Role of Retail Analytics in India

Posted in Operations & IT Articles, Total Reads: 5996 , Published on 01 December 2013
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It is an interesting time to be a retailer. Customers are becoming more demanding in terms of value, choice, availability and accessibility of products and services. The current economic slowdown is also forcing consumers to look for best deals and consumers are happy to wait for special deep discount promotions to make their purchases. Add to that the additional challenges in India because of the diversity of customers and cross cultural population. Globally, the retail industry has undergone drastic changes over the last couple of decades to service these expectations. It is high time for Indian retailers to keep pace with these global changes. The book Moneyball ‘The art of winning an unfair game’, which was based on using analytics to improve outcomes in unpredictable baseball games sums up the lesson that Indian retailers can learn to align their strategy to win in the current retail market in India.


Image Courtesy: David Castillo Dominici, freedigitalphotos.net


Traditional retail customer programmes are limited by the fact that the customer in physical retail is more often than not identified only at the end of their store visit while payment and the opportunity for winning engagement experience is a little limited as the customer is leaving the store. Retailers generally identify a target list of customers who have stopped visiting and made them an offer to lure them back. Fast forward to retail analytics and you can get into the minds of the customers. Most retailers in India already have access to considerable sources of data in the form of store sales, market research, and competition information. Inside retail stores data can be gathered from Bluetooth, WI-Fi signals from smartphones. Analysis of all this data can be used to identify customer early on and personalise the 'influence' to the specific customer with real time offers. This increases the chances of success.


To put it formally, ‘Retail analytics’ is to understand the power of different sources of data and build a solution that extracts the maximum value from available data which can shape the decision making capability of an organization. According to Gartner globally Business Intelligence and analytics industry was worth $12.2 billion in 2012. In this highly competitive market, the six largest vendors – Oracle, SAP, IBM, Microsoft, SAS, and Teradata – accounted for 68% of worldwide revenues in 2012. Indian Analytics market is estimated to be $375 million in 2012 and is expected to be $1.15 billion by 2015.


Are you ready for Retail Analytics?


There are certain prerequisites for analytical progress in retail

• Most important is data availability. You can’t do analytics without high quality, integrated, and accessible data. Data can be classified into various types. Demographic and transactional data about who the customer is and what, where, when and how much did they purchase, etc. Attitude data is information about a customer's preferences, what do they talk about a product on social media. Interaction data reflect the customer's responses to offers, likes, dislike. Data can be captured —from point-of-sale (POS) transactions, RFID sensors, social media, credit programs, current loyalty programs and enterprise resource planning (ERP) and other business applications.


• Management interest and leadership support towards analytics. Retail management team should have desire to build their own analytical capabilities, rather than relying on manufacturers to provide them insights.

• Scale of retail. Though not without exceptions but generally large retail stores provide the ability to invest in analytics and the people who make them possible.


Strategy for successful retail Analytics

1. Identifying needs and need groups

In determining how to begin putting retail analytics in place, retailers will first need identify which areas they want to target: product planning, supply chain, pricing and promotions, customer insight, or locating store and forecasting. They have to target particular analytics which match their strategies and capabilities. It would not be sensible for a retailer focused on low cost and low margin to have its initial analytical efforts address customer loyalty and close personal relationships. Supply chain and pricing analytics would be more logical for such a firm.



There are four needs groups that can use the analytic information of the organisation towards their objectives. Merchandising and marketing department to serve customers, finance and controls department for internal operations, supply chain functions for supplier’s collaboration, and executive leadership for competitive environment.


2. Employing right analytics in the evolutionary lifecycle

Retailer have to gauge the current sophistication of their analytics capabilities—including data sources, systems, and methodol¬ogy—and find out their position in the evolutionary lifecycle of analytics. As retailer moves from early growth phase to maturity phase, the role and investment in analytics increases.


Once retailer recognises its capabilities and its position in the evolutionary lifecycle, it can use these to guide his investments in business intelligence systems, processes and infrastructure.


Retail Analytics in Practice

True value of retail analytics lies in its ability to deliver powerful insights to increase profitability. A study from Mckinsey indicates that retailers who optimally used analytics extract 60% enhancement in margin and a 1% increase in productivity.


There are encouraging signs of usage of analytics amongst Indian retailers and leadership is showing support. Oxford Bookstores, Calcutta increased its online sales by 100% and revenue by 50% through adoption of a SaaS-based ERP to solve issues like excess purchases, over-stocked SKUs and slow-moving inventory. India’s largest retailer Future group recently deployed data warehousing and analytics for its multi-format chain of retail stores to make smart decisions about customers, product, pricing and promotions. Big Bazaar has set up Customer Advisory Boards (CABs) as a measure for receiving valuable customer feedback. HomeShop18, a leading e-retailer, is in the process of building an intelligence team responsible for slicing and dicing consumer data to grow revenue. Shopper's Stop Limited is using analytics using SAS framework to analyse over three years of customer data, in multiple formats and have increased customer loyalty, satisfaction and profitability, while improving overall operations.


Conclusion

India’s retail sector is an evolving market. The annual retail business in India is estimated to be $500 billion. As more retailers enter the market and consumers buying pattern and shopping behaviour evolve analytics will play increasing role in India. Retailers need to evolve from using analytics to show what happened (reporting) and what is happening now (alerts) to what will happen. The Indian retailers that utilize retail analytics will have the opportunity to turn their capabilities into a key source of competitive advantage for many years to come. This will help them to gain market share and leadership positions in the retail industry.


This article has been authored by Vikas Goyal from IIFT Delhi



Sources

• www.ideasmakemarket.com/2011/05/supply-chain-challenges-in-indian.html

• http://www.thehindu.com/sci-tech/technology/indian-retailers-need-to-embrace-analytics-solutions/article4795436.ece

• http://www.cxotoday.com/story/retail-analytics-right-sizing-for-excellence/z

• McKinsey Global Research Institute: The Rise of Indian Consumer Market

• http://www.booz.com/media/file/BoozCo-Retail-Analytics

• http://www.deloitte.com/assets/

• http://www.accenture.com/us-en/consulting/analytics/retail-analytics

• http://www.mckinsey.com/client_service/retail/latest_thinking/perspectives

• http://www.infosys.com/industries/retail/white-papers/Documents/big-data-big-opportunity.pdf

• http://www.cio.in/case-study/erp-solution-delivered-saas-style-bumped-oxford-bookstores-revenue-rs-34-crores

• http://www.sas.com/offices/asiapacific/india/success-stories/shopperstop.html

• http://www.business-standard.com/article/technology/the-importance-of-who-bought-and-why-112050700044_1.html

• http://www.business-standard.com/article/management/analysing-customer-behaviour-in-retail-113092200710_1.html

• http://indiaretailing.com/article-detail.aspx?mcatid=23&catid=24&aid=4600



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