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Andy Wood, MD, GI Insight |  |
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 | Thomas J. R. Emmerich, VP of Sales Operations , SAS Institute EMEA You Asked
What is the future of Business Intelligence in the Retail sector? | | |
The Expert's Answer
A brief history of BI in retail.
Retailers are now paying significant attention to BI software, specifically in the areas of merchandise intelligence (including merchandise planning, assortment, size, space, price, promotion, and markdown optimization), customer intelligence (including marketing automation, marketing optimization, and market basket analysis), and operational intelligence (including IT portfolio management, labor optimization, and real estate site selection).
There are many factors that have led retailers to adopt BI software: increased competition, the need to squeeze more profitability out of less space, prevalent credit card usage, the Internet's role as an alternative sales channel, the popularity of loyalty cards, and soon, RFID (radio frequency identification). These milestones have created a wealth of data that retailers are now beginning to appreciate and use.
BI in the retail IT infrastructure.
In the typical retail IT infrastructure, there are two fundamental categories of systems: transactional/operational systems, such as POS and purchase order management systems; and analytic/BI systems.
Operational and transactional systems such as merchandise management, ERP (enterprise resource planning), and POS, are very good at what they do -- organizing huge amounts of operational data and transactions. These systems can tell retailers what has happened in their business and what their customers have done -- last week, last month, and last year.
It's critical, however, for retailers to understand what will happen: what the demand will be for a select assortment of merchandise, what impact an incremental price change will have on demand, which floor plan will sell more designer shoes, which customers will respond to a direct mail or catalog offer.
Real value comes from systems that go beyond the limitations of operational software alone, systems that can take operational data and create enterprise intelligence and predictive insights.
These BI systems must combine data management (consolidating, organizing, and cleansing huge amounts of disparate data from varying systems and platforms) with predictive analytics (data mining, forecasting, optimization). When they do, retailers can make sense of customer, product, supplier, and operational data and draw insights that will help them run their businesses better and more profitably.
Which types of retailers are realizing the most benefits from BI?
We find that the retailers that are realizing the most significant returns on their investments are those that take a purposeful, pragmatic approach to establishing an intelligence platform upon which to base all other BI solutions.
A single, reliable demand forecast, for instance, can also be used in merchandising, marketing, logistics, store operations, call center staffing, etc., for operational benefit. BI that remains segmented by functional area can provide some value, but retailers can realize a much larger return by building the foundation upon which the rest of the house will stand.
Specific areas in which retailers can benefit most include:
• Merchandising
• Marketing
• Operations
It is important to note that a good BI solution will be able to integrate with any other system or platform.
There must be a closed-loop interface between the operational systems that retailers rely upon to conduct day-to-day business and the BI systems that help them conduct that business more efficiently and profitably.
What's the future in retail BI?
The future of retail BI will be defined by the retailers that have figured out how to maximize customer satisfaction and profitability with the right combination of quality products, friendly and efficient service, unique value, a differentiated shopping experience, and a business model that truly serves its community -- locally and globally. How will this be accomplished? It starts with understanding the customer and then linking that insight into every decision that is made, from merchandising to marketing to distribution to store operations to finance, so that retailers can predict how to best serve their customers' ever-changing needs and desires.
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