How a Twin Cities gift store learned to predict sales

Some gift-shop owners stock their stores with wares that they like, hoping customers will like them too. Tyler Conrad, the owner of GoodThings gift shops in White Bear Lake and Maple Grove, prefers to let numbers do the talking.

For about a year, he's been using software that helps him predict what customers want to buy, for how much, and when they want to buy it.

"The biggest challenge in retail is knowing how much inventory to buy and when to buy it," Conrad said.

The software comes from ManagementOne, a Tucson, Ariz.-based retail-services firm, and combines sales information collected from GoodThings with similar stores all across the country.

It's similar to inventory technology that major chains have been using for years. Such tools take transaction information from the point-of-sale systems inside stores, compare it with inventory and then analyze the data for patterns.

Conrad was at first reluctant to use such software. He decided to start small by trying the analytic tool in just select departments. But he quickly began to see some surprising information in the patterns.

Kitchen towels, for example, were very popular. As the software showed that, he added more to the store and that business grew by 50 percent, from $60,000 to $90,000 a year. Profits also grew; kitchen towels yielded $20,000 more to the bottom line over a two-year period. "My cash flow has dramatically improved," he said.

Conrad started testing the software with about 12 product departments. Now, he's using it for all 60 departments in the stores.

Capitalizing on bestselling products has been one of the most dramatic lessons from the use of ManagementOne's software. Conrad said many small retailers don't always trust their own success. They worry that an item they have carried for years may no longer be fresh and wonder if customers may be getting sick of it.

But under the system's predictive analysis, Conrad said, "You never stop buying the winners until the numbers tell you. The buyers will come to me and ask 'Should we quit buying this?' and I say 'Look at the numbers. They haven't been wrong yet.' "

A ManagementOne consultant shared with Conrad a recent example of a Chicago small business that discovered sharply increased sweater sales from one holiday season to the next. The firm sold $13,000 in sweaters in December 2017 at a pace, the software suggested, that meant it could sell many more if it had them in stock. The store boosted orders for the 2018 holidays and sold $60,000 worth of sweaters last month.

Conrad noted such insights can also help profits. "You increase your volume so much that you can ask for an extra discount and then your margins go up," he said.

Velocity also matters to retailers, and ManagementOne helped GoodThings increase the turnover of inventory. "The faster you react to a winner and get rid of the losers the more [inventory] turns you will achieve," Conrad said. "If we don't sell something within 90 days, there's a problem."

Top sellers typically account for 20 percent of what sits on store shelves, average sellers 60 percent, and losers 20 percent. By spotting the losers more quickly, Conrad put those products on sale and got them out the door. GoodThings increased its annual inventory turns from 1.5 to almost 4.

Before using the software, Conrad and the product buyers for GoodThings evaluated the popularity of products less frequently, sometimes just with year-over-year comparisons. But the system from ManagementOne provides more of a dashboard than a final ledger.

On a daily basis, GoodThings' managers can look at their laptop and see daily analysis of sales vs. plan, sold margin, average transaction value, average unit price sold, number of units sold, units sold per transaction and net returns.

Every minute, store information is uploaded to a database that provides a plan on how much to buy and a goal for sales. A quick look at the dashboard and a manager knows how close or far he or she is to the day's sales goal.

GoodThings was founded in 1973 in White Bear Lake by Sharon Conrad. Son Tyler came on board in 1998 after he sold his Minnesota Mittens company.

A second store was added in Maple Grove in 2003. The original White Bear Lake store expanded in 2014 and again in 2016 when GoodKids opened as a separate location. Earlier this month, Conrad announced the acquisition of the Bibelot stores on Grand Avenue and in Linden Hills.

This year, Conrad said he will probably add one or two people to the store's buying team, which now includes three people on clothes, three on gifts and one on kids' products.

Despite the success he's had with the ManagementOne tool, it cannot replace a good buyer. "It can make a good buyer into a great buyer, but a bad buyer is still a bad buyer," he said.