May 11, 2007, 12:00 AM

How Guitar Center checks profitability with web-based business intelligence

When Guitar Center offers customers extended warranties along with products, its web-based business intelligence system pulls and analyzes data from several applications to determine if the deals will positively impact sales and profit margins.

When Guitar Center Inc. offers customers extended warranties along with products, its web-based business intelligence system pulls and analyzes data from several applications to determine if the deals will boost sales and profit margins.

Guitar Center, which operates 210 stores as well as several retail web sites and catalogs under its Musician’s Friend direct-to-consumer division, uses a business intelligence application from MicroStrategy Inc. to find correlations between special offers on warranties and the profitability of combined sales of products and warranties. “We want to know if it works to our advantage or not,” CIO John Zavada tells Internet Retailer. “Then we’ll drill down to specific stores and salespeople, then down to all the aspects of specific sales tickets.”

That capability goes a long way toward helping Guitar Center’s 12 district managers grasp how effectively the 5,000 sales associates in its more than 200 stores handle the sales of warranties, he adds. Guitar Center also is using the MicroStrategy system to pull and analyze data from several software applications and databases to review other operations as well, such as whether and how much it should pay for vintage guitars to offer at retail, Zavada says.

Before it had the business intelligence system, Guitar Center was only able to look at data at product category levels by day or week, he adds. Although it could mix and match information to see how sales of one item might affect another, it often had to first get on the company’s I.T. department’s to-do list, which could take weeks, to receive reports on Excel spreadsheets. “A lot of times managers would get their information, but it would be old and less valuable,” Zavada says.

Now, Guitar Center managers can create new reports in minutes through a web interface, he explains. “We’re able to select things based on multiple dimensions, such as specific sales translated to profit margins for specific items, time periods, locations and individual salespeople,” Zavada says. “We can look at a large data cube and drill down into it to understand different performance metrics. With about 30,000 SKUs, we can do analysis on any item by day or even by hour.”

Guitar Center is No. 50 in the Internet Retailer Top 500 Guide.

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