How to use retail analytics to grow your sales

Tuesday, July 26, 2022

Imagine how much easier small business ownership would be if there was an exact formula you could follow to supercharge sales and achieve success.

As a retailer, you know there are too many factors to consider to create such an equation. Instead, you probably focus on offering great service, building lasting customer relationships and, of course, your selection of thoughtfully-curated merchandise — whether you sell fly fishing gear, vintage furniture or locally-made ceramics.

There’s one other component, though, that can help your business (and sales) grow: retail business analytics. Many retail chains like Costco, Nordstrom and Target have utilized retail data for years, but small businesses like yours can also take advantage of the insights this data can provide.

Still, several studies across multiple industries indicate some retailers simply don’t tap into retail data analytics as part of their modus operandi — even though companies that make data-driven decisions have a better shot at longevity.

In fact, one study found only 5% of retail businesses qualify as data-driven companies, with retailers citing the use of legacy systems as well as cultural resistance among the team as barriers to embracing digital insights.

Collecting and interpreting retail data analytics may feel intimidating, but there are plenty of easy-to-use tools available to help you do so (more on those later). And it’s worth it: The more data you have, the better business decisions you can make, helping you grow profitably and stand out among the competition.

In this article, we’ll take a look at:

  • What retail analytics are

  • How to use retail analytics to benefit your business and boost your sales

  • The best tools to gather and analyze data

  • How to focus on the metrics that matter

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What are retail analytics?

Really just a fancy term for how you interpret all of your retail store data, retail analytics can help you decide everything from the operating hours of your store to the brands you carry on your shelves.

Retail analytics can be diagnostic and predictive, meaning they show you historical data and forecasted trends. Both of these can help identify where improvements can be made — in your staffing, inventory, marketing…the list goes on. Since the insights you’ll gain can help you discover everything from products that may not be quite the right fit to the optimal layout of your store, analytics are beneficial for you and your customers.

The most successful retailers know that analytics are essential for making decisions, and they understand how that data can be used to develop customer loyalty, customize marketing strategies and navigate the supply chain.


What are the benefits of retail analytics?

Before we dive in and look at the full picture, here’s a quick overview of the power of retail analytics:

Provides helpful customer insights

Sales data analysis can determine the age, location, preferences and other categorical information about your customers, giving you a snapshot of your target demographic and their purchasing habits. Customer segmentation can also show you metrics like how often they shop and how much they typically spend.

Helps you understand consumer behavior

You can use qualitative and quantitative methods to analyze every step of the customer journey, from why a customer does or doesn’t purchase a product to how they interact with loyalty programs.

Tracks inventory levels and fulfillment operations

Digital data can tell you which items sell best, which products aren’t performing well and the popularity of an item at different times throughout the year — so you know what to stock up on and when.

Lets you optimize production and procurement

You could rely on past orders to help make buying decisions, but the combination of historical data and pattern analysis can help you better decide which items to order and in what amounts, maximizing your inventory’s potential.

Today, customers are becoming increasingly flexible with their purchasing habits. Many are buying in-store and online — and some are no longer pledging their loyalty to a particular brand in favor of finding the best deal. These shifts in spending make it more critical than ever to collect inventory and customer demographic data, so you can recognize and predict consumer behavior and market trends.

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How can retail businesses use data analytics?

Between supply chain disruptions in the retail space and ongoing technology advancements, the current retail environment has experienced a lot of rapid changes over the last few years. Those who have appointed and followed a more data-driven approach may be better positioned to tackle the latest challenges.

Fortunately, there are numerous ways to implement retail data analytics in your business:

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Make sure your advertising dollars are appropriately allocated

With traditional advertising methods like broadcasting and direct mail, retailers used to have to wait days or weeks to determine if a campaign was effective. But digital marketing gives you real-time insights, allowing you to see how your online marketing efforts are performing across various channels from the moment they go live. By eliminating the guesswork involved in more conventional marketing approaches, you can devote funds to channels that have proven successful and given you a positive return on your investment.

Here’s how:

  • Get laser-focused on online advertising strategies that convert and generate revenue. Getting rid of low-performing campaign elements can also help prevent higher customer acquisition costs.

  • Mine advertising and website data to identify patterns and determine which paid advertising campaigns to scale or cut.

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Make better pricing decisions to increase profitability

The ease with which consumers can compare prices online means retailers need as much data as possible when pricing their products. Pricing data can also help you decide when to offer discounts and other promotions, so you can maximize the success of a discount event.

Here’s how:

  • Create, analyze and frequently reference your internal cost/profit analysis.

  • Use historical data to develop a pricing approach that makes sense given current market dynamics.

  • Consider multiple pricing strategies, including economy pricing and bundle pricing.

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Forecast customer behavior and personalize the customer experience

If you could press a bright red button and immediately enhance your offerings or prepare for future customer behavior, you probably wouldn’t hesitate to smack it, right? Anything to make store ownership easier! That’s kind of what consumer data and human insight can do when used together: make it a bit easier to anticipate customer preferences and enhance your offerings. It’s not quite as easy as pushing a button, but it can eliminate a lot of guesswork or decision fatigue. Keep in mind, though, many of your customers might use multiple channels throughout the sales funnel, so you’ll want to aggregate data to prevent fragmented personas and incomplete insights.

