Big Data: The Next Frontier for Retail

The last three years have seen retail sales at Macy’s go up 10% - a significant improvement given the recent sluggish track record of the retail industry. Vice President of Analytics at an upscale chain of department stores, attributes this growth in sales to Big Data. Accordingly, until three years ago this upscale chain was still using Excel spreadsheets to manage customer and sales data. That has changed. Because Big Data – which also requires tools more sophisticated than Excel -- is now helping retailers improve margins, operations and sales. An American specialty jewelry company reported an increase of 49% in sales in the last holiday season, thanks to Big Data and associated technologies. Others like grocery stores and leading retailers are moving swiftly to increase their investments in Big Data technologies^[i]. But there are laggards. A study commissioned by Wipro and conducted by The Economist Intelligence Unit (EIU) called The Data Directive

^[ii] found that between industries (Manufacturing, Financial Services, Professional Services, Retail and Consumer Goods, Technology, Media and Telecom), retail was the least prepared with data strategies (13%). This is despite the fact that the study also showed that 50% of CMOs found a clear and positive difference in using data to improve their understanding of customers. However, the good news is that 40% of those surveyed in retail realized the value of data and were building resources around it (see Figure 1).

Big Data has two implications on retail:

1. The retail industry, which has been traditionally good at capturing and using data, needs to up the game thanks to the increased flow of data. It has to familiarize itself with the challenges the torrent of data brings with it and the tools required in managing this data.

2. Given growing cross-channel data volumes, it must quickly learn to capture the right data for analysis. Failing to do this could mean slowing down decision-making, sometimes making the wrong decisions and often just paying a lot more to extract actionable information than is truly required.

Given that Big Data is going to be the next frontier for retail, I believe that the focus should be to ensure that adoption is based on the required output. It is easy to get lost in sourcing and capturing every single data point, in every available format, defining complex data standards and governance processes, building the IT infrastructure around this, appointing data stewards, storing the data, cleansing it, shipping it, securing it and mixing it with legacy data or publicly available data and then finding that the investment isn’t producing expected ROI.

A study by the McKinsey Global Institute said that retailers could improve operating margins by 60% using Big Data^[iii]. But you don’t want the benefits eroded by over-investment or poor investment in the technology to enable the use of data.

This means retailers must first decide what capabilities, benefits or insights they want to unlock using Big Data. Do they want to optimize their marketing investments, reduce the cost of maintaining their online presence, increase their mobile dependency, understand consumer needs, provide the customer with better shopping experience, personalization, re-do the product mix, gain higher control over their supply chain, reduce cost of meeting regulatory requirements, etc? Each of these requirements will spell out the data requirement, how to source it and how/ when to analyze it.

About the Author

Hari Shetty is part of the senior leadership team at Wipro and heads the Retail vertical across the globe. As head of Retail, he is responsible for strategy and execution of Wipro's business plan within the industry segment. Hari has been part of the Retail vertical since its inception and today Wipro is among the top 7 Retail technology service providers across the globe and provides services to 10 out of the top 20 retailers.

Hari has over 20 years of consulting experience in the industry. His experience spans across multiple functions in retail and he has worked with some of the best-in-class retailers on cross channel strategy, business transformation, simplification, predictive analytics, and technology transformation. Prior to his current role, he was responsible for technology and architecture in Retail and Consumer Goods industry groups.

Hari has multi-disciplinary background in technology, management, finance and law.

He is an evangelist on multi-channel retailing and strongly believes social media and a connected customer experience will change the face of retail.

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