BusinessWeek had an interesting article in December about the growth of Tesco, a British grocery chain, and on its use of data mining as a competitive weapon. Here’s a quote:
Analysts say that Tesco’s big advantage over major international rivals, which also include Germany’s Aldi and Lidl, is its unrivaled ability to manage vast reams of data and translate that knowledge into sales. While data crunching may sound dull, it has given Tesco two major advantages: an unmatched ability to operate multiple retail formats–ranging in size from convenience stores to hypermarkets–and the market knowledge to offer what many analysts say is the best and broadest range of house brands from any retailer. (my emphasis)
Tesco uses Dunnhumby, a British data mining firm, and the analytic insight they produce to manage everything from shop formats to store layouts to targeted sales promotions. So why does Tesco scare WalMart? Well because they are the only other retailer who has managed to really put their data to work and this has long been WalMart’s big advantage. For years WalMart managed their systems more effectively than anyone, allowing them to stock and replenish products quicker and with less waste. I got a classic illustration of this one summer when it was freakishly hot – everywhere had sold out of fans (because it was hot) except WalMart who had managed to get more delivered, apparently instantly!
But Walmart has not, at least as far as I know, been known as a data mining company. They use their information, sure, but to operate in very well defined bounds. They have not tried to turn that data int insight that would let them try something new. They have also been focused on information about stores not information about customers. This means they lack the kind of customer-centric data that would allow them to target customers individually in marketing, on the web or even in the store. Tesco excels both at finding opportunities for innovation in its data mining and in applying that data mining to operational decisions – decision management.
I blogged recently about the growth of analytics in retail and the success of companies like Tesco is only going to push this growth along faster.
If you are interested in what Tesco are doing you might also enjoy reading about Sonetto, the business rules platform they use to support their multi-channel strategy.