Tuesday, January 24, 2012

Business Intelligence in Retail. Insights you can count on.

BI for retail will be defined by the retailers who have figured out how to maximize customer satisfaction and profitability through the right combination of quality products, friendly and efficient service, unique value, a differentiated shopping experience, and a business model that truly serves the communities they serve -- locally and globally.

How will this be accomplished? It begins with an in depth understanding of the customers and then linking that insight into every decision that is made, from merchandising to marketing to distribution to store operations to finance, so that retailers can predict how to best serve their customers' ever-changing needs and desires.

Our strategy for the future of retail BI provides for that very scenario, through our experience in designing intelligence platforms and our solutions for customer, merchandise, operations, and performance intelligence that are combined in a toolset designed to equip retailers to become truly innovative.

A solution seeking to use customer behavioral data to make better merchandising or marketing decisions needs to interface with sales transaction systems, loyalty systems, in-house credit systems, coupon redemption systems, catalog and Internet customer data systems, and so forth.

A system that recommends optimized price changes should interface with the price management system, the item master, the system that generates labels, etc.

The Retailers that are Realizing the Most Benefits from BI

Retailers that are realizing the most significant returns on their investments are those that take a purposeful, pragmatic approach to establishing an intelligence platform upon which to base all other BI solutions.

A single, reliable demand forecast, for instance, can also be used in merchandising, marketing, logistics, store operations, call center staffing, etc., for operational benefit.BI that remains segmented by functional area can provide some value, but retailers can realize a much larger return by building the foundation upon which the rest of the house will stand. This is true of both top-tier and midmarket retailers, regardless of segment.

Specific Areas in Which Retailers can Benefit Most Include:

Merchandising-- This is clearly the most important area of a retailer's business and an area where retailers are beginning to exploit the full value of BI. Analysis of past performance, combined with plans and forecasts of trends future customer behavior, leads to more accurate initial allocations of merchandise across channels and stores.

Assortment and size optimization that are based on customer demand patterns ensure that the correct assortments, size, and case-pack distributions get sent to the correct stores. Daily price, promotion, and markdown optimization ensures that items are priced for optimal profitability, both preseason and in season.

Space automation and optimization ensure departmental sales and profit per square foot are maximized, and products are given the correct inventory and space on the shelf or on the rack. Optimized fulfillment ensures that products are allocated or replenished based on demand. Accurate analysis also results in a more efficient use of manpower in picking, packing, and shipping the first wave of product, while minimizing additional, costly payroll expenses to facilitate transfers between stores, vendor returns, changing signage and labels for markdowns, and otherwise correcting mistakes.

Marketing-- By understanding customers better -- whether by profiling, segmenting, gauging propensity to respond, or using market basket analysis -- retailers can create better-defined targeted campaigns, reducing expenses (printing, paper, postage) while increasing response rates, revenues, and gross margins. Also, as retailers gain a better understanding of their customers' buying behavior, this analysis can then be used to create more effective merchandising plans for the next season.

Operations -- Understanding and predicting changes in demand -- by hour, by day, by location, by promotion, by price change-- means that the store floors, the catalog call centers, and the fleet crews delivering replenishment orders from the DC to the store are all appropriately staffed. This understanding also leads to optimal productivity since store-level human capital costs can be scheduled better and managed more efficiently.

The Integrated Solution

It is important to note that a good BI solution will be able to integrate with any other system and platform. That said different BI solutions need to interface with different operational systems for different purposes.

A solution seeking to use customer behavioral data to make better merchandising or marketing decisions needs to interface with sales transaction systems, loyalty systems, in-house credit systems, coupon redemption systems, catalog and Internet customer data systems, and so forth. A system that recommends optimized price changes should interface with the price management system, the item master, the system that generates labels, etc.

There must be a closed-loop interface between the operational systems that retailers rely upon to conduct day-to-day business and the BI systems that help them conduct that business more efficiently and profitably.