Yes, retail is a trillion dollar industry worldwide. Yes, your consumers will continue to buy as you cater to their every need, want and desire ranging from camping supplies to handcrafted jewelry to custom-made shoes. Then why do slumps occur in shopping patterns and consumer behavior? What determines how a customer perceives your brand and how do you know for sure?
It is a widely acknowledged fact that retail is one of the sectors most influenced by seasonality factors; but surely there must be a way to track and strategize retail business in a way that elevates the lull periods. Now, with the exploration of data and its magical powers, various sectors have adopted data analytics as an integral component of their planning and decision-making process. So, how can the retail industry benefit from the use of data analytics?
In a retail context, strong ERP systems have been tracking and storing historical data for years. The journey of every SKU that ever came into the system to the point of sale is closely monitored. So aren’t the possibilities obvious? Well, yes, but how does a retail decision-maker decide which areas of business will benefit the most from the effective data management and analytics?
The problem clearly is that there is all this data available about your customers, your product, your outlets, your P&L, so on and so forth, but which key areas to do you really apply retail analytics insights to and gain business momentum?
The fundamental nature of retail business is in providing a feel-good factor to the simple act of purchasing products. Based on this, we can broadly recognize five core areas where the use of data analytics will provide significant leverage in the competitive retail market place.
- Did you have a good time?
Think of all the ways you can communicate with people and then multiply it by three and what you get is the number of ways your customers are telling you what they experience each and every day at your outlets and how they really feel about your brand. The volume of data generated through customer feedback forms, in-store surveys, mystery shopping reports and social media forums have the ability to provide any discerning retailer the necessary information to build a customer relationship strategy. The next step is to utilize a platform that can provide a sustainable customer experience tracking mechanism and lo behold, you are now on the path to providing a delightful experience at your outlets.
- Your loyal friend
How important is loyalty to your brand/outlet? Ever have that one customer who visits to your outlet three or four times a month just to see “what’s new”? If you are a retail manager, it must make you wonder how you can engage this customer in a way that extends their positive sentiment towards your brand/outlet into something a lot more tangible. Analytics can clearly enable you to gauge this customer’s movement along the loyalty track and determine a customer’s lifetime value to your outlet. Ok, so you know what your customer’s likely value is, how does this translate into a meaningful experience for them? By identifying the customer’s lifetime potential, you can now tailor your offering not just for a broad demographic segment but also for every unique customer.
- Marketing as we knew it
With the onslaught of digital media, retail marketing, as we knew it has morphed into something that provides instant feedback on the success or effectiveness of every campaign. A 2013 study finds that a significant proportion of US retailers spend 50% of their marketing budget on digital channels. Why is that important? Because generating and tracking customer walk-ins do not only mean outlet traffic but also online traffic. With developments in marketing channels, there are enormous opportunities in applying data analytics techniques to identify ideal campaign vehicle, predict campaign reach and ultimately determine if the net marketing effort resulted in actual conversion or not.
- Lean, mean supply machine
Inventory optimization and a lean supply chain mechanism are so crucial for a retail business regardless of whether there are 10 outlets or 10,000 outlets. If the sell-through is higher than your forecasted net week cover or if the objective is to keep in-store stock levels low but have more frequent deliveries, wouldn’t the use of forecasting and optimization techniques help achieve lean muscle in the supply chain and inventory replenishment space? More importantly, having an optimal delivery and inventory management system helps your Open-To-Buy (OTB) plan as your potential profit is directly related to your OTB.
- Numbers to maps
Well the numbers look good but do you know everything there is to know about your key performance metrics? What other forms and interpretations of data could you be looking at that could really have an impact on your decision-making? A vast majority of retailers have a pretty sound ERP setup that holds an enormous amount of data. The primary metrics of Average Transaction Value, Conversion, Units per Transaction, GMROI, Sales per sq.ft per day etc., are all consistently tracked, but business intelligence must go beyond these. With advanced analytics and visualization tools, new metrics can be identified that may have tangible impact on outlet performance and every retailer must try to leverage this.
With a clear and consistent focus on employing analytics in these five areas, retail businesses can achieve significant value and knowledge addition. Identify the right analytics solutions provider that is suited to your organization and don’t be afraid to embrace data and all that it can offer!
This blog is authored by Sindhuja Vasudevan, Project Manager at BRIDGEi2i
BRIDGEi2i provides Business Analytics Solutions to enterprises globally, enabling them to achieve accelerated business impact harnessing the power of data. Our analytics services and technology solutions enable business managers to consume more meaningful information from big data, generate actionable insights from complex business problems and make data driven decisions across pan-enterprise processes to create sustainable business impact. To know more visit www.bridgei2i.com
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official position or viewpoint of BRIDGEi2i.