Retailers: Big Data analytics delivers bigger margins


By Peter Zaballos
Chief Marketing Officer, SPS Commerce

Gone are the days when analytics was relatively straightforward, internally focused on historical sales and price. Those were the good old daysnice and simple. Today, consumer-centric retailers track everything from transactional information and demographic data to brand commentary on social media. We had no way of knowing then just how important data would become in todays digital retail environment. Knowing your customer has taken on a whole new level of meaning.

Many of todays leading retail companies are harnessing the value of big data by combining order and sales data with internal and market-based data to better understand how to service each individual store.

And while information has always been equated with power, it is now essential to survival. That’s because big data is now big business. Hotel chains harness data to create digital engagement with their customers to increase bookings, professional sports teams to attract more fans, and retailers to drive store and online traffic, increase sales, and improve margins.

Even the experts agree

When data is analyzed and shared, it drives better item sell-through and increased profitability. In fact, according to a report by McKinsey, retailers can achieve 60 percent improvement in operating margins by harnessing product attributes, inventory information, sourcing information, social validation, and other data to form the foundation of their digital relationship with consumers. That’s important because consumers access an average of 10.4 sources of information prior to making a purchase, according to a Google study.

However, consumers are fickle and keeping pace with buying habits isn’t easy. Starting with traditional raw point-of-sale (POS) data, retailers now have access to information about consumers that analytics can transform into meaningful intelligence that guides informed action to boost sales, balance inventory with demand and improve overall bottom-line performance.

Increase sales and come out on top

In addition to powering consumer engagement, big data delivers unprecedented insight into the effectiveness of marketing efforts. POS analytics can easily compare slightly different approaches to a single campaign, for example, or evaluate a specific stores product sales related to a specific promotion or end-cap location. This intelligence is invaluable to driving future promotions and getting a better handle on localized assortments tailored to individual store locations.

Analytics also offer valuable insight into purchasing behavior: who buys what, at what time, how often, and in what quantities? When combined with loyalty programs, this information can reveal cross-promotional opportunities for retailers and their suppliers, such as issuing POS bar-coded coupons when competitive or complementary products are purchased. The success of these coupons can be tracked as well.

GPS location capabilities, available on most mobile phones, offer yet another opportunity for retailers to engage todays shoppers through pop-up promotional messages that are highly relevant to a specific time and location. Imagine a shopper standing in front of a display of jeans receiving a text offering a discount on a certain brand, or promoting a BOGO on a display of sweaters nearby. When linked to events, the possibilities for location-based promotion are even more compelling.

Perfect balance mean big benefits for business

Retailers, vendors, and other trading partners need to share data to ensure they have engaged consumers. When they offer the right products, in the right quantities, in the right outlet at the right time, everyone comes out on top. Retailers and their trading partners must operate in unison to satisfy consumers requirements for product information, social validation, inventory information, competitive pricing, convenient fulfillment, convenient returns and more to achieve the perfect omnichannel balance.

Sharing such intelligence across a retail network strengthens collaborative relationships for improving delivery of products when and where they’re needed, boosting profitability for all parties involved.

Retailers can quickly source new suppliers that can meet specific item, fulfillment and other requirements. Suppliers with real-time visibility into product performance can spot and respond to new opportunities and sales trends, while quickly and accurately refining forecasting, identifying needs, and avoiding stock-outs or oversupply.

Whats more, the use of data analytics to track vendor performance, such as order-fill rates and on-time metrics, makes suppliers and trading partners more accountable. Quality improves throughout the supply chain, to the benefit of retailers, suppliers, and consumer.

So ask yourself a question: If big data is essential for building digital engagement with shoppers that results in in-store and digital sales, and for optimizing sales performance in omnichannel retail, what are you doing to embrace the big opportunities that it can provide?

About the author

Peter Zaballos is CMO at SPS Commerce, which perfects the power of trading partner relationships with analytics and other retail solutions for the SAP community. Share your digital retail insights with Peter at @peterzaballos.

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February 15, 2016
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