Summary 

• Retailers need to understand profitability to make informed business decisions.
• Being profit-aware involves connecting internal business performance, promotional activity, price adjustments, product exposure, and inventory status data with your competitive and customer data.
• While a profit-aware lens is critical, to have a complete view of performance, retailers must layer all three lenses (market, profit, and customer) on top of each other. 
• EDITED’s True Retail Intelligence platform provides retailers with connected insights that are market-informed, customer-centric, and profit-aware, giving them full clarity. 

Introduction – Don’t Confuse Sales With True Profit

Retailers – you know that profit is one of the most important factors when it comes to success. But, how do you truly understand profitability and ensure your choices put profit at the center?

As you may remember from part 1 of this blog series, we introduced the idea of a three lens view – a view that brings together competitive, internal, and customer data for a complete, clear view of retail performance – and focused on explaining the market-informed lens.

Now, in part 2, we’ll dive into what the profit-aware lens is and why it is crucial to understanding your performance. 

Profit-Aware Definition

Being profit-aware means maximizing revenue and optimizing profitability by connecting business performance, promotional activity, price adjustments, product exposure, and inventory status. 

You have to look holistically at the pieces that make up profit to truly understand which choices will be profitable for your specific business. 

How Does a Profit-Aware Lens Work Across the Product Life Cycle?

Assortment 

Sales and sell-through data are some of the most common metrics retailers use to evaluate assortment performance, but it’s critical to include profitability metrics to determine success. By connecting promotional activity to price, margin, and inventory status metrics, you gain insights into whether your assortment is truly successful. 

With this connected data, you can determine: 

1. Which products within your range have a high product profit percentage
2. Which products have more potential due to high profitability but perhaps low sales due to lack of inventory

Pricing 

Knowing how to price your products is critical to profitability. A market-informed approach helps ensure your offering aligns with the competition; however, what’s right for a competitor might not be right for you. Looking at pricing through both of these lenses simultaneously can help you more quickly determine the right course of action for your business. 

Understanding market pricing and profitability allows you to quickly see opportunities to:  

1. Increase the price on overperforming products with low profit that are underpriced compared to competitors 
2. Reduce the price on underperforming products and maintain competitive pricing while protecting margin as much as possible  

Site Merchandising

If you have great products that your customers are interested in, but you aren’t presenting or promoting them effectively, you will hurt your overall profitability.  

You can optimize your website by taking a profit-aware approach and analyzing data around:  

1. Which products convert the best and generate the highest profit in your range
2. Which profit-generating products/categories can be featured in upcoming campaigns

The Need for a Complete, Three-Lens View

Retailer A is planning a promotional campaign to help drive traffic and boost sales. Its team has conducted extensive market research and identified key trends driving consumer interest based on demand and customer behavior data. They’ve also benchmarked their pricing against competitors to ensure they are priced competitively upon launch.  

However, while the team is taking both a market-informed and customer-centric approach to creating this promotion, they are overlooking critical profitability data.  

Without a profit-aware view layered on top of the other two lenses, the retailer cannot understand the impact of discounts on their profit margins or inventory status and costs. They risk running a campaign that generates sales, but significantly erodes profitability.   

How could they easily mitigate this risk? Using EDITED’s True Retail Intelligence for a clear view of connected insights that is market-informed, customer-centric, and profit-aware.  

EDITED Clarity™: Make Better Business Decisions

Being profit-aware is one of the three critical pieces for retail success. 

Having a retail intelligence platform that combines your internal, competitive, and customer data allows you to easily access connected insights and ensure every decision you make is market-informed, profit-aware, and customer-centric. 

Schedule time to chat with us and find out how EDITED’s True Retail Intelligence can give you the clarity you need to make the most profitable decisions throughout your business.