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Retailers and sales managers know the importance of analytics, but they often don’t have access to these tools. The retail industry tends to be data-driven with lots of metrics that can help businesses make better decisions. This post will cover some top retail metrics for retailers who want to learn how best practices work in retail.
The “retail analytics examples” is a topic that discusses the usage of retail analytics and top retail metrics to drive sales.
The term “retail analytics” refers to the process of measuring, recording, and interpreting data, which often includes information on sales, inventory, employees, and customer demand. Businesses may find patterns and forecast results by analyzing these indicators.
There are a plethora of retail and ecommerce indicators that may be used to assess performance, track development, and, most importantly, drive sales. Certain measures are referred regarded as KPIs (key performance indicators) because they provide direct insight into performance, productivity, and income, whilst other analytics may help you figure out what’s driving that performance.
The ones you follow may vary depending on your business and products, but we’ve included 11 of the most useful retail analytics below.
Transaction Value on Average
Transaction Value on Average (ATV) is the typical amount a customer spends when they shop with you.
Because most POS systems can offer the ATV on a daily, weekly, monthly, or yearly basis, this is a useful indicator for both brick-and-mortar and online companies. ATV may be more accurate when measured over longer periods of time, but tracking daily ATV can aid coaches and motivate workers more directly.
Divide the total amount of all transactions by the number of transactions to get your ATV. Your average sale is $100 if your monthly sales reach $50,000 and you have 500 transactions.
Total amount of sales / total number of sales = Transaction Value on Average (ATV)
For example, $50,000 divided by 500 equals $100.
How to Use Transaction Value on Average to Increase Sales
The only method to boost sales is to increase the number of clients you have or the amount of money they spend. ATV provides you with a picture of how much your present consumers spend so you can devise tactics to enhance that figure. Businesses may employ ATV to boost sales by doing the following:
- Using a gift with purchase promotion or a discount with a particular dollar spend to build customer promotions pushes consumers to spend more in order to qualify for the promotion. Plus, even if you’ve shifted your sales online, this method is simple to implement.
- Upselling is the practice of informing consumers about the advantages and benefits of buying a higher-end model of a product they’re interested in, and then persuading them to purchase the more expensive variant. This may be done online by suggesting appropriate upgrades or offering a comparison table on specific product pages.
- Identifying top-performing workers: Retailers may use employee-specific ATV to identify employees who have the highest average transaction volume and those who need more sales training.
- Setting precise ATV objectives: Set a particular ATV that you want staff to fulfill each shift or week, and consider rewarding those who achieve their targets with a bonus.
In action: When our retail expert Meaghan Brophy managed a spa, she used Transaction Value on Average to help calculate sales commissions. Associates would earn a percentage of their total retail sales, which was based on their ATV. Implementing this commission structure incentivized upselling and helped increase the store’s overall retail sales.
Vend POS shows the Transaction Value on Average or “basket value” on the retailer dashboard.
Items Included in Purchase
Items Included in Purchase, also sometimes called units per transaction (UPT), measures the average number of products sold during a customer transaction in a specific time period. So, while UPT is a similar concept to ATV, you’re measuring how many products customers buy on average rather than how much customers spend on average.
Items Included in Purchase can be calculated by dividing the total number of products sold by the total number of customer transactions for a specific time period. For example, if you have sold 100 items in 50 sales, your average Items Included in Purchase is two.
Total number of products sold / total number of transactions = Items Included in Purchase
E.g., 100 items / 50 sales = average of two Items Included in Purchase
Like with ATV, you can use any length of time when measuring Items Included in Purchase. Monthly or seasonal data on Items Included in Purchase can provide a big-picture benchmark for how much people are buying. Alternatively, daily or weekly UPT measurements can be used to track employee performance.
How to Use Items Included in Purchase to Drive Sales
The most common way to increase Items Included in Purchase is via cross-selling, impulse sales, and add-on sales techniques. Cross-selling and add-on sales encourage customers to purchase additional related items. Impulse sales involve encouraging customers to make unplanned purchases.
To enhance UPT and revenues, use cross-selling and add-ons to:
- Merchandising: Have you ever noticed how, during the summer, supermarket shops would stock marshmallows and graham crackers alongside chocolate? To stimulate more sales, retailers position lower-demand goods close to higher-demand ones. Incorporate automatic product suggestions based on particular products—or even user data—into your online store to replicate this.
