You’re going to have to get used to it: data is everywhere, we contribute to it constantly, and it has a huge impact on the retail industry. In fact, 80-90 percent of all the data in the world was created in just the last two years. Big data is generally portrayed as having all the solutions to many of the biggest issues in retail (as long as it is mined and utilized correctly), but it still has a lot of quirks to work out.
A big chunk of the problem with big data comes down to how it’s defined. There are dozens of different takes on it, but let’s discuss it as the rapid increase of the creation of diverse and quickly transforming data through multiple channels that must be processed in innovative and strategic ways.
Global retail sales should reach $3 trillion this year, and big data has the potential to unlock a larger slice of the market share pie for retailers. How? Well, that’s the interesting part.
How Big Data Helps
Since it is defined so broadly, big data encompasses many types of information that are useful to retailers, both online and in-store. They say that you don’t know until you mine and that couldn’t be more true. We’ve all heard about the beer and diapers example in which Walmart learned that the two products were often bought together after analyzing data from in-store purchases. Retailers have many insights to gain from their customers’ purchasing habits, such as when shoppers buy the most, what they buy together, and which offers are most effective.
Retailers understand that they need data to win, as 59 percent identified a lack of consumer insights as their top data-related pain point. Big box retailers are already benefiting from big data. Walmart creates 1 million rows of transaction records each hour from a combination of in-store purchases, social data, and more. This gives the retailer access to massive customer insights to help target customers and merchandise more effectively.
How to Use Big Data
In the ever-changing world of retail, staying up-to-date is a challenge and a necessity. The top three things that retailers need to know are: how effective their pricing is, when shoppers are most active, and what items they buy together. These three key insights can be derived from big data, but consistent mining is the only way to really enjoy the benefits. I’ll break these down into pricing and shopping behavior to explore big data’s impact on each.
Pricing: Do you know the optimal price for each of your products? Unless you’re psychic, you will need to test slightly different prices to determine which one provides the sales and profit margins. Not all retailers are able to price perfectly the first time around and that “perfect” price rarely stays the same. A bathing suit in June will sell at a higher price than in December. Forecast demand based on historical sales data and price according to variables, such as seasonality and competitor prices.
Shopper behavior: Demand tends to peak during the evening and on the weekend. Retailers can alter pricing based on traffic and conversions to maximize sales and profit. Say it’s the end of the season and the retailer wants to make room in their warehouse for the upcoming season’s styles. Dropping prices when traffic is high will help products move.
On the other hand, raising prices slightly when demand is high will help pull in more profit margin from each sale. Similarly, promoting products that shoppers often buy together can boost your average order value and help products move more quickly. Automatically bundling these products can be a time-saver for busy shoppers and encourage them to buy by showing that getting all the items together is cheaper than buying them separately. Increase average order value while building loyalty.
Big data isn’t a new concept, but it is a resource to tap into sooner rather than later. All of the answers you need are there in front of you, it’s just a matter of crunching the numbers. The insights that big data offers can take your retail business from zero to 60 in no time. Mining, analyzing, and acting on data is the only way to make informed decisions to ensure the success of your retail business.
How have you used big data and what impact have you seen?