Tuesday, January 03, 2012: 11:59:55 AM

Retail Guest Column

Key to success in retail - Aspandyar Karkaria, Altair

Data management and business intelligence could help retailers retain and attract customers

Profitable retailing is about getting the right product into the right store at the right time, and this can be best enabled by focusing on getting the right information to the right person in the right form at the right time.

 
Retailing is a complex business with thousands of SKUs across multiple stores. Simple measures of success do not apply to this paradigm. Add to that the complexity arising out of the fast moving environment demanding ‘newness” all the time. Merchandise assortment, managing old stocks and related decisions, to name a few, have a large impact on the already thin margins, which are characteristic of this industry.
 
With sophisticated data collection applications available to retailers today, what gets often overlooked is the fundamental need to make sense of all the data. Organisations have implemented systems that control everything from the back end supply chain operations to financial applications, and extending to smart POS systems. The real value of this data so collected becomes evident only when it can derive intelligence through a unifying analytical layer.
 
Also observed is the ubiquitous use of spreadsheets that contain the data downloaded from the sophisticated systems for further analysis, which in the first place were designed to avoid spreadsheets. This results in the absence of “single source of truth” for all the key stakeholders. 
 
For retailers to be successful, it is important that they optimise their product mix and make the best use of the space at their disposal. With ever decreasing differentiation from competitors, and ever changing customer needs, retailing today is the business most amenable to intelligent analysis.
 
Data and BI
 
Retailing has never suffered from lack of data, rather the other way around. The successful retailers in the future will be those who can derive intelligence out of their “data assets” to drive business. Promotions, customer loyalty programs, merchandising management, supply chain velocity, logistics optimisation, inventory management, space management, foot falls, day part sales, service optimisation and more will all be a factor of how well the retailers mine their data for intelligence.
 
Talking about the kind of data available for driving business intelligence (BI) through analysis, one needs to consider all the sources; the internal data comprising of point of sale data, financial data, promotions data, external data comprising of market data, market shares and pricing as well as customer data spanning their demographics and buying patterns. And this is just the beginning.
 
BI as a technology can be effectively leveraged to derive key performance indicators (KPIs) for multiple stakeholders who form the decision chain. BI tools like HiQube from Altair enable validated decisions, moving away from “gut based” decisions. It helps go beyond static reporting allowing complex analysis such a market basket analysis, unearths forward buying opportunities, helps derive effective promotions, and simplifies product mix conundrums. Moving from analysis to analytics, and into the realm of statistical models and optimisation, HiQube empowers decision makers to have forward looking strategies. It spans the post-mortem-to-prediction paradigm – answering why something happened in the past as well as what is likely to happen in the future, such as addressing key questions of customer likelihood to buy into a new category in the future.
 
The genetic algorithm based optimisation built in specialist tools like HiQube will allow retailers to cut further costs through their supply chain and logistics optimisations, over and above the inventory optimisation. This opens up the area of analytics and empowers retailers to optimise their operations to reduce their cost of operation.
 
Future in retailing will not belong to those who generates the most data, but who best leverages their data assets. It will be increasingly incumbent on the market players in retailing to organise and analyse the burgeoning and disparate information silos to answer the question on which their survival will depend – What will make my customer stick? – and therein lies their nirvana of profitability.
 
Aspandyar Karkaria is the marketing manager - HiQube-BI India, Altair

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