- Training sales staff: Let workers know what your current transaction items are, what you’d want them to be, and educate them on all product offerings so they can make useful customer suggestions.
Increase your UPT and revenue with impulsive purchases by:
- Merchandise your checkout: Place enticing goods such as sweets, travel-sized products, or low-cost needs at the checkout so consumers may pick up more items while waiting in line. Though some retailers achieve this by including suggested items on the cart screen or using popups at checkout—both of which can be tailored to customer interests—some retailers achieve this by including suggested items on the cart screen or using popups at checkout—both of which can be tailored to customer interests.
This online retailer increases the number of things per transaction by promoting related add-on purchases.
- Offering seasonal goods: Seasonal products might range from summer sunglasses to peppermint-flavored things throughout the holidays. Consider what things buyers need or desire during a certain time of year and place them front and center, whether on a striking display or on your store’s homepage.
Analysis of the Market Basket
Analysis of the Market Basket (MBA) is a type of statistical affinity analysis that lets business owners determine the strength of association between certain products that customers purchase together.
This retail statistic uses data acquired via a POS system or other ecommerce technology to assist merchants better forecast consumer purchase habits—and ultimately boost sales.
Like measuring Items Included in Purchase, brands can use sales data to create likely conditions—or if-then statements—that let them anticipate which products a customer will buy. They can then use that information to recommend those products and increase sales.
To do so, shops gather sales data using their current POS system and then use the Apriori algorithm, which is part of the arules package in R. This requires some time and talent, but it may be outsourced to a competent data analyst for a reasonable price on sites like Fiverr and UpWork.
Apriori algorithm: A famous approach for determining association rules and general trends in transaction databases.
R is a free programming language and data analysis software that is widely used.
Because this is a complicated measure, if you’re a smaller business, you may want to start by manually evaluating your sales data and noting any trends that stick out.
If you own an electronics shop, for example, you could see that clients who purchase a new smartphone are more likely to also purchase a screen protector and a phone charger.
How to Use Analysis of the Market Basket to Drive Sales
Similar to how you utilize UPT data, once you uncover these links, you can use the knowledge in both brick-and-mortar and online shops. Boost your sales by:
- Cross-selling: If you can predict what things consumers will want next, you can make it easy for them by putting them near together in your shop utilizing cross merchandising tactics. Create popups that display when consumers add certain goods to their shopping carts, offer a “Discover Additional Products” tool like Amazon’s, or just add potential pairings to product descriptions in an online context.
- Recommending similar items: Knowing what consumers are likely to add to their carts makes it simpler to determine which suggested products to include on particular product pages. If you have a physical business, this is also useful information to provide personnel so they can offer personalised suggestions to customers.
- Marketing promotions may be tailored: MBA data can help you create more successful marketing initiatives outside of your website or retail. You may enhance sales by developing customized, targeted adverts that make it easier for people to obtain everything they need in one spot if you know what they want before they do.
The “Discover Additional Things” function on Amazon leverages MBA data to suggest products that are statistically likely to be purchased.
Rate of Conversion
Retail Rate of Conversion compares the number of people who enter your store or visit your website with the number of people who make a purchase.
Perhaps surprisingly, average brick-and-mortar Rate of Conversions range from 20% to 40%—so 60% to 80% of people who walk into your store leave without buying anything. For ecommerce sites, the numbers are even more staggering, with Rate of Conversions typically between just 2% and 5%.
Calculate your Rate of Conversion by taking the total number of people who made a purchase and dividing it by the total number of visitors you have to your store or website. Rate of Conversion is presented as a percentage, so multiply by 100. For example, if 100 people walked into your store and 25 made a purchase, your Rate of Conversion would be 25%.
(Number of visitors who made a purchase / total number of visitors) x 100 = Rate of Conversion
For example, (25 paying customers / 100 total visits) multiplied by 100 equals 25%.
How to Use Rate of Conversion to Drive Sales
Rate of Conversion is more commonly used by online businesses because it’s easy to track how many people visit or view your site in any given time period.
Many POS systems integrate with small business foot-traffic counters like Dor if you own a brick-and-mortar shop.
