There are few industries that are witnessing as much change as the retail industry today. The new kind of 'digital' shopper, the slowing economy and the proliferation of new channels of marketing and communication are challenges that the retail industry must understand and address in order to remain competitive. Fortunately, utilizing analytics on the vast amount of data available is helping retailers make sense of all the madness and adapt to this swiftly changing world.
Let's examine the various ways in which analytics can help the retail industry. One way to tackle the problem of 'show rooming' (visiting a store to see the merchandise, but buying later from an online source) is to use analytics to better understand customer behavior. Retailers can counter show rooming by engaging the in-store customers with relevant and personalized promotions and offers as they are considering a purchase so as to induce them to shop in the store. They can also provide access to all the information shoppers are looking for on their phones and tablets either in the form of store displays, 'ask-me' information kiosks in the store or mobile-optimized websites and applications that are as helpful and resourceful as the sales staff in the physical store.
The granularity of data available to retailers also makes it possible to customize and personalize the promotions and offers to suit each customer. Using this data that ranges from demographic details to recent purchases to click streams, the retailer is able create highly customized offers that steer consumers to the "right" merchandise or services-at the right moment, at the right price, and in the right channel. For example, ads for diapers can be directed at a customer buying baby bottles, since in all likelihood, the baby for whom the bottle is being bought will also need diapers for the next couple of years. The US grocer Kroger has found that it gets a 40% redemption rate from its analytically-targeted coupons, compared to an industry average of 2%, and believes the promotions have increased overall sales by 5%.
While we have talked about two areas where analytics can be beneficial - show rooming and promotions - there are many other areas where it can provide deep insights into the behavior of the "digital' shopper. As the retail industry learns to understand and leverage data, they are finding that while there are new challenges to face, the use of analytics helps change these challenges into opportunities, leading to increased profitability and customer satisfaction.