Disrupting retail – with intelligent data

The rise of customer led disruption is not new to the retail industry, however, what is truly transformative is the need for retailers to focus on the digital value chain

Disrupting retail – with intelligent data - CIO&Leader

Retail industry has been in a cusp of a silent revolution from a product centric model to a customer centric model. Disruptions in technology like the Internet in the 1990s, Mobile in the 2000s and digital technologies in the last 5-6 years has resulted in a technology savvy customer, who has a very different set of expectations, from a product centric world of retail where the retailer would procure products at optimal prices and sell to customer at higher prices.

Importance of digital technologies in providing a seamless customer experience is key to customer engagement

The rise of customer led disruption is not new to the industry, however what is truly transformative is the need for retailers to focus on the digital value chain – one focused on collecting data from multiple sources (products, customers and locations), analyzing the data to generate insights and using the insights to trigger actions. Amazon Go, which is an Amazon initiative of convenience stores, where customers can choose and buy items without having to go to a till or a self-checkout station. The store is fitted with cameras and sensors and track every shopper’s behavior in the store, the data collected is used to generate insights and trigger actions on making the shopping experience better. The digital value chain can be applied across the retail value chain as we shall examine in the next section.

Transforming Retail with Data

At the cusp of digital disruption in retail is ‘Data’ that is helping retailers move from a product centric view to a customer centric view. Let us review the value chain of a retail enterprise to visualize the disruptions that digital technologies are bringing at each stage.

  • Logistics – Logistics is a key challenge in a retail business irrespective of brick and mortar or online. At the core of the logistics are Suppliers who ship their goods either to the physical store or to customers in case of online shopping. Supplier Performance is a key enabler of retail businesses. Other key areas where Big Data Analytics and Artificial Intelligence can be applied are in Route Optimization, Inventory Planning and Replenishment and Shipment Tracking. In Route Optimization digital data sets like weather data, traffic data can be used to apply insights in route planning, resulting in optimized logistics. IoT sensors can be used in warehouses and stores to determine inventory levels and potential stock outs on fast moving items that can be fed into inventory management and replenishment algorithms.
  • Strategy and Planning – Retailers need to perform Sales Planning & Forecasting based on analysis of sales across channels and forecast demand. Use of POS data in analyzing sales as well as forecasting based on Advanced Analytical models can help plan JIT inventory. In addition, stores need to be located strategically to earn customer mindshare, thereby Real Estate Planning becomes a key planning driver. Retailers also need to analyze the impact of brands on competing brands by analyzing competitive sales data from 3rd party providers integrated with Big Data technologies.  
  • Merchandizing – One of the key differentiators in retail industry is the ability to gather Competitive Intelligence on product/brand trends, customer preferences in the target group. In addition, Market Basket Analysis across channels provide retailers deep insight into customer behavior and buying trends. IoT, Big Data Analytics and Mobile are the enabling technologies that provide significant value. Assortment Planning leverages the insights from Market Basket Analysis and Competitive Intelligence, enabling retailers to focus on the right items to stock, in the right quantity at the right moment in time. Based on customer buying trends and Social Media Analytics, retailers can also look for potential Cross Sell opportunities.
  • Store Operations – With increasing pressure on margins and lower costs associated with online shopping, retailers need to analyze Store Profitability proactively. Near real time insights from store systems into Data Lakes, provide valuable insights about store performance including Stock Out Analysis, Loss Analysis. Insights around Customer behavior based on Layout Management helps retailers organize their store layout and placements better.
  • Marketing – One of the key drivers of digital disrupting is around making Marketing more efficient and fleeter footed. Customer Segmentation analysis based on current data and aspirations, helps plan promotions better and feed into Marketing Effectiveness measured through targeted Promotions. Learnings from these initiatives are continuously fed into CRM systems to enhance the customer experience and enhance marketing effectiveness.
  • Customer Experience – At the core of this new customer centric model that retailers have adopted, is the customer experience. Traditionally retailers have used Customer Loyalty Programs, which are now enhanced by Customer Insights and understanding the value of the relationship through Customer Lifetime Value. These insights are leveraged by CRM systems and processes to plan promotions and offers. With the customer increasingly tech savvy and spoilt for choice, retailers are now pushed to be ahead of the game when it comes to customer service.

The key disrupting technologies that are reshaping the way retailers are making the transition to a customer centric business, are as follows:

  • Mobile – Mobile displays and workstations that help customers view product catalog in availability in store as well as pay through payment systems, enhances the customer experience in stores such as Argos.  
  • IoT – IoT sensors in store to pick up customer movements, 3D printing for custom products and parts.
  • Artificial Intelligence and Big Data – AI and Big Data are crucial differentiators for retailers aiming to build a consolidated view of customer preferences and enhance the customer experience across channels of interaction.
  • Smart Beacons – Smart beacons work with Bluetooth technology to alert retailers, when customers are near the store or signage and help them provide customized offers at a given time. This takes targeted Marketing to a new level. Retailers like Target, Walgreens have already rolled out new beacon deployments.
  • Virtual Reality – Customers prefer to hold, touch while buying certain items like clothes, cars or homes. Virtual Reality and Augmented Reality are empowering customers to experience the product without being near it and may enable them to take buying decisions.

As is evident from the transformational impact of digital technologies at each stage of the Retail value chain, companies are increasingly looking at leveraging these technologies not only for productivity enhancements, cost optimization but also as a differentiator in enhancing revenues through enhanced customer experience and targeted campaigns. The key benefits that digital disruption has provided the Retail industry are as follows:

  • Seamless Omni-Channel Experience– Ability to ingest data from across the supply chain and in stores, provides retailers the ability to leverage the insights that helps provide a seamless omni channel experience to customers. This is at the core of the customer centric strategy that retailers are moving to.
  • Cost Optimization – Digital technologies have helped optimize the cost of operations by analyzing data across the supply chain which can be analyzed to generate insights across Logistics, Merchandizing, Store Operations and Marketing.
  • Customer Retention – Armed with the digital technologies and enhanced customer service capabilities, retailers are better placed to handle customer churn as well as acquire new customers. However, customer loyalty can be earned by continuous innovation in optimizing the supply chain as well as enhancing the customer experience.
  • Productivity – As we have seen right across the value chain digital technologies have brought significant productivity gains through Automation, Big Data analytics and IoT. Ability to handle and process unstructured data in form Social media sentiment analysis, weather data for route planning optimization has also enhanced productivity of enterprises which would spend many man hours analyzing such data sets and generating insights.
  • Revenue Models – With customer centricity at its focus, retailers will look to create customized offers/product bundles to meet customer buying behavior. This creates an ability to generate new revenue streams as well as look at Cross Sell opportunities based on Market Basket Analysis and Competitive Intelligence. The ability to merge multiple data sets and generate insights creates new revenue generating models and opportunities.

Importance of digital technologies in providing a seamless customer experience is the key to engaging with customers today. According to the PwC Future of Customer Survey Experience Survey of 2017-18, the 3 things customers were ready to pay more for were – Convenience, Speed & Efficiency and Friendly & Welcoming Service. Interestingly 96% of survey respondents mentioned they wouldn’t interact with a company providing unsatisfactory customer experience.

The author is Data Platform Solutions Lead at the Services Integration Hub in IBM and has written three books


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