The Company
Chicago, Illinois
With annual sales of more than $1 billion, Wickes Inc. is a leading distributor of building materials and value-added building components. The company currently operates 101 sales and distribution facilities in 24 states, and also maintains a major presence on the Internet through its web site and affiliation with Buildscape.

Goal
Stone Analytics performed a study for Wickes to review its customer and sales information with the specific goal of identifying unexploited relationships within its company data that could then be used to increase the profits of Wickes.

Approach
Wickes supplied Stone with transaction data from 101 Wickes Lumber Centers for a 40-month period.

Results
Using this information, Stone analysts performed a series of conditional probability and cluster analyses, through which they discovered cross-selling opportunities totaling $1.7 million annually. In addition, based on the trends and volatility observed in the sales data, they also demonstrated that the company could increase profits by another $1.3 million per year through improved inventory performance, for a total benefit of $3 million.

The Lorenz curve pictured at right shows the concentration of Wickes' sales and profits across product classes. "Separation" is the area between the curve and a 45° line, and is a measure of the level of concentration of sales within the top products. Again, the graph suggests the persistence of high returns to analyses targeting the top product lines.

Implementation
The analyses fit together as a cohesive set of tools. The results of the cluster analysis provided characterization of purchase behavior by diverse groups of customers. The conditional purchase probabilities accurately determine which products have the strongest cross-selling capabilities. The markup analysis shows which product types were most (and least) profitable, along with the contribution of each to gross profits. Combining these analyses it is possible to determine which products to offer which customers in order to maximize both sales and profitability. Finally, the forecasting analysis facilitates inventory management to maximize turns and thus ROI.