In the performance-driven world of retail paid search, there are many external factors that can impact the performance of an account. These factors include product assortment, inventory availability, merchandising, convenience, shopping experience, competitive landscape, overall marketing investment, and more. That’s why it’s important for us to be experts—not only in paid search—but also in retail strategy.
A retailer’s inventory is the single most important factor in determining how well the business will perform, therefore, optimizing the buying cycle and continuously improving inventory management systems are crucial to long-term success.
Optimizing the Buying Cycle
Every season, a retailer’s buyers, or merchant teams, try to predict which products will be popular the following season. To accomplish this, they will likely rely on historical sales data, primary and secondary research, and pure gut instinct to anticipate upcoming trends. Next, they will place orders with vendors or manufacturers six to nine months in advance of a season. All of those orders are really predictions of how well each product will sell by noting how many units, including which sizes, colors, and other product variations. For orders placed this far in advance, additional inventory will likely not be available at a later date. For example, while I worked in merchandising, I met with vendors to place orders for the spring season as early as August, before most of the fall merchandise had even arrived. Committing to such an investment so far in advance, before even knowing how Fall merchandise would perform, was a delicate task.
Insufficient inventory can result in missed sales, a boost for competitors, and customer frustration. By contrast, excess inventory can result in unwanted markdowns and lower margins. It’s a tough spot to be in. Even the most seasoned buyers miss the mark from time to time.
Balancing Inventory Costs and Sales
Managing an inventory efficiently and profitably is not an easy feat. In addition to being every retailer’s most crucial resource for becoming profitable, it is also the greatest business expense. Those expenses include manufacturing or wholesale costs, returned or damaged products, seasonal marketing and merchandising investments, and more. A retailer cannot sell something it doesn’t have in stock, but it hurts the bottom line to end a season with a surplus of seasonal products that must be discounted to clear them out and make room for new merchandise.
Getting the Right Data
The more data buyers have access to, the better. It’s not just real-time data telling them what’s popular now, but data that can help predict what will be popular in six to nine months. In paid search, we have a plethora of this data at our fingertips. We collect and aggregate a wealth of consumer behavioral data and shopping analytics over the life of an account and we can identify very specific trends and insights using search query and purchase data.
For example, leading up to and during the 2014 Halloween season, we not only grew revenue for a costume and party retailer client year-over-year, but we also analyzed that data and provided insights related to merchandising, inventory, price competitiveness, and product mix to our client. This information greatly assisted in planning the busiest time of the year. The types of trends we typically look at include:
- Consumer intent and buying patterns: Paid search is one of the few channels where we can connect customer intent to actual shopping behavior by revealing patterns in the terms customers searched for before they visited the website, and which of those searches led to conversions. This helps us identify intent patterns behind more generic or vague search terms, and gives our client’s buyers useful data for honing inventory strategies while also helping us optimize landing page results. While our costume retailer was preparing for their busy Halloween season, we noticed currently had no costume inventory for this particular theme, we advised they begin stocking the costumes. They accepted our recommendation and purchased all inventory for this particular segment.
The Adlucent account team created a campaign for a popular theme, developed specific landing pages and built out a program for all related keywords. Because we granularly tagged each theme we built out for Halloween, we were able to attribute all of the revenue that was generated by that particular campaign.
- Product mix and consumer demand: We can also make specific product recommendations to help clients capitalize on current consumer demand by looking at search volume behind products and categories that the client doesn’t currently carry but is matching to through broad match terms. For one of our clients (a major online designer apparel and accessories retailer), we noticed a significant amount of search volume for a certain men’s shoe brand that was matching to the broad match manufacturer term. Our client only carried women’s styles in that shoe brand, but we were able to pass that data to their merchandising team to make them aware of the demand for that particular brand of men’s shoe.
- Seasonal peaks and micro-seasons: By looking at search volume for various products and categories over time, we can help clients stay on top of evolving seasonal trends, give them useful data for what products or categories will be popular, and help them anticipate that demand.
We can identify peaks within a given season by looking at patterns in demand for specific products and categories, right down to the week, day, or exact time of day. This helps inform clients about estimated demand increases and decreases for specific products or categories. Demand patterns, especially smaller patterns within a larger season, influence pricing and sales strategies and ensures high demand products are in stock.
A company’s paid search and retail strategies go hand-in-hand. They are stronger together, and these teams should share data regularly. Search can be an early indicator of demand and a pulse point on consumers; therefore, at Adlucent, we act as an extension of our client’s teams and share insights regularly about merchandising trends. We encourage our client’s paid search teams to work closely with their buyers and merchandisers to ensure data on impending trends, products, and competition are shared regularly.
Data sharing allows both teams to optimize overall business performance by helping to anticipate and capitalize on evolving trends, staying ahead of consumer demand, and gaining a lasting competitive advantage.