Big-box retailers, supermarket mega-chains, and online grocery delivery services.
Setting your independent grocery store apart from these giants might seem like an uphill battle, but you have something they don’t: the ability to know your customers by name, understand their wants and needs, and create a shopping experience that aligns perfectly with their preferences.
But to achieve this goal, you need to become a grocery analytics expert.
In this blog, we’ll explore the power of grocery analytics and how you can use your store’s data to slash operating costs, increase revenue, and cater to your most valuable shoppers.
Grocery Analytics 101
Before we dive into how to use your grocery analytics, let’s talk about what to track and how to track it.
The best way to collect and analyze sales and inventory data is through your grocery store’s point of sale (POS) system. Your POS software should track every sale and inventory shift in real time, letting you check your numbers at a glance or take a deep dive into your historical data.
Here are just a few examples of what a modern grocery POS system can reveal about your store’s performance:
- Bestselling products: See which items are flying off the shelves and which are collecting dust.
- Peak shopping times: Identify your busiest days and hours, and adjust your inventory and staffing accordingly.
- Inventory turnover rate: Learn how inventory flows through your store and discover which products are at risk of stockouts and spoilage.
- Average transaction value (ATV): See how much customers spend on average during each trip to your grocery store.
- Average basket size: See how many items customers generally buy during a shopping trip.
- Shrinkage: Discover how issues like spoilage and shoplifting impact your grocery store’s bottom line.
- Profit margins: Track the wholesale cost, sticker price, and profitability of each product in your grocery store.
- Departmental insights: See how each of your store’s departments is performing in terms of inventory turnover, profit margins, spoilage, and more.
Now, let’s explore how you can use these insights to boost your bottom line.
1. Reduce Spoilage by Department
The first step to achieving higher grocery store profits is to control your shrinkage. Every expired dairy product, spoiled steak, or wilted vegetable you throw away increases your inventory costs and decreases your revenue opportunities.
And with the grocery industry’s razor-thin profit margins, you simply can’t afford to lose hundreds of dollars per week to inventory management mistakes.
Fortunately, your grocery analytics can help you identify where spoilage is happening and make a plan to address it.
Every time you or one of your employees removes an expired product from the shelves, make sure to log it in your POS system. Once you’ve collected enough data, look for patterns. Which departments and product categories have the highest rates of spoilage?
For example, if you frequently encounter butcher and deli department discrepancies, consider upgrading to an integrated deli scale and printer for more accurate inventory tracking and labeling.
If your dairy and produce coolers are full of expired products, implement a first in, first out (FIFO) stocking approach to ensure your near-expiry items are sold first.
Your data might also reveal that certain suppliers deliver products with inconsistent quality or shorter remaining shelf life. From there, you can build a relationship with more reliable vendors.
2. Forecast Product Demand
Stockouts are another significant threat to grocery store profitability — but you and your shoppers don’t have to settle for empty shelves.
Your grocery analytics can help you accurately forecast inventory to prevent stockouts and reduce spoilage.
Look into your inventory turnover rate by department, product category, and individual item. This data will help you tailor your ordering strategy to your customers’ actual shopping habits.
For example, let’s look at your meat department. Are your shoppers reaching for chicken more often than beef products? Stocking more chicken and less beef could lead to fewer stockouts and lower spoilage — helping you meet customer demand and protect your bottom line.
Pro tip: Want to make inventory forecasting even easier? Look for a POS system with grocery analytics and automation features. You can set a minimum threshold for your customers’ favorite products, and your POS system will automatically generate purchase orders to replace them — this saves you time and ensures your shelves are stocked with the perfect balance of products.
3. Improve Your Product Mix
As an independent grocer, your greatest strength is how well you understand your customers.
Let’s say you run an international grocery store that carries a well-rounded selection of ingredients and snacks from around the world. If you notice high sales of paneer, curry powder, and coconut milk, you can assume that you have a dedicated segment of customers who want Indian cuisine staples.
Expanding your Indian offerings can help you appeal to this growing demographic and boost sales.
Similarly, you can identify underperforming products and categories. If you offer a wide range of high-end olive oils and pasta sauces but don’t sell many of them, consider lowering your spending on these expensive Italian-inspired ingredients, and shift your focus to your data-driven bestsellers.
4. Set Smarter Prices
Setting the right prices is one of your toughest jobs as a grocer — but you don’t have to do it alone. Your grocery analytics should take the guesswork out of calculating margins and setting prices.
The first step to data-driven grocery store pricing is to carefully track your wholesale costs for each item in your POS system. Your software should calculate the margins for you, ensuring you turn a profit on every single product.
Another way to boost your store’s profits is to invest in electronic shelf labels and use your data to create a dynamic pricing strategy.
During peak shopping hours, you can add a slight increase in your bestsellers’ prices to pad your margins. When business is slow, you can lower prices to increase your average basket size.
5. Launch Strategic Promotions
Frequent promotions are critical for keeping sales high and customers happy, but simply lowering prices on your bestsellers can hurt your bottom line.
That’s why you should rely on your grocery store’s POS data to make smarter promotional decisions.
We recommend using promotions to boost sales on underperforming or near-expiry products. This is a win-win for you and your customers: They can stock their refrigerators and pantries for less, and you can increase turnover and prevent spoilage.
You can also use your grocery analytics to learn which types of promotions are most successful — revealing their impact on your overall sales and profits.
6. Stay Ahead of Trends
Big-box supermarkets look at national trends to stock their stores with the products customers want — but your grocery analytics offer a more localized look at your customers’ buying patterns.
For example, health-conscious options like protein-packed snacks, nondairy milks, and organic meats and produce are becoming more popular nationwide — but your customers might differ from the majority.
Instead of following broad grocery industry trends, dig into your store’s sales reports to spot shifts in your shoppers’ behavior — whether they’re opting for healthier or more indulgent snacks and ingredients.
Pro tip: Your grocery analytics play an even bigger role in helping you spot seasonal trends! Check your historical sales data to learn when to stock seasonal favorites and which products should occupy most of your shelf space.
Become a Grocery Analytics Pro With IT Retail
Ready to cut costs, boost profits, improve customer satisfaction, and compete with the big-name grocery giants? We can help.
For more than 30 years, IT Retail has given independent grocers like you the tools, support, and data to achieve small business success. Our all-in-one POS software includes in-depth inventory management and profit reporting to help you learn about your customers and make more informed stocking and marketing decisions.
Start your IT Retail journey today by generating an instant, custom quote for your grocery store using our build and price tool.
by Luke Henry
