If you don’t know how many people will buy your product, you cannot plan for your inventory storage and movement. This is where retail market research comes in, to help you know your audience and what they want.
Apart from the market size itself, studying attributes such as your target demographics, preferences and persona helps you communicate to your consumers in the right way and prompts more people to make a purchase.
In other words, sizing up your market is the very first step in any sales and marketing activity.
What is market research?
Market research is the process of conducting a clear, objectives-based and logical inquiry into the sales potential of a given market.
Before you set out to sell anything, market research helps you know how many people are likely to buy. In other words, you may have the best product but if you don’t have buyers, your business is doomed.
Retailers need to take retail market research seriously. Particularly if you sell a niche product, this step is so much more important.
Types of market research
Market research can broadly be classified into two types- primary and secondary.
Primary Market research
In primary market research, you use customer data and your own past sales data to come to some conclusions. Usually, primary research is more exhaustive and includes customer interviews, focus group surveys and so much more. In this method, the aim is to get as many specific inputs as possible.
Primary research is also usually more expensive and time-consuming since you do everything from scratch.
Secondary Market Research
Usually, all market research begins with secondary research. In this method, you use data that is already available- reports, statistics, and other interviews- to come to some broad conclusions about the viability of your idea.
Industry trends and case studies also make up-secondary research. There are several organizations today that provide such information for a fee.
Why is retail market research important?
You may assume that you will have 1000 buyers in the first month but the only way to know for sure is to do your market research. Big brands often have the muscle to conduct very focused surveys.
However, smaller retailers have also found a way to successfully conduct research. Kickstarter campaigns are a great real-life example of market research. Many people post products and ideas but only a few of them are successful. This clearly reflects what the market wants and what it doesn’t.
If you start your retail business without knowing your audience size, buying power and product need, the likelihood of failing is just as strong as the likelihood of success.
Four ways by which you can do retail market research
Use Public Journals
Using available data on market size and potential is the best way to get started with the estimation process. For one, this data is available online for a small fee so there is no time lag in interviewing people and collating their responses.
Usually, using data from public journals to estimate market potential gives fast results. However, the results may be relatively less accurate.
For example, some sales reports are only compiled annually. So the data you work with may already be a few months old. This method is recommended under one of two circumstances:
- You need a broad estimate of your market potential and wish to understand the rough breakup of the audience
- You need to know whether this product in this market is worth your time.
The Journal Of Common Market Studies is a good online resource to use. You can also use data from blogs and resources that have been developed by market research websites in your industry, or you can use reports compiled by consulting firms. Most of these reports are compiled from actual market data- while they may not be recent, or entirely relevant to your business case- they make a good starting point.
Lastly, don’t forget the reports published by the Statistical agencies. These are often Government-approved and come as accurate as it gets.
Conduct A Keyword Search
Here’s a very simple trick to understand the demand for your product in the market- type the keywords into Google Trends. For example, if we wanted to sell CD players, we would type in ‘CD player’ into the search box. These are the results:
Further below this interesting chart, you can also see the interest in this product by region. You can also see some other search terms people look for that are relevant to the query ‘CD player’.
It is important to zoom out of these results a bit. You may want to look at sales trends over the past five years, just in case they have been on a decline.
Also, a keyword search does not always guarantee that your products have potential, and will therefore sell. For example, you may be selling a niche product. Then, the story you tell becomes just as important in generating awareness.
Thus, the more targeted towards a niche your product is, the harder it is to use just the keyword search to determine your market potential. In such cases, use the keyword search in tandem with the journals and reports, and consider what chunk of your niche market you may be able to target. Be realistic.
Benchmark Existing Players
Make a list of all of your direct competitors and study their annual turnover reports. You can usually get these reports through the Governmental body that manages corporate affairs in your state or region. Be sure to collect such reports for all the regions/ countries in which you wish to sell.
The only pitfall here is that very small businesses are often not required to report their turnover. Hence, a major chunk of the sales figure may be lost and you’ll have to hazard a guess.
Sometimes, company interviews and reports may make indirect references to the sales figures, using other metrics instead such as the production capacity and the number of hires year-on-year.
A good researcher who knows their domain well can extrapolate these statements to come up with the revenue, and therefore the market share of these businesses.
In general, benchmarking is a task best undertaken by experts. Hire a consultant with a good track record in the domain and access to resources.
Use Group Studies And Surveys
If you are a vendor supplying in bulk, this process becomes relatively easier for you. You just need to speak to a few buyers and understand how they will be estimating their sales. In turn, this can paint a picture of how you must be estimating your market potential.
If you sell a product directly to the end customer, group studies and surveys come into the picture. Only expert teams can usually conduct such surveys. They know the right questions to ask to arrive at quantitative results. Moreover, they have the tools and resources to bring the right target audience into the surveys.
Surveys these days are mostly sent and taken through an online medium such as email. Filtering criteria ensure that only the right people provide their inputs.
Usually, conducting surveys and collating data is considered an expensive exercise, but it provides the most accurate results.
If you want to do it on a much smaller scale, you can present your product prototype to groups of people and gauge their responses. This can serve as a starting point. It helps you understand whether your product is indeed interesting and whether you should be investing in professional surveys.