Warrendale-based First Insight now second nature to large retailers
Retailers can go with their gut when it comes to deciding which products will fly off their store shelves, but it’s a strategy that can backfire.
Using intuition instead of data costs the retail industry an estimated $1.1 trillion a year in lost sales, said Greg Petro, CEO of First Insight Inc., a Warrendale-based technology company helps retailers make better decisions about the products they put in their stores.
Founded in 2007, the company has been growing quickly — by between 50 percent and 100 percent a year for the past five years — and counts some well-known retailers as clients, including Abercrombie & Fitch, the Limited, Aéropostale, Helzberg Diamonds, Maurices and Things Remembered, Petro said.
First Insight, which this year opened an office in San Francisco and is planning another for London, surveys consumers in a variety of ways and gives companies advice not only on which products to stock, but how to price them, how to market them to the right customers and how much of each product to stock.
Petro, who founded the company after a career in department stores, discussed First Insight’s origins and future in a recent interview with the Tribune-Review. Below are edited excerpts.
Trib: How did you come up with the idea for First Insight?
Petro: The idea was created from my days at Kaufmann’s here in Pittsburgh when I was in the merchant world. We would walk the selling floor and ask the customers what they thought of the products we were considering. But as time went on, and the business grew, customer intimacy was lost. We believed that technology could restore that customer understanding and intimacy, basically enabling something that they’ve done for years but in a more technological way.
Trib: How many clients does First Insight work with and what kinds of industries are they in?
Petro: Our customers’ revenues represent about $250 billion in a $5 trillion global market. Those customers are in the categories of vertically integrated retailers, to mass merchants, department stores, sporting goods — every segment you can imagine in retail. We also have customers that represent brands, and wholesalers, who are providing their products to the retailers. We service all three of those and the products that are being sent through our platform are everything from men’s, women’s, kid’s and home products, to apparel, footwear, shoes, accessories, handbags and consumer electronics.
Trib: What is the potential for First Insight?
Petro: We’re growing internationally and will continue to. We’ve been in EMEA (Europe, the Middle East and Africa) for a while now. We’re in 30 countries. We’ll continue our global expansion to include areas that we call APAC, which is Asia Pacific. As well as extending into South America. That’s one component of our strategy and our growth. The other part of our strategy is around capabilities. We’ve been focused primarily on what retailers and brands and manufacturers should be making. We’re going to be expanding that on the marketing side, which is, what are the offers that should be made? Who should they be made to? And personalized ads based upon the products we’ve already tested and know that consumers want.
Trib: How big of a challenge is it to get good data?
Petro: Consider how big the problem is. On a global scale, this challenge represents a $1.1 trillion error. There hasn’t been a lot of data, and there are an enormous amount of errors that are occurring. A product either didn’t sell or a product sold even better than they considered it, which is the flip side of the coin where I thought it would do well, but I didn’t take enough risk. The way a consumer sees that is it’s a stock out. The consumer loves it and goes to the store and they can’t find it and they’re not going to come back.
Trib: Give me a real world example with a specific client?
Petro: Helzberg Diamonds CEO Beryl Raff has said we were able to improve their hit rate, which is the selection of the right new products to bring to market, from 35 percent to 65 percent. That’s enormous movement in the value delivery to these organizations. To give you a sense, we deliver 3 to 9 percent improvement in gross margins to these organizations, and 4 to 10 percent comp store sales improvements. So we’re moving big needles.
Alex Nixon is a Trib Total Media staff writer. Reach him at 412-320-7928 or [email protected].