Here’s how:

  • Ask for feedback directly through forms and surveys, where customers can share ideas and opinions.

  • Empower your staff to collect data throughout a customer’s shopping trip, simply by asking them questions about their experience and expectations.

  • Compile complete buyer personas for your target audience with in-store and online insights.

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Create irresistible in-store product displays

Combining digital sales data with insight you gain from those one-to-one interactions can help determine the best placement for the products you sell. You might be surprised at the effect a simple display can have on a potential sale — enticing customers to shop longer, try something new and/or purchase more than they intended to because of a certain grouping of merchandise.

Here’s how:

  • Use digital metrics and A/B testing to track how much product is being sold within a given period of time. You can track the sales of a certain item for a certain period of time, and then re-merchandise your displays to see how the product performs in a different location.

  • Watch how your customers interact with products and merchandise items. Put impulse items near the register and position complementary products side by side.

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Improve the online customer experience

No matter which ecommerce platform you use, you’ve probably noticed that it provides some analytics that show how visitors are interacting with your website content. You might be able to see where shoppers are located and which search keywords are being used to find your website. Plus, you can usually view the bounce rate, conversion rate and average time spent on a page.

Here’s how:

  • Make sure your website is user-friendly; consider the size and color of the text, overall layout of each page and their load times.

  • Use free SEO tools to gauge what your target audience is interested in, then tailor your content accordingly.

  • Gather feedback at every touchpoint with on-page notifications and live chat platforms that allow for real-time conversations with a retail specialist.

  • Mine insights to figure out what is and isn’t working on your website, then adjust accordingly.

If you keep in touch with your customers via email, the email marketing software you use likely also provides data like open rates, clicks and A/B testing results. These analytics are invaluable for effectively engaging with your customers!

Retail analytics are designed to help you increase your sales, foster connections with customers, identify the popularity of a product, observe market trends and keep you informed about how your small business is performing overall.

If you haven’t capitalized on this capability yet, now’s the time to get started. Perhaps you feel like you don’t have time to mess with metrics, or maybe you have the tools but don’t know how to use them to their fullest potential. But once you start using retail analytics for your retail shop, you probably won’t look back — why would you when your sales start to skyrocket?

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Which tools are best for collecting retail analytics?

Many larger brands like Walgreens and Sephora have long adopted big data for their brands. Take restaurant brands like Starbucks and Wendy’s, for instance. Both of these companies use geographic information science (GIS) to determine where to open a new location based on factors like population density, traffic patterns, average income of nearby households and proximity to public transportation.

Studies have shown, though, that some retailers still hesitate to leverage data analytics. As small business retailers like you become increasingly more aware of the value that retail analytics can provide, the same studies show that there is more interest to embrace the numbers, too.

If that’s you, a modernized POS system built for retailers by retailers and designed to help your POS compete against other retail businesses is a great place to start. Look for one that lets you run a variety of sales reports, including inventory sell-through, employee and vendor performance.

You can also learn a lot about your business’ performance through the following services:

  • Sales forecasting software

  • Demand forecasting software

  • Team management software

  • Inventory management software

Should you decide to switch your retail POS system, there are several factors and features worth considering for your next retail POS that can benefit your business — including customizable dashboards, unlimited custom fields and flexible reporting options designed to help you grow your profits.

To figure out if it’s time to upgrade your analytics framework, ask:

  • Are there any mistakes I am making year over year that data can help solve?

  • Do I frequently experience inventory issues like overstock or out-of-stock items?

  • Do I have too many markdowns at the end of a season? Are they hurting my margin?

  • Am I always having to adjust my current forecasts?

  • Are the answers to my problems clear, or do I need deeper insights?

  • Do my current analytics tools communicate with each other?

With a robust retail POS, you can get a holistic understanding of your customers, products, competitors, markets and more — and all on an easily-exported PDF or quick-to-share URL link.

Focus on the metrics

Focus on the metrics that matter for your business

Yes, there can be too much of a good thing. If you have more data analytics than you know what to do with, don’t be afraid to adjust your approach so you don’t get overwhelmed. Ultimately, the retail analytics you track should be clearly definable, easy to understand and make sense for your unique business.

Just like there isn’t a basic formula for guaranteed retail success, there also isn’t a one-size-fits-all solution for retail analytics. Instead, figure out how the retail analytics options in this article apply to your store and start implementing where you can.

Final thoughts

Final thoughts

Small business retailers like you are busy, and a majority of you have the same goal in mind: grow your sales and increase your profitability. Using retail analytics and hard data can help you boost your profitability, improve your customer service, deliver actionable insights and equip you with the numbers needed to help you make smarter business decisions overall, so you can concentrate on the dozens of other tasks at hand each day.

Know someone who owns and operates a restaurant? Consider sharing the top five restaurant analytics worth tracking to help them increase their visibility and grow their profits.

Heartland is the point of sale, payments and payroll solution of choice for entrepreneurs that need human-centered technology to sell more, keep customers coming back and spend less time in the back office. Nearly 1,000,000 businesses trust us to guide them through market changes and technology challenges, so they can stay competitive and focus on building remarkable businesses instead of managing the daily grind. Learn more at