Continued from page 1
The Strength of
Market for BI in Retail Today
The market is very strong and getting stronger. While it is difficult to find a comprehensive suite of retail-specific BI offerings that spans spectrum from competitive intelligence to merchandise planning and optimization (product, price, promotion, and placement) based on customer insight, to knowing how to maximize ROI on next marketing campaign, to understanding where to build next store, to reducing supply chain costs. Retailers are telling us over and over that they are seeking a single, stable, reliable, and proven provider of superior BI solutions. They are implementing projects that span multiple years and will deliver value for years to come.
The Retailers that are Realizing Most Benefits from BI
We find that retailers that are realizing 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 foundation upon which rest of house will stand. This is true of both top-tier and midmarket retailers, regardless of segment.
Specific Areas in Which Retailers can Benefit Most Include:
Merchandising -- This is clearly most important area of a retailer's business and an area where retailers are beginning to exploit full value of BI. Analysis of past performance, combined with plans and forecasts of future customer behavior, leads to more accurate initial allocations of merchandise across channels and stores. Assortment and size optimization that are based on customer demand patterns ensure that correct assortments, size, and case-pack distributions get sent to correct stores. Daily price, promotion, and markdown optimization ensures that items are priced for optimal profitability, both preseason and in season. Space automation and optimization ensure that departmental sales and profit per square foot are maximized, and products are given correct inventory and space on shelf or on rack. Optimized fulfillment ensures that products are allocated or replenished based on demand. Accurate analysis also results in a more efficient use of manpower in picking, packing, and shipping first wave of product, while minimizing additional, costly payroll expenses to facilitate transfers between stores, vendor returns, changing signage and labels for markdowns, and otherwise correcting mistakes. Marketing -- By understanding customers better -- whether by profiling, segmenting, gauging propensity to respond, or using market basket analysis -- retailers can create better-defined targeted campaigns, reducing expenses (printing, paper, postage) while increasing response rates, revenues, and gross margins. Also, as retailers gain a better understanding of their customers' buying behavior, this analysis can then be used to create more effective merchandising plans for next season. Operations -- Understanding and predicting changes in demand -- by hour, by day, by location, by promotion, by price change -- means that store floors, catalog call centers, and fleet crews delivering replenishment orders from DC to store are all appropriately staffed. This understanding also leads to optimal productivity since store-level human capital costs can be scheduled better and managed more efficiently. The Integrated Solution
It is important to note that a good BI solution will be able to integrate with any other system or platform. That said different BI solutions need to interface with different operational systems for different purposes.
A solution seeking to use customer behavioral data to make better merchandising or marketing decisions needs to interface with sales transaction systems, loyalty systems, in-house credit systems, coupon redemption systems, catalog and Internet customer data systems, and so forth. A system that recommends optimized price changes should interface with price management system, item master, system that generates labels, etc.
There must be a closed-loop interface between operational systems that retailers rely upon to conduct day-to-day business and BI systems that help them conduct that business more efficiently and profitably.
The Future of BI in Retail
BI will be defined by retailers that have figured out how to maximize customer satisfaction and profitability with 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 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.
Our vision for future of retail BI provides for that very scenario, through our intelligence platform and our solutions for customer, merchandise, operations, and performance intelligence that are combined in a suite designed to equip retailers to become truly innovative.
A solution seeking to use customer behavioral data to make better merchandising or marketing decisions needs to interface with sales transaction systems, loyalty systems, in-house credit systems, coupon redemption systems, catalog and Internet customer data systems, and so forth. A system that recommends optimized price changes should interface with price management system, item master, system that generates labels, etc.
Director of Microsoft Solutions for OnX Enterprise Solutions
