The market for data analytics in the retail industry is growing, from just over $1 billion in 2016 to an estimated $4.73 billion in 2024. The reasons for this are many: the retail market is increasingly competitive, customer demands are high, and managing operating costs is crucial to long-term success.
Data analytics provides the foundation for data-driven decision making, which can be applied to help organizations reach strategic goals. Whether a retailer wants to improve the customer experience, improve operational efficiency, maximize marketing ROI, or grow the business, retail data analytics can help a retailer achieve long-term success.
Retail analytics in the United States are used in five main areas: customer management, merchandising, in-store operations, supply chain, and strategy and planning. Each of these areas is expected to grow significantly over the next five years as more retailers implement data analytics programs (see graph below).
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Source: Statista, 2019¹
Applying cloud data management technology allows a company to improve data security and scalability, while becoming more agile, flexible, and collaborative. These factors could very well be a key component of long-term business success, as technology continues to drive enterprise data modernization.
Superior customer experience may well be the defining factor in long-term retail success. A recent study² found that companies can increase their earnings by 70% within three years of investing in the customer experience, while another found that customer experience will be the key brand differentiator by 2020 – surpassing both price and product in the consumer decision-making process.
Retail data analytics and data management can be applied to improve the customer experience by deepening a retailer’s understanding of the customer, their journey, and their expectations. The better you understand the customer, the more likely you can make decisions that are aligned with meeting expectations and improving their overall experience.
One of the biggest benefits of implementing retail data analytics is being able to track and attribute marketing activities to sales generated. In doing so, retailers gain analytical insight that can help drive their strategy for better marketing that actually contributes to retail success. Retailers can use data analytics to improve customer profiles, allowing for more personalized messaging that is preferred by 86% of today’s consumers.³
While average operating expenses vary on the type of product, customer, and location of a retail business, in general retailers operate on very tight margins. Any change to operating expenses can have a substantial impact on the overall profitability of the business, so using data analytics to improve operational efficiency and control costs can directly affect the bottom line.
Retail data analytics can be applied to improve operations by optimizing employee scheduling, identifying the times of day, week and month when additional support will be needed; or can be used to improve inventory management, preventing expensive overstock and inventory shrinkage.
Identifying the trends that affect your business can help a retailer discover both opportunities and potential issues. Sales can be tracked by customer, product, and location over time, and used to predict future inventory requirements, determine pricing and marketing strategies, and measure the effectiveness of promotions and campaigns.
A recent study4 found that even though retail had the highest proportion of any industry placing great importance on customer insight (89%), faster decision-making (79%) and improving process and cost efficiency (68%); only 5% of retail and CPG enterprises qualified as data-driven. Reasons for this include a lack of skilled employees, resistance to change, and legacy processes. However, overcoming these challenges is critical to retailers focused on long-term success.
Retailers that do