Once it’s collected, use Rate of Conversion data to increase sales by:
- Placing items on your ecommerce homepage: If you have a lot of visitors who leave straight away, it’s possible that it’s because the product they were looking for was too difficult to discover. Make sure that your promos and marketing send them to that product page rather than your website’s main page.
- If a lot of people are interested in your items but aren’t buying them, consider experimenting with various pricing deals or significantly decreasing costs to see if that boosts conversions. In an online situation, this is much simpler since you won’t have to develop new signs or price tags.
- Adding employees during times of low Rate of Conversions: If your brick-and-mortar business has high foot traffic but low conversions, it may be a sign that customers aren’t getting the help or attention they need. Adding employees can increase sales and conversions. For online businesses, a chatbot can answer questions and help your customers find what they need faster.
In action: Jeff Moriarty, marketing manager at Moriarty’s Gem Art, used Rate of Conversion data to improve his website layout and increase sales. “When people used our website’s internal search bar on their mobile device, the Rate of Conversion was 5x that of those who didn’t. We immediately moved it to being visible at the top of the mobile website 100% of the time, and saw our average Rate of Conversion on mobile devices almost double.”
Rate of Shopping Cart Abandonment
The cart abandonment rate, which ranges from 55 to 85 percent, is the proportion of online customers who add products to their shopping cart but quit the site before making a purchase. It’s an important online metric, but it’s difficult to apply to brick-and-mortar stores.
Divide the total number of completed transactions by the total number of shopping carts with at least one item in them to get your store’s shopping cart abandonment rate. If your cart abandonment rate is reported as a percentage, double it by 100. This figure represents the percentage of transactions that have been completed. Subtract this value from 100 to find the percentage of transactions that were abandoned.
For instance, if you have 50 completed purchases in a month but 200 total shopping carts, your completed transaction rate is 25%. So, your cart abandonment rate is 75%.
(Total shopping carts / completed purchases) x 100 Equals percent completed transactions Cart abandonment rate = 100 percent – percent completed transactions
For example, (50 completed transactions / 200 total shopping carts) multiplied by 100 is a 25% completion rate. Cart abandonment rate is calculated as follows: 100% of all carts – 25% completion rate = 75% cart abandonment rate.
How to Increase Sales by Using Cart Abandon Rate
Because you’re reaching out to someone who has previously showed interest in a product, targeting a prospective customer based on their abandoned basket is incredibly successful for driving sales. Use data from abandoned carts to boost sales by:
- Automated follow-up emails: After a customer abandons their basket, send them tailored emails reminding them of what they left behind. According to studies, 45 percent of cart abandonment emails are read, and 21% of them are effective in bringing customers back to the business.
- Discounts or promotions: Send a 15% or 20% off voucher that may be utilized on the products in the shopper’s abandoned basket.
Shopify has features for tracking and recovering abandoned shopping carts.
You may minimize your total cart abandonment rate by urging customers to buy right immediately, in addition to targeting shoppers who have previously abandoned their carts.
Ecommerce merchants may increase sales and decrease cart abandonment by:
- Showing the whole cost of an item: After shipping, taxes, and other costs are computed, customers are sometimes startled by the total cost of their transaction. Prevent this by displaying an anticipated total that includes these costs before customers click the checkout button.
- Reducing delivery expenses: Shipping prices are sometimes the deciding factor in whether or not a customer places an order. To combat this, provide free delivery with a minimum purchase; this keeps shipping costs from cutting into your profit margins and encourages consumers to buy more.
- Streamlining checkout: When there are too many steps to complete—or too much information to type—during checkout, customers leave their carts. Offer guest checkout and simple payment choices like Apple Pay and PayPal to make it simpler for consumers to finish a deal.
- Having a reasonable return policy: Some customers quit their shopping carts because they are unsure of the return policy or are concerned that they won’t be able to return the item at all. You may put these customers at ease by explicitly stating a customer-friendly return policy. Find out more about how to handle retail returns.
In action: Patrick Crane, CEO of Love Sew tracks Rate of Shopping Cart Abandonment to spot any issues in the checkout process. Additionally, he uses this metric to assess the effectiveness of retargeting efforts such as his abandoned cart emails. Learn more about shopping cart abandonment statistics and prevention tips.
