.

To answer all of the above, we always recommend starting with the definition of the Shopper profile of each store:

Get to know the Shopper of your physical store in detail as well as the online store knows them.

By knowing in detail the Profile and the Purchase Mission of your client by store, you will be able to offer them an offer and a better shopping experience than the competition.

Start analyzing your sales tickets from the last 12 months:

Each customer purchase generates a ticket with valuable information about that individual's purchasing habits. The ticket contains data that can make a big difference in the total sales volume of the store and also in profitability:

  • TIME: time analysis identifies the periods of the day and week in which the store is being visited by current customers. In the same way, it shows empty or inefficient periods, which must be reduced or eliminated. It is especially important for manufacturers who want to carry out "tasting" activities of their product in stores, so as not to spend money on days and hours when no one enters the store.

  • FORMAT: A store located in a residential area does not sell the same product format as another located in an area with high pedestrian traffic in an office area, due to the Shopper's purchasing mission. If the objective is to consume a product immediately, you will look for it in an individual format, unlike when you go to the store to buy the product to consume it at home throughout the week. The tickets store this information and can be used to identify stores where it is necessary to expand the space of the larger formats and vice versa.

  • QUANTITY: we know how many products of each product are purchased in the same visit, which allows us to design more convenient packaging offers for the Shopper or design more effective promotions with the number of units that they are normally willing to buy.

  • CORRELATED: we also know the different products that are purchased in the same visit, and that will be used not only to optimize the secondary locations of key products in the store but also to design promotions that seek to increase the value of the ticket in the store.

(For more details on the 4 most common ticket analyzes we carry out, we recommend reading our article).

Our Machine Learning algorithm was designed to receive unlimited data, such as that of more than 1,000 stores in a network of convenience stores in Brazil, allowing complex analyzes to be carried out considering the sales of several years and a large number of establishments in just seconds. The algorithm identifies purchasing patterns, considering not only the mix of products per ticket, but also:

  • The day of the week and hours of purchase,

  • The number of purchased units of each product,

  • The total value of the ticket,

  • The form of payment (credit or debit card, cash, etc.) and

  • Store characteristics: size, location, store model, etc.

Analysis of external variables that can explain the purchase profiles by store.

We know that umbrellas are sold in the rainy season and that in areas with a high nighttime crime rate, purchases are made in the morning.

Nothing surprising, right? Well, those who use this information to prepare in advance, bill on average 1.5 times more than those who do not, because they avoid running out of product in peak periods of demand.

The magic appears when our algorithm is able to determine a close correlation between variables external to the store and significant changes in purchasing patterns within it.

This service will allow you to increase the quality of your demand estimates and adjust the execution guidelines of the stores: from the assortment, the prices, the space assigned by category, brand and product format, to the display or planogram of products in the store.

When we put the algorithm to work with your data, it will allow you to identify external variables that could have a direct correlation with key categories for your business, such as:

  • Vacations, holidays, and general seasonality.

  • Weather forecast

  • COVID 19 cases or pandemics

  • Crime rate

  • Urban developments: schools, buildings or residences, universities, parks, shops, etc.

  • Vehicular or pedestrian traffic

These changes in the demand for products in the store will require adjustments in the execution guides of the main categories such as the location and space allocated, the order of display of products in the planogram, their prices, and even store promotions.

Example: if the sale of juices is concentrated in more than 70% in the morning hours, why not use that refrigerator space in other more demanded drinks in the afternoon or evening?

This algorithm has managed to increase the sales of manufacturing companies in connected stores by at least 10% sustainably over a year. Imagine the impact that can have when totaling this increase in the main categories of your store.

And why isn't everyone already doing it?

The difficulty or barrier that many physical retailers present to grow more and take advantage of this tool is their ability to adjust the execution guide by store in an agile and frequent way. For this reason, our service always culminates with a concrete implementation plan based on the available resources.

Implementation plan of the execution guide by store

It's not just an execution limitation at the store level. It is necessary to develop the capabilities of the Retailer throughout the entire organization, starting from the central office, where corporate, category and brand strategies are designed and approved.

Digital stores are better prepared to adjust their offer more quickly and frequently than physical stores:

It is very easy to ensure that a digital store reduces the visibility of the juice category at night, and instead increases the space used by other beverage categories that are more in demand at that time.

However, in order to change the dynamics of a physical store, the organization must be transformed from its heart, considering the following variables:

If you need help throughout this process or have any questions, do not hesitate to contact us. It will be a pleasure to talk with you

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