What small, independent retailers can learn from baseball statistics.

It’s finally April and the start of another baseball season. Soccer may be our most popular game, but baseball is our national pastime, and the start of each new season brings essays and odes to the game.

This week, CBS’s 60 Minutes published its own feature to mark the new season, a profile of Bill James. For the uninitiated, James is one of the most creative and influential statisticians in the game, credited with changing many long-held beliefs about how to assess players and think about the game. He got his start more than 30 years ago, writing and self-publishing an annual statistical summary for each upcoming season. He now works for the Boston Red Sox, and his approach to statistical analysis has been almost universally accepted and adopted throughout the game.

James’s essential insight was that looking at baseball through a deep analysis of statistical data could shed new light on old preconceptions and tell a story of what is happening on the field and why, far beyond what we know. see the eyes of the players, managers, executives and fans were really watching. He showed, for example, that slugging percentage and on-base percentage were far more accurate predictors of on-field success than the traditional statistics of batting average, home runs, and RBI.

This idea, that numbers can add nuance, depth, and understanding in ways that mere observation cannot, has direct application for small, independent retailers. For retailers, the playing field is the store, the front door, the merchandise displays, the cash wrapper, the back room. Players are your associates and customers, and statistics are derived directly from their interaction.

Many small, independent retailers are very astute observers of what is happening in their store and are very focused on sales and profits, but are less familiar and comfortable with deeper quantitative analysis. In-store viewing is vitally important, but in-depth quantitative analysis can open up new lines of thinking and shed new insight and insight into what is actually being viewed.

What are some of the key metrics to analyze? Many of these metrics are comparative to previous years or seasons and are expressed as percentage changes. Let’s start with the front door and head back to the store.

How is your foot traffic? In the recent business downturn, this is where many retailers have struggled. They just don’t have as many customers coming through the front door.

How is your transaction count? If traffic is down, transactions are likely down as well. But how is your conversion rate, the ratio between transactions and traffic count? Has your transaction count remained stable or has it also decreased?

How are your average units sold per transaction and your average sales dollars per transaction? Can you split these metrics between target items and boost items?

Let’s look at things from a marketing point of view.

Which departments and categories are increasing in sales? Which ones are trending down? How is the composition of sales changing, as measured by the percentage contribution of each department and category? Is this due to changes in demand or other internal factors, such as sales floor positioning and display?

What is happening with the sales units by department and category? What about the average sale price? Are customers exchanging higher-priced items for lower-priced items, or perhaps vice versa?

What is happening with sales by department and category? Are you increasing the percentage of your discount sales to all sales? Is your markdown percentage increasing on your markdown sales? What about the percentage discount, resulting from the markdowns, on your total sales? Are markdowns increasing due to inventory buildup, or perhaps as a result of being caught up in an ever-increasing pattern of promotions?

What is happening to your gross margins by department and category? Are they increasing or decreasing? Is it attributable to a change in your sales mix, a change in your initial margins, or changes in your discount percentage as a result of markdowns? How can you change your sales mix in your favor? Is it about marketing the existing programs on the sales floor or is it necessary to adjust the assortments you manage? What other steps can you take to increase your gross margin percentages and gross margin dollars?

And what about your inventory?

How is the composition of your inventory by department and category? Is the inventory piling up or does it look like it will come to light? What is the inventory turnover trend for each department and category? What can a detailed analysis of your gross margin return on inventory investment (GMROI) tell you?

What is the average retail price of your inventory for each department and category? What about your inventory markup by department and season? If the margins are out of place, could it be because the margins have been eroding? Is it because supplier invoice costs have risen more than you’ve allowed in your margins, are you tied to brand name products with pre-determined prices, or are your hands tied by the competition on price?

How efficient are you at processing new inventory receipts? Do you get to the ground quickly? Is it fully issued and is the ticketing accurate? How well do you handle exceptions, late shipments, over-shipments, mis-shipments, and unauthorized substitutions? Are you returning products as quickly as possible and are you diligent in making sure you are receiving full credit?

How’s your psychiatrist? Are you counting cycles frequently? What do your results show? Are you able to identify the cause of the shrinkage and close the holes in your policies and procedures that contribute to the shrinkage?

Finally, let’s look at that all-important metric, your cash.

Do you have a cash flow plan, a budget that details the cash you anticipate bringing in and the cash expenses you’ll need to incur? Do you see yourself far enough into the future that you can anticipate when you might experience a cash crunch (which is extremely important for seasonal retailers)?

Does your plan give you the benchmarks that allow you to monitor your performance as you go and point to areas where you might need to take immediate corrective action?

This is just an initial list of metrics that any small or independent retailer should always keep in mind. For any given retailer, there are other critical metrics appropriate to their specific business. But for any retailer, like any good baseball fan, the key point is not to rely solely on your eyes. You probably won’t see the full picture.