Retailers Use Gaming to Predict Sales Before They Happen
by Deidre Crawford, Technology Editor
May 18, 2012
With gaming becoming more and more popular, it’s no surprise that it has now found its way into retail analytics.
Traditional predictive retail analytics have relied on waiting until a product exists and then launching a test run and examining the sales history to see which products sell better than others.
First Insight uses online games to help retailers gauge wahich merchandise to move ahead with and which to hold off on. It also determines what colors and styles are most popular—all before the product has been created.
The concept is based on the idea that retailers want to understand their customers and provide them with what they want rather than guessing which products and styles they’ll be drawn to, said Jim Shea, vice president of marketing for the Pittsburgh-based company.
“It’s addressing the most difficult challenge in retail,” he said. “How will an item that is new to a retailer’s assortment or new to the market perform? And what is the optimal starting price point for that item?”
First Insight offers five games geared around crowd sourcing to inform retailers what products to promote and which to avoid and how each item should be priced. The games are shared with the consumer via social media, email, mobile apps or the retailers’ websites.
They can also include preliminary questions to screen for age, gender or knowledge of the product.
Email is currently used the most often, but First Insight Chief Executive and President Greg Petro said the company wants to provide multiple options.
“We want to engage with consumers wherever they reside,” he said.
The most used games are “What Would They Pay,” “Style Opt” and “Sold!” With “What Would They Pay,” consumers are shown images of products and asked to rate what they think each different product costs—for example, a silver-plated watch versus a watch with a leather wristband.
“Style Opt” allows voting on styles, and “Sold!” provides a virtual storefront where consumers can stock new products and select price points. Feedback can help dictate pricing, as well as preferences toward specific merchandise.
Some stores provide the games via iPad on-site in their stores and reward the customer with a digital coupon for playing.
“Games are interesting because it’s the idea of getting people to do activities rather than an arduous task,” Petro said.
Consumers also like the idea of being in the know and receiving a “sneak peek” at unlaunched products, he explained. All of the games provide feedback within 72 hours, allowing brands and retailers to decide which merchandise they’re interested in producing or purchasing.
If the leather wristwatch turns out to be unpopular, it will be marked in the “avoid” category—or as “modify” if the style proved to have a successful response in a different material.
The games can be used to test pricing, popularity and trends, as well as images of merchandise that has already been created or designer sketches of products that don’t exist.
In January, Anaheim, Calif.–based action-sports retailer Pacific Sunwear started working with First Insight to gain guidance on new products and designs by using sentiment and pricing data.
In such a consumer-driven economy, the need to understand customer demand is critical, said Charles Mescher, PacSun’s senior vice president of men’s.
David’s Bridal, the nation’s largest bridal retailer, has been using the technology since October 2010 as a supplement to in-store testing.
“We test a lot of our new styles in stores before we roll them out to extrapolate decisions about viability in the chain, and it takes a lot of time and money,” said Jeff Warzel, David’s senior vice president of supply chain. “It’s not a replacement for store testing, but it has given us another channel of selection. One involves a heavy investment of inventory and takes months; the other takes weeks.”
When brides register with the store, they provide their email addresses, and, because the company has such a large consumer base that actively participates in the online games sent via email, David’s Bridal has access to a substantial amount of feedback.
The stores also enlist their style ambassadors and sales consultants to play the games in order to provide their feedback as to what products and styles to avoid or produce.
In the case of “direct rollouts,” where a gown is manufactured directly off of results from First Insight testing without doing additional store testing, the company shaves about three months off of production. It reduces production time from 8½ months to 5½ months, Warzel said.
David’s initially only used First Insight for its bridal gowns, but the company has since branched out into using it for accessories and bridesmaids’ and special-occasion dresses.
First founded in 2007 by Petro, a former Saks Fifth Avenue executive, First Insight initially avoided visibility until it had developed a substantial client base.
Now, the company’s clients include a variety of Fortune 500 companies, department stores, footwear companies and specialty retailers that range in annual sales from $50 million to $70 billion, according to Petro.
“Now that we have a number of customers and case studies and are growing rapidly, we want to get the word out to other retailers about our solution and how it can help them realize significant gains in sales and margin,” he said.