Sell-Through Percentage
Sell-Through Percentage (or STR) is the percentage of an individual product sold during a certain time frame. It looks at how many of a particular item you started with and how many are left at the end. To calculate Sell-Through Percentage, divide the number of products sold by the beginning inventory on-hand.
For example, if you bought 100 copies of a specific book to sell in your store and after one month 40 of those books had sold, your Sell-Through Percentage would be 40%.
(Items sold / total number of products) multiplied by 100 equals sell through rate.
For example, (40 books / 100 books) times 100 is a 40% book sell through rate.
How to Use Sell-Through Percentage to Drive Sales
Retailers may utilize STR data to figure out how popular a product is or how successful a new product launch was. This allows online, brick-and-mortar, and multichannel companies to improve revenue in the following ways:
- Knowing when to buy things: Knowing how rapidly products sell allows you to decide which ones to buy more regularly, ensuring that you don’t lose out on sales due to a lack of inventory. This method may also help you minimize the expense of holding surplus items when they’re less likely to sell if your shop is entirely online.
- Showcasing bestselling products: Prominently displaying products with the fastest Sell-Through Percentages and labeling them as “bestsellers” increases sales by encouraging more shoppers to purchase the product. For online retailers, this can be accomplished by highlighting products on your store’s homepage—or as recommended items at the bottom of relevant product pages.
On the homepage of Sephora’s website, there’s a “Selling Fast” carousel.
- Discounting slow-moving merchandise: Decreasing the price of products with slower Sell-Through Percentages can increase sales of those products. This approach is even easier if you have an ecommerce business—simply adjust pricing online and gauge customer response.
- Eliminating the worst-selling items: Slow-moving things should be phased away to make place for new inventory or bestseller items. This is also a good method if you don’t have a lot of storage space.
As seen in action: I used to keep track of the STR of midrange watches and gold charms while I worked in several jewelry shops since they were the most often bought goods. We had a large range of products in these categories, so knowing which styles needed to be reordered in quantity when placing an order with the supplier was critical.
Lightspeed provides reports that calculate inventory turnover by product and category automatically.
Revenues by Category
Revenues by Category—or sales per department—examines the total sales a retailer has for each type of product.
This information is valuable since it reveals which items generate the greatest revenue. It may also be used to discover the most popular and lucrative product categories so you can generate more retail sales with better information.
Luckily, Revenues by Category is one retail metric that requires very little calculation. It simply involves tracking product sales and totaling those numbers based on whatever categories you’ve assigned. If you’re using a POS system like Lightspeed, Revenues by Category numbers are automatically calculated.
If you’re not using a POS system, the ability to track Revenues by Category comes down to the tools you use to organize your inventory. For example, if you’re using a separate inventory management software, you could track estimated category sales with inventory counts. Some retailers even track category sales with spreadsheets they update at the end of each day, although this can be quite labor-intensive.
Increasing Retail Sales by Using Category Data
Data on sales by category helps you to make educated judgments about which goods to have in your business, which ones to refill, and which ones aren’t selling. To do so, follow these steps:
- Focus on what’s working: If one or a few categories are routinely outselling others, highlight those goods in displays and on your website. Consider extending product lines in those areas if you have the capacity in your stockroom or warehouse.
- Investing in successful items: When it’s time to refill or release new stuff, focus on the categories that are doing well. This is particularly useful if you run an online business and don’t have the space to keep products for lengthy periods of time.
- Slow-selling categories should be phased out: If some categories are selling at a lower rate than others, consider making them a smaller portion of your store—especially if the present goods take up a lot of space in your storefront or storage area.
Lightspeed analyzes sales by category and uses the data to produce color-coded graphics.
Gross Profit Margin
Gross Profit Margin (or gross profit margin) is an important retail KPI for driving sales because it shows what percentage of your store or product revenue is actually profit—versus what just covers the cost of merchandise.
Products with greater profit margins may be more lucrative than those with lower profit margins but larger overall sales.
Gross Profit Margin is calculated by subtracting the cost of goods sold (COGS) from selling price, dividing by selling price, and then multiplying by 100 to get a percentage.
For example, let’s say you have a sweater that you sell for $50 and it costs you $15 to purchase that sweater wholesale. Your Gross Profit Margin would be 70%, which is pretty good. Margins can vary by industry (grocers and food sellers typically have lower margins), but generally retailers should aim for at least 50% margins.
