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Transforming retail with analytics and decision management


Tom Davenport has done some research into analytics and retail (reported here: Retailers recognise analytics as key to business transformation. Here’s a quote from the new item:

Retailers today are searching for ways to derive more customer intelligence, marketing savvy and operational insight from their overflowing databases. In addition to acknowledging that the use of analytics is the key to future success in this data-intensive industry, retail executives also revealed to Davenport that:
Analytics improve retailers’ bottom lines most quickly when applied to pricing and merchandising.
Analytics drive market differentiation and customer-centric marketing.
Analytics help retailers achieve demand-driven supply chain optimisation (sic).

What I find interesting about this is that all these examples of the power of analytics involve things that are becoming more dynamic. So:

  • Price optimization means dynamically making the most effective price (balancing profit, acceptance rates, supply etc) one customer at a time
  • Analytic merchandising increasingly means making merchandising decisions store by store, month by month or even day by day
  • With most retailers now being multi-channel, marketing and customer-centricity must be extended to the web and other channels
  • Supply chain optimization is becoming more dynamic, combining optimization and business rules, rather than the subject of occasional planning exercises

So the value of analytics is to be found when analytics are injected into operational processes – the essence of decision management. Increasingly retailers, like other users of analytics, will find themselves thinking about decision management based on analytics not just on analytics.

I have a few posts on Decision Management in Retail here and I expect I will have more over the coming months.


Comments on this entry are closed.

  • Tyler Frieling February 17, 2009, 7:40 am

    James, Good insight.  I can say that based on our experiences at Istobe and my 10 years of BI/Analytics/Data mining experience you hit the nail on the head by stating that the real ROI of an analytics solution is when they are used to drive decision support, basically when used at a strategic and tactical level. 
    In the past the reports seemed to be created to support already defined decisions/strategy.  Current tools enabling the business line to help define strategy is pretty exciting and is what makes data drive success.
    As an obvious plug we are trying to help retailers succeed by providing free retail analytics tools .  Hopefully they help retailers stay afloat in these tough times.  If nothing else the tools further support the idea that technology exists to implement analytics.  https://scorecard.istobe.com/

  • Jeff Fisher March 31, 2010, 4:57 am

    Good article. But for most retailers words like transformation are scary.
    There is an urgent need for easy-to-deploy solutions for small and medium size retailers.
    Emcien offers an analytics solution the converts POS data into customer buying patterns, that retailers can act on.