For decades, business intelligence was something reserved for top-tier retailers, who used it primarily for simple financial reporting and sales analysis purposes. Over the past few years, all that has changed. Today, business intelligence is providing retail organizations of all sizes with a way to not only enhance operational efficiency and cost-effectiveness, but to achieve clear differentiation in an increasingly competitive and dynamic industry.
In what areas of retail operations can BI provide the greatest impact?
Forecasting and planning
The ability to predict customer wants, needs, and behaviors, and stock store shelves to satisfy those demands, is the key to success in the retail industry. With a business intelligence solution in place, retailers can analyze historical buyer data, and identify the patterns that will help them anticipate future shopping trends. This, in turn, will lead to more accurate merchandising and inventory management across all outlets.
Price and cost management
For many retailers, finding the balance between the prices they charge customers, and the costs of doing business, can be quite a challenge. Products must be priced for optimal profitability, and left over stock must be handled with the utmost care (i.e. is it more cost-effective to initiate a mark-down, transfer it to another store location where it is more likely to sell, or leave it to take up valuable rack space in hopes that someone will eventually buy it?). Business intelligence makes it easy for retail organizations to perform this kind of “what if” analysis, so they can anticipate the results of specific scenarios to make better, more informed decisions.
Sales and performance analysis
Which stores are meeting their quotas, and which ones aren’t? Which products are selling well, and which ones are sitting on the shelves? Retailers need insight into what’s working, and what isn’t – and business intelligence can provide it. Armed with this information, they can quickly identify underperforming stores, products, and sales representatives, and take immediate corrective action.
Promotions
BI tools enable the kind of comprehensive customer profiling that retailers need to thrive. Through in-depth insight into who is buying, what they are buying, how they are paying, and other key characteristics, retail firms can structure their marketing programs to better reach their target audience and boost results and return on investment. This, in turn, will lead to increased awareness, sales, revenues, profit margins, and market share.
Not only are the applications for BI in the retail industry virtually endless, but so are the tools that retail organizations can choose from. While needs will vary greatly based on the size and scope of the company’s operations, there are some key capabilities that all firms should look out for when choosing a business intelligence solution. These include:
- Access to real-time data. Retail organizations need to be completely agile. Those on the store floor must often make decisions in a day, or in some cases, even an hour. Outdated information can lead to poor choices that can impact sales, replenishment, staffing, and other critical functions.
- Integration. A variety of business applications support retail operations. A BI solution will need to access and combine information from all of them, such as systems for sales transactions and point-of purchase activities, in-house credit management, coupon redemption, catalog and online purchases, price management, and customer-relationship management.
Global support. As more and more retailers seek new sales channels, many are expanding their reach by opening outlets online and around the world. Therefore, the ability to fully enable global financial operations through such features as automatic conversion and calculation of foreign currency, and support for international regulatory requirements is critical.