(Selling price – cost of goods sold) / selling price x 100 = Gross Profit Margin percentage
For instance, ($50 – $15) – $50 multiplied by 100 is 70% ($35–$50) multiplied by 100 is 70%
How to Use Gross Profit Margin to Drive Sales
Gross Profit Margin can be calculated for an entire store, per item, or per product category. Once determined, retailers can use Gross Profit Margin to increase sales by:
- Increase pricing on low-margin products: If some of your margins are really low (less than 40%), consider raising prices marginally. Because you don’t have to update actual price tags or signs as much with ecommerce, experimenting with pricing is a breeze.
- Stocking more high-margin items: High-margin products bring in more profit even if sales are slower than low-margin products since you earn a bigger proportion of profit from each sale. This may be tough for ecommerce organizations, depending on their warehousing situation—especially if they have just migrated online.
- Promoting high-margin products: Reorganize your store’s display to highlight high-margin items at the front or at the checkout. Similarly, an online store might highlight high-margin items on its site or in email advertising.
In action: When working in procurement for a resale ecommerce company, I calculated the Gross Profit Margin of every prospective item before purchasing it for inventory. Our merchandise automatically went on sale after being in stock for a designated period of time, so items with a low margin and low market demand were rejected.
Rate of Customer Retention
Rate of Customer Retention (CRR) refers to a retailer’s ability to hold on to current customers and keep them coming back.
High Rate of Customer Retentions typically indicate strong customer loyalty and high satisfaction with the retailer’s products and service. These numbers are perhaps more important now than ever, as retailers are testing new ways to retain customers during the economic impact of a pandemic.
CRR is calculated by dividing the total number of repeat customers by the total number of customers. If your retention rate is stated as a percentage, multiply it by 100.
If you have 500 overall clients in a given month and 200 of them are repeat customers, your retention rate is 40%.
(Repeat customers / total customers) x 100 = Rate of Customer Retention %
For example, (200 recurring customers / 500 total customers) multiplied by 100 is 40% customer retention.
How Rate of Customer Retention Drives Sales
Rate of Customer Retention is important for sales because it focuses on long-term revenue and growth potential. If a business consistently brings in new customers, but they only shop once, your sales will remain steady but won’t grow in a significant way.
If, on the other hand, a retailer attracts new consumers who return, the company will develop significantly.
Customer retention may also contribute to increased sales in less obvious ways, such as:
- More referrals: Repeat customers are more likely to distribute favorable news about your company and promote it to friends and family. This is particularly useful for ecommerce enterprises that aren’t constrained by consumer geography.
- Reduced client acquisition expenses: It costs 25% more to gain new consumers than it does to keep existing customers. This is particularly critical if you depend on Facebook Ads or other forms of internet marketing to generate visitors to your website.
- Higher spending: Customers who return to your store again and again typically have a higher Transaction Value on Average than first-time customers.
In action: James Green, owner of Build a Head, has started measuring Rate of Customer Retentions in addition to Rate of Conversions to try and better forecast revenue and sales. “We always track Rate of Conversions, but customer retention means more steady profit long term.”
The average income your shop generates per square foot of sales space is known as sales per square foot.
It gives you a sense of how effective you are at using sales space and assists you in making smart merchandising, inventory, and sales choices.
Take your total sales and divide by the number of square feet in your selling space to get your sales per square foot. The sales floor, goods displays, and registration area are all included in the selling area; however, your office and stockroom are not included.
For instance, if you sold $500,000 worth of items in a year and your sales floor is 2,000 square feet in size, your sales per square foot is $250.
Sales per square foot = total sales / square feet of selling area
For example, $500,000 divided by 2,000 is $250.
Retailers should strive for yearly sales of at least $500 per square foot, however this might vary depending on the goods.
If you offer large, low-cost items like used furniture, your sales per square foot are likely to be lower than a high-end electronics or jewelry shop. However, if your sales per square foot are much lower, you may be underselling yourself.
How to Increase Sales by Using Sales Per Square Foot
Data on sales per square foot is useful for visual merchandising and shop layout in brick-and-mortar stores, but it’s less useful for online.
