Customers today have access to a wealth of information even before they begin their shopping. To offer them the right product mix at the right price and through the right channel, retailers should know what they value the most. Indira P Rani, Vice President (Distribution Sector) with IBM India/South Asia, talks to “Images Retail” about the importance of analytics to retailers. Analytics can help them achieve this by delivering a smarter shopping experience and helping them build smarter operations, merchandising mix, and supply chain.
Q. How would you rate the awareness levels among the Indian medium and large retailers about retail analytics? How many of them would actually be using business analytics today?
We do see an increasing level of awareness among modern retailers in India about analytics. They now understand the potential of analytics and the value it can bring to their business in the form of better customer insights and more efficient operations. In a competitive and changing market environment, where customers are more aware and demanding, analytics can help retailers provide superior shopping experiences.
Analytics can also help bring in more business efficiency in areas such as merchandising and supply chain, among others. Retailers in India have started recognising the importance of business analytics and we are witnessing increasing traction, which is expected to rise further in the coming years.
Q. If the current usage of business analytics is low among the Indian retail community, what do you think are the reasons?
The implementation of analytics solutions needs a certain level of understanding of retail business in the IT environment. In India, the retail industry is dominated by the traditional sector, which has very low adoption of IT. Even in the modern sector, which has emerged only in the last few years, the primary focus so far was to build a basic IT platform to meet immediate requirements.
The sector had not scaled enough to face the complexity of business for which analytics is needed. Hence the adoption of analytics had not yet taken off. However, with the strong growth of the modern retail sector and increasing maturity of the IT systems, we would see higher adoption of analytics among retailers in India.
Matured markets around the world have realised the benefits of analytics in transforming their business by implementing proven solutions and we would see higher adoption of analytics among retailers in India aspiring to transform many areas in their business.
Q. What are the factors driving the growth of business analytics among the Indian retail community? Wh y is thi s capability actually needed by retailers?
The market dynamics in modern retail is changing. Competition is high. Shoppers are far more informed and using channels like social media to get information and share their experience. By using analytics that can derive information from both structured and unstructured data (like social media), retailers can customise their promotions, offer real-time information to customers, and create a unified shopping experience across all touch points. Analytics can also improve the merchandising and supply network by predicting customer demand and a real-time analysis of inventory across all levels.
To give an example, Kiddicare, the largest online and baby supplier in the UK, is using analytics for better customer insights and continuous service improvement. They are being able to identify additional mrevenue, capture it, and deploy their marketing resource in the right areas. The number of items per order at Kiddicare rose from 1.7 to 2.5 within 4 months of the implementation of the analytics solution.
Another area where analytics can help retailers is strengthening their entire retail operations, including supply chain, planning, and budgeting. With an integrated view of their entire operations, retailers can predict possible scenarios and take corrective measures instead of reacting to them.
Giant Tiger, a Canada-based retailer with a network of more than 200 stores, used analytics to create a stronger alignment of local financial and commercial planning with the central cooperative objectives. It helped them reduce the budgeting cycle by up to 85 percent. By eliminating the spreadsheet-based data collection, they are saving approximately 220 hours per month for store-based staff.
Q. What are the cost implications of using business analytics software for retailers? Is its cost justified compared to the benefits that would accrue to the retailers?
As the retail industry matures in India and client expectations increase even further, retailers need to build competitive differentiation. Today, analytics is not just an investment; it is a critical need for retailers to be futureready. There will not be a market differentiator if retailers don’t resort to better consumer behaviour analysis and methods. At the same time, analytics can give them significant value in terms of efficiency and cost.
Elie Tahari, a US-based global fashion brand, for example, is using analytics that provides real-time solutions from the sales floor to its suppliers’ inventory and production schedules. It has helped Elie reduce their reporting cycle from as many as two days to just a few minutes now. They have also achieved a significant 30 percent reduction in their supply chain and logistics costs.
Q. What kind of systems do retailers need to put in place at their locations to effectively collect data and analyse it using business analytics software?
The systems requirements for analytics would depend on the client’s need. As a service provider, we would analyse our client’s existing systems, identify various sources of data, measure the level of automation and then evaluate all this in the overall business context to derive the right solution for the retailer.
Q. In what way can business analytics and retail forecasting impact the profitability of retailers? How can it help them get a competitive advantage over those retailers who don’t use business analytics? What is the USP of business analytics to retailers?
Retail the world over is a highly competitive market place with a relatively lower profit margin. Hence, it is absolutely critical for retailers to have an optimal operation system in place, along with better insights to the market trends and customer preferences. Analytics enables retailers to build these capabilities in their operations. It helps them ensure better utilisation of their resources, reduction in cost, and higher market penetration. All these add to the overall profitability of the retailer.
Q. What are some of the common challenges that retailers may face while putting business analytics to optimum use at their stores?
Analytics gives insights to business and works as an enabler for business decision-making. It is important for the retailers to have a clear idea on how they are going to use the insights generated by analytics. They have to act upon it and empower their employees at the store level accordingly. Which is why it is crucial that there is a strong integration between business and technology. It can help a smooth implementation of analytics at the store level.
Also, getting skilled resources at the store level can be challenging at times. Hence, retailers may consider deploying analytics on a cloud-based model. It will help them mitigate risk and address the issue of skill availability.
*This interview was originally published in May 2012 issue of Images Retail.