April 26, 2017

Forecasting Outcomes are the Sum of all Analytics and Marketing Knowledge Possessed by Your Company

The smartest companies run five-year forecasts ... these forecasts are the sum of all business knowledge possessed by the company.

You remember the "omnichannel" movement of 2011 - 2015 ... a movement that detonated in spectacular fashion with the implosion of traditional retail. How did that happen?
  1. The smartest retailers produced five-year forecasts based on the interaction of economic factors, merchandise productivity, and new + reactivated customer counts.
  2. The smartest retailers quickly figured out that the "industry" had a 1% to 2% drag on productivity, overall ... maybe due to Amazon, maybe due to shift of business online. Lots of "maybe" possibilities.
  3. The smartest retailers ran forecasts/simulations that illustrated the impact of online business on in-store sales. They quickly learned that retail was doing more to grow online than online was doing to grow retail ... and when forecast out over five years, the results were not favorable.
  4. The smartest retailers passed this data on to their Real Estate and Finance Teams.
  5. Real Estate teams stopped the pursuit of new stores, and for good reason.
  6. Finance Teams determined that "x" stores needed to be closed.
  7. Retailers began closing stores.
  8. Store closures cripple malls, further reducing foot traffic, tearing down comps among the existing stores.
  9. And here we are, today, in 2017, with a largely self-inflicted problem.
Meanwhile, the "industry" begged retailers to pursue an "omnichannel" strategy at the exact time when retailers needed to figure out what the purpose of retail actually was.
  1. Too few people produced sophisticated forecasts outside of "straight-line" trends showing that online would grow ... 
  2. This led to a different set of outcomes ... "grow digital" while hoping retail would remain static, leading to overall growth and positive digital outcomes.
  3. The outcomes did not come to fruition. Online grew, retail shrunk, stores closed, retail shrunk, Amazon grew, omnichannel strategy failed (spectacularly).
Go read the 10-K statements from leading retailers. As far back as 2014, "smart" retailers began telling Wall St. that they would begin closing stores in future years. These companies had reasonable forecasts - they could easily see the future coming. And they did something about it ... before the rest of the industry could catch up.

"Forecasting outcomes are the sum of all analytics and marketing knowledge possessed by your company.If your company isn't producing five-year forecasts that accurately measure the interaction between online sales transfer from retail and store closures, you've got problems, right?

If you aren't producing forecasts for the next five years, please contact me (kevinh@minethatdata.com) and we'll get busy, ok??!