In a globalized economy, businesses, consumers, suppliers and markets are creating and consuming an ever increasing amount of data. The volume is so large that several retailers are unable to manage the information overload. Intuitively they understand that the data contains vital business information, but it has created a frustrating challenge – they are unable to clearly prioritize the use of data and ensure it is applied to those parts of the business that yield the highest returns.
A study commissioned by Wipro and conducted by The Economist Intelligence Unit (EIU) called The Data Directivei found that businesses, which included retail, were stockpiling data – from social media, machines, sensors, staff email, markets, etc. --and the trend would continue to grow for another two years. At least seven in ten companies were collecting syndicated third-party data such as weather information (72%) or government data (70%), while many gathered anything from internal staff data (66%) to some kind of location-based information (41%) among many other types. Two-thirds of the business leaders in the study said the range and types of data have expanded in the past two years. It was apparent that data would soon overwhelm retailers.
It isn’t that retailers don’t recognize the value of data. They do. Historically, they have leveraged data to build an intimate and enviably understanding of their customers. Many industries have emulated retail’s approach to building insights into their own customer. Now retailers need to take a step forward and redefine their data management strategy. Digging only into customer profiles and buying behavior won’t cut it any longer. A new study, a sequel to The Data Directive called The Data Storm, by Wipro and conducted by The Economist Intelligence Unit (EIU), shows that retailers who have redefined their data management strategy are making considerable headway. As much as 65% of companies reporting an average increase in EBITDA of 10% or above over the last three years said they have a well-defined data policy, compared to just 17% for those with lower growth.
What are the areas where retailers must consider leveraging data for substantial gains? We believe it is in practically every aspect of business that data has a meaningful role to play:
Customer: Retailers must use data across channels to build a single view of the customer in order to enrich overall customer experience.
Store: Optimize store operations using data for demand sensing, shrink analysis, returns management, energy and labor optimization and improvements in in-store customer experience.
Financials: Mitigate risk through scenario simulation and what-if analysis using the vast amount of data now available to retailers and be positioned to accurately forecast true financial positions and profitability.
Spend: Ensure ideal cost benefit balance in trade promotions and campaign effectiveness, identifying hidden opportunities for savings.
Merchandize: Optimize markdowns, improve replenishment accuracy and forecast seasonal volumes using data and analytics.
Supply Chain: Improve inventory turns and fulfilment rates, reduce inventory costs, enhance vendor performance and improve sourcing and shipping strategies using data.
How do data and analytics translate into bottom lines? In a recent engagement with a leading broadline retailer in North America, Wipro analyzed the selling size data to determine the optimal composition of size packs for seasonal apparel. The recommendations reduced lost sales by 31%. The retailer estimated a projected gain of approximately $14 M through the initiative. The impact of using data can clearly be substantial. Retailers who understand this are quickly moving to redefine their data management strategy. These retailers will stay ahead of competition in a world that is increasingly becoming data dependent.