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Published 19 October 2012 13:33, Updated 21 November 2012 07:33
An offhand remark by the chief executive of retail and auction website GraysOnline Cameron Poolman got me thinking. Is every business, at heart, a data business?
At a lunch discussing sentiment and performance of mid-market companies, Poolman was asked what was happening at Grays. Rather than launching into a pitch on his own business, he reported on what he saw in Grays’ insolvency business - the company offers asset valuation services to insolvency practitioners and financiers, as well as selling off liquidated assets. “Construction, mining services, manufacturing are all struggling because of the high dollar,” he said. “ We’re still seeing some retail issues. And then you get segments that are struggling, like hairdressers. We’re just inundated with hairdressers at the moment.”
Poolman could read the tea leaves of a particular industry, based on how many hairdryers, mirrors and swivel chairs were being sold off on the website.
Wow. Rein me in if I’m being a bit of a data nerd, but how cool is that? Although I knew GraysOnline was great for liquidated cafe’s drinks fridges, I just thought of it as a pretty standard e-commerce play. But here Poolman was, reporting insolvency trends by the sector and by the minute.
I wanted to know more, so I scheduled a phone chat with Poolman for the next day. And he delivered.
Poolman thought his hairdressing anecdote was not too fascinating, so he started crunching the numbers on other aspects of the business. A big chunk of Grays’ revenue (and the only thing I’ve ever bought from the site) is wine. Most of the wine is auctioned, so the price fluctuates.
“We’re like the stock market for wine,” he says. “The price we get for it is the price consumers are prepared to pay.”
Poolman was keen to see how his internal data related to the rest of the economy, so he tried mapping average wine prices against the Westpac-Melbourne Institute Consumer Sentiment Index, but there were no clear patterns. Similarly the Australian dollar had no bearing on the wine price. But when Poolman mapped wine against the 90-day bank bill rate, a rough equivalent of interest rates, it “absolutely correlated”.
Here’s the graph. To me, I wouldn’t say “absolute” but I agree with Poolman when he says “if interest rates drop, one month later our average price of our wine increases.” Grays’ buyers felt more rich when interest rates were low.
Source: Grays Online
Although Poolman agrees there is interest in the data, he is not keen on selling it to an external market. “We don’t want to position ourselves as advisors. It’s not really what we do,” he says.
But, he sees the value in taking more advantage of such data internally. “As soon as we saw that correlation we thought we should be speaking to our wine makers when interest rates go down and tell them to keep producing more wine,” he says. “On the flipside, when there are higher interest rates, we could spend more money on marketing to lift demand. That’s actually really good data for us.”
Poolman reckons e-commerce businesses like his are sitting on reams of data, but he warns that analysis needs to be looked at through the prism of business objectives.
“A lot of people have more data than they know,” he says. “You just need to make sure you don’t have analysis paralysis. When you have so much information and data, you can just get lost in the data. You can look at it for days and not achieve anything.”
Some data is just interesting for interest’s sake. And other findings are just good for a knowing smirk. Poolman also crunched the numbers on Grays’ reviews. Customers can choose one to five stars. He found no correlation when looking at reviews by state, suburb or days of the week. But...
“The thing that became interesting was there was one linear relationship,” he says. “The older you got the worse you reviewed, the grumpier you were.”