Information, particularly vital data about the market, demographics and potential customers, is essential for small businesses. But rather than spending sometimes scarce resources acquiring it, those businesses can readily find much of it for free, suggests a new report from the University of Waterloo.
The study, ‘Comparison of methods for quantifying consumer spending on retail using publicly available data’, found that publicly available information could save local governments and small businesses thousands of dollars in consulting and research fees.
Conducted by Derek Robinson, a professor of geography, along with Andrei Baluluscu, a former Waterloo master’s student, the study was essentially a test to see if free, publicly available data could be as useful as reports from a consulting company, for instance. The authors looked at the likes of sales data on offer to better help company’s make important business decisions such as where to open new stores or which areas to market their products.
Working alongside a private company in the home improvement retail sector in Ontario, they were able to pair the public consumer spending data from Statistics Canada along with data from the private company to see if they would be able to match the sales data on offer. By combining this information, they could easily identify the spatial pattern of consumer spending on home improvement products and identify geographic hot spots and cold spots related to people’s spending habits.
“We tested out … could we use the spending data at different levels of detail and match what the sales data was saying?” Robinson explained, noting that they used four different census units ranging from fine to larger areas. “When we looked at these four different levels of detail, we found that we were able to match the provincial sales data very well with these Stats Can consumer data; the interesting piece of that is that there are a lot of companies that charge a huge amount for their data. If you look for data from a couple of different organizations in Canada you may spend upwards of $50,000 for data – and in many cases those companies are augmenting the Stats Can data.”
Breaking the province into some 20,000 units, the study was able to generate data on 23 individual product categories related to home improvement and how spending in these categories varied by household income. From there, the information was verified using proprietary sales data provided by a big-box industry partner in the home improvement retail sector to show that the estimates were indeed accurate.
While they focused on the home improvement market for this study, their conclusions aren’t exclusive to that sector.
“This method can be applied to any sector, and could help businesses pick the right location, based on market demand for new stores, and help to prevent the roughly 7,000 businesses that fail each year from having to close their doors,” said Balulescu. “This tool can help to put smaller businesses on an equal footing with large retailers, who have more capital to spend on gathering businesses intelligence. Furthermore, it could help local economic development departments prove to companies there is both market and opportunity in their region.”
That being said, with the study completed, Robinson found a few potential barriers for use of the data.
Firstly, while the census data are incredibly rich and useful, there can be a learning curve on how to read and make use of that information. He recommends that it would be beneficial to provide more resources for small businesses on how to properly use the potential cost-saving and lucrative tool.
“One thing it points out is that there might be a lack of a publicly available tools that could help out small businesses of ten people or less so that they could better use the Statistics Canada data in this way,” he said. “Publicizing the utility and online tutorials on how to use them might be something useful.”
Additionally, having examined the voluntary census data from 2011 comparatively to the 2016 census data, he encourages that the more people the fill out this information, the more it will help to serve the community they live in.
“The census work that is done for Stats Canada is incredibly important for providing business opportunities, providing our politicians decision-making capacities and for providing economic development planning branches of government capacity for enticing businesses and demonstrating that there is demand for product and manufacturers in stores to come to an area.”