Management system software helps Wawa with
the "what ifs"
From June 2009
By D. Gail Fleenor
Making decisions that impact the bottom line can
be intimidating unless you have the utmost
confidence that those decisions are fact-based.
To improve its decision-making process, a
leading convenience store chain opted for a way
to test the effects of proposed changes before
Wawa operates more than 570 c-stores in
Pennsylvania, New Jersey, Delaware, Maryland and
Virginia. The privately-owned chain, based in
Wawa, Pa., is well known for its dedication to
being on the cutting edge of technology and
innovative operations but, like many other
companies, its analysts used to pore over reams
of spreadsheets. Assumptions were then made
based on the best interpretation of data.
The company basically "took chances" when
considering investments, according to director
of planning and analysis Adam Schall. "You can
avoid making bad investments with a more precise
analytical tool than a spreadsheet."
Distance from sister stores, new competitors in
the market, road closures and bad weather are
just a few of the site variables that Wawa must
consider before investing in a new location.
"With a spreadsheet, you can't solve for many
different variables at one time and, when doing
a test, it is impossible to filter out all this
variable noise," Schall says. "You really cannot
determine true cause and effect."
What Wawa required was technology with a
statistical regression tool and, after reviewing
the offerings of several companies, Schall chose
Test & Learn management system software from
Applied Predictive Technologies.
With Test & Learn, retailers "can test ideas on
a limited-risk basis in a small number of stores
before a company-wide rollout," says Patrick
O'Reilly, president of Arlington, Va.-based APT.
More than 40 Fortune 500 retailers, financial
institutions and consumer goods companies
currently use the suite to help make more
Wawa ran simulations in six different areas
before contracting with APT: labor tests were
conducted to determine the effects of adding
personnel during certain shifts; new product
rollouts were tested to understand
cannibalization effects on other products and
categories; and SKU rationalization tests were
used to determine the optimum product mix. "We
also used the tool to help evaluate historic
cannibalization results of our most recent store
openings," Schall says.
What Wawa learned as result of those tests
wasn't "always consistent with our hypothesis,
which is O.K.," Schall says. "We're making
decisions using valuable and limited resources.
If you learn from a test that you're not moving
the needle, that can be just as important as
learning that you are succeeding so that you
won't go down the wrong path of investment."
The most powerful aspect of the APT solution,
according to Schall, is the ability to look at a
situation from the macro level initially and
then use the software to slice and dice results
for deeper insight. "We are able to segment
stores based on attributes such as demographics,
location and accessibility."
If the overall test of a new product isn't
positive, Test & Learn allows for further
analysis of those stores where the product did
achieve success. "You may discover a ‘nugget'
that you never would have found with a
spreadsheet," Schall says. "In today's economy,
to be successful and gain market share,
retailers must tailor different offers to
different markets. The segmentation tool
provides the road map for these offers."
Wawa is also using APT's Market Basket Analyzer
to capture transaction data by product, evaluate
possible marketing efforts and analyze the
ability of various products to drive additional
margin. "It allows you to look at every POS
transaction and provides insight into what
comprises each ticket," Schall says, which
allows Wawa to see relationships between
products across all categories and identify
those items that bring customers into the store
and the companion items that were purchased.
"You can re-merchandise offers based on product
relationships you learned about with the tool,"
he says. "It confirms some category strategies
and challenges the validity of others."
Web-based Test & Learn provides retailers with a
greater level of comfort in the analytical
process, which allows them to spend less time
debating decisions in a variety of areas,
according to O'Reilly.
"One issue we are seeing a lot right now is that
almost every retailer has store remodels in its
capital budget, but returns on investment are
unclear," he says. Test & Learn can help
retailers "determine incremental sales resulting
from a remodel and allows retailers to see the
dollar increase for each dollar spent."
Not business as usual
It also can help determine which store profile
will get the best return from a remodel.
"Retailers can see what additions create the
value, such as lighting, and then be smarter
about how they spend their remodel dollars,"
Retailers can also use Test & Learn to determine
the ROI of freestanding inserts, allowing them
to "reshape their media budgets and be smarter
about spending," he says.
SKU rationalization helps retailers determine
the "economies of products and also what
additional purchases each product spawns,"
O'Reilly says. Loyalty to particular products
can be determined, as well.
"It's not business as usual any more," Schall
says. "We cannot be doing things the same way
that we always have. The competitive landscape
is more difficult and more challenging than
ever; the economy is burdensome. We have to work
smarter by mining data better and using it to
maximize time and capital investment. This tool
allows us to do that."