Retail - A Leading User Of BI Tools

Retailers understand clearly that 80 percent of their income is derived from 20 percent of their customer base. That is why loyalty programs surged 10 years ago, in an effort to grow and retain their core customer numbers.

However, loyalty programs only work by offering discounts to custotmers on products they have already decided to purchase. They do little to increase revenue through upsell or cross sell tactics.

They are also challenged to fully quantify the effect one department’s actions and
activities have on other parts of the store and business.

Multiple business analytics sources, all measuring different processes are making it difficult, if not impossible to make good decisions that positively and directly affect the bottom line.

New Ways To Appeal To Customers

By analysing patterns in buyer behavior, retailers can identify new ways to appeal to them. This desire to gain greater visibility into customers’ is leading retailers to adopt business intelligence. Nearly 70 percent of retailers recently surveyed by the Aberdeen Group already use BI tools while another 26 percent plan to invest in BI. That represents one of the highest industry reports I have seen in recent years.

The retail environment requires quick decisions to capitalise on trends or curb loses from previous poor decisions.

However, the most value in retail use of BI tools and technologies is derived from obtaining a longer term view of their customers’ behavior.

Focus on Customer Lifetime Value

Top performing retailers are nearly twice as likely to focus efforts on improving the lifetime value of their customers as a business intelligence strategy. This involves:

1. Understanding customer profitability
2. Understanding the offers and incentives that draw customers back for repeat business
3. The ability to take advantage of opportunities for cross-selling and up-selling customers on subsequent visits

A typical multi-stage BI initiative will involve:

Phase One - Analyze sales data from stores to monitor the performance of selected brands and determine when and where sales are strongest. Analysis also provides information on which products consumers purchase together and, if sales drop, which products shoppers buy instead.

Phase Two - Information on how promotions affect sales and how well new products sell in stores.

Phase Three - Analyze data to determine which kinds of media are most effective for sales promotions.

BI is able to provide granular information such as : women aged 18-30 in a certain part of the country are buying a lot of Diet Cola.

Key Business Value Findings

Retailers recognise the need to differentiate the in-store experience in ways other than low-price.

Delighting customers and empowering store employees are becoming core tenets of retailers mission statement.

The concept of improving the in-store experience is not new, and do not guarantee retail success. More than half of the success depends upon impeccable execution of in-store initiatives. Impeccable execution cannot be achieved or maintained without regular and frequent review of in-store activities.

Closed loop task management systems are being used to assign and confirm execution of store-related tasks, with larger retailers using demand forecasting for both stock and labor requirements. By providing tools to store employees on the selling floor, retailers also provide differentiated in-store experiences for customers.

Keys to Success

Access to current information on product and employee performance and updating back office information systems are key steps for retailers. Many still depend on faxes, phone calls, mail, and e-mails for their head office-to-store communications.

By creating a more compelling, convenient, and consistent in-store experience for consumers – opportunities for improvement are available. Taking advantage of these opportunities should result in improved comparable store sales and store operating income.

A key imperative is a move to customer-centricity, creating store performance metrics that confirm and reward progress, and reviewing performance against those metrics more frequently.

Best in class can be accomplished through improved workforce management, task management, and better customer service tools.

Retailers must be prepared for the changing infrastructure requirements that occur as a result of growth and incorporate lessons learned by other innovative retailers.

Next: BI Strategy For Retailers

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