Leveraging Transaction Data for Competitive Benchmarking in Retail
In the highly competitive retail industry, understanding how your business measures up against competitors is crucial for success. Competitive benchmarking is an essential technique that enables retailers to compare their performance, strategies, and practices with industry peers or best-in-class companies. A valuable resource for competitive benchmarking is consumer transaction data.
In this Money Talks post, the Facteus team delves into the use of transaction data for competitive benchmarking in retail and provides examples of how this information (including real-time consumer spending data) can fuel greater business success.
What is Competitive Benchmarking & Transaction Data?
Competitive benchmarking involves comparing a company's performance metrics, strategies, and practices against those of industry peers or best-in-class organizations. This process provides insights into a company's strengths, weaknesses, opportunities, and threats, empowering retailers to make data-driven decisions and enhance overall performance.
Transaction data consists of anonymized consumer credit card spending and debit card transactions, offering rich information about consumer spending patterns and preferences. By harnessing this retail shopping data, companies can gain a deeper understanding of their customers and the competitive landscape, which is invaluable for competitive benchmarking.
Leveraging Transaction Data for Competitive Benchmarking
Retailers can use CPG data, SKU data, and other consumer spending and transaction data to inform competitive benchmarking in various ways, such as:
Market Share Analysis: By comparing a retailer's sales to the total sales within a specific market or category using transaction data, retailers can calculate market share and assess their performance relative to competitors, identifying potential areas for growth.
Example: If Walmart's sales in a specific region represent 20% of total sales in that region, while Target's sales represent 15%, Walmart can use this information to refine its expansion strategy or marketing efforts to increase its market share.
Customer Demographics and Preferences: Analyzing transaction data can help retailers understand the demographics and preferences of their customers compared to their competitors, informing marketing and merchandising strategies.
Example: Transaction data may reveal that Nordstrom attracts a higher percentage of millennial shoppers than Neiman Marcus, prompting the latter to reconsider its product offerings and marketing campaigns to appeal to this demographic.
Geographic Performance: Retail transaction data can be used to identify high-performing and underperforming locations, allowing them to optimize their store network and capitalize on growth opportunities.
Example: Whole Foods may notice that their stores in urban areas have higher sales than suburban locations, informing their decision to focus expansion efforts in cities.
Pricing and Promotional Strategies: Comparing transaction data across competitors can provide insights into the effectiveness of pricing and promotional strategies, enabling retailers to optimize these initiatives and maximize sales.
Example: Transaction data might show that Kohl's sales increased significantly during a recent promotion, while JCPenney's sales remained stagnant, indicating that Kohl's promotion was more effective in driving customer engagement.
How Retailers Can Benefit from Transaction Data in Competitive Benchmarking
Incorporating transaction data into competitive benchmarking efforts can offer numerous benefits to retailers, including:
Identifying Growth Opportunities: Retailers can use transaction data to uncover untapped markets or customer segments, informing expansion strategies and driving revenue growth.
Enhancing Customer Experience: Understanding customer demographics and preferences enables retailers to tailor their product offerings and in-store experience, leading to increased customer satisfaction and loyalty.
Optimizing Marketing Initiatives: By analyzing the effectiveness of pricing and promotional strategies, retailers can refine their marketing efforts to maximize customer engagement and drive sales.
Informed Decision-Making: Armed with insights from transaction data and competitive benchmarking, retailers can make data-driven decisions to improve their overall performance and maintain a competitive edge.
Conclusion
Leveraging transaction data for competitive benchmarking is a powerful tool for retailers seeking to gain insights into their performance relative to industry peers. By harnessing this valuable data, retailers can make informed