If you operate a physical store, sales per square foot may help you raise sales by:
- Comparing store sales per square foot: If particular regions of your business have better sales per square foot, attempt to reproduce similar merchandising methods or product choices in failing store locations.
- Changing the layout of your business: If all of your popular things are at the front, visitors may not even see the rear half of your store; change the arrangement to encourage customers to wander around the whole area.
Per Employee Sales
Per Employee Sales examines how much revenue each employee is bringing in.
Retailers can look at overall sales per employee, but assessing an employee’s average retail sales per hour is a more accurate way. This strategy compares full-time and part-time employees equitably.
To calculate the average Per Employee Sales per hour, first gather the total sales by each employee. Take each employee’s individual sales and subtract any commissions they receive from those sales. Finally, divide that number by the number of hours they worked—this will give you their average sales per hour.
POS systems automatically show employees’ sales per shift or day. Many systems, like Lightspeed, also let businesses run custom reports on employee sales to see metrics like average sales per hour, Revenues by Category, and sales per time of day.
Lightspeed automatically calculates employee sales per hour, employee profit per hour, and Transaction Value on Average per employee.
How to Use Employee Data to Increase Sales
The average sales per hour of workers gives insight into present performance and creates a standard for what shops may expect employees to achieve. Data on average sales per employee may be utilized to boost sales by:
- Informing staffing decisions: If you wish to meet a certain revenue target, this data point can assist you figure out how many employee hours you’ll need.
- Identify coaching opportunities: If certain workers have a considerably lower average sales per hour than others, they may benefit from sales training to assist them improve their performance.
- Identify strengths: If certain workers have a high average sales per hour, merchants can keep an eye on them, examine what they’re doing well, and share that knowledge with the rest of the team.
How to Make the Most of Retail Data Analysis
Retail metrics may be a strong tool for increasing sales, but they must be collected, examined, and interpreted carefully in order to be useful.
The most difficult aspect of adopting retail analytics is not just ensuring that you get the data, but also understanding how to analyze it and put it to use.
In five easy steps, you can put retail analytics to work for your company:
1. Install a point-of-sale system
Technically, you could use a spreadsheet to monitor certain retail data analytics on your own. Setting up a POS system, on the other hand, may assure accuracy while saving you hours of effort each week—as well as enabling powerful analytics by supplying data that would otherwise be impossible to get.
As a result, choosing a POS system that can develop bespoke reports that make vital data simpler to absorb is the first step in adopting retail data analytics.
2. Decide what you want to measure
Decide what data points, KPIs, or general metrics you want to track before you can utilize retail analytics to boost sales.
If you’re utilizing a POS system, you’ll have access to a massive amount of data all at once. Instead of attempting to monitor several factors at once and being overwhelmed, it’s advisable to concentrate on a few retail data points at a time and gradually measure a few tiny changes.
3. Gather information about the retail industry
Begin collecting data after you’ve decided on certain metrics.
POS software will become your closest buddy when it comes to data collecting. Many small businesses use spreadsheets to keep track of sales and client activities. This, however, takes a lot of time and effort, and it never delivers as much information as a POS does.
You’ll also be able to access all you need from your current ecommerce dashboard if your firm is online.
4. Analyze & Compare Numbers
These figures alone might give some preliminary insight into your company’s success. However, you’ll need to enter them into one of the particular retail data analytics formulae below to acquire a more precise and actionable figure in order to utilize them to increase sales.
Then, to measure performance over time and observe whether sales are increasing, develop a regular plan for measuring your selected metrics. This is something that may be included into store management responsibilities.
5. Use Retail Analytics to Help You Make Better Decisions
Once you’ve decided what to measure and when to measure it, utilize the data you’ve gathered to make educated business choices, such as the ones we mentioned above for each indicator.
See which product categories are doing well if you’re gathering data on sales of certain product categories. When it comes to purchasing items, put more money into the product categories with the highest sales.
Conclusion
More than ever, company owners must focused data in order to make informed buying, marketing, and personnel choices that will boost profits without the guesswork.
Retail analytics provide merchants the data they need to make educated choices that will help them compete with larger companies, particularly as the retail environment changes in the aftermath of COVID-19.
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The “big data in retail examples” is a term that is used to describe the use of analytics and other tools to drive sales. The “big data in retail examples” can be found on Retail Analytics & Top Retail Metrics to Drive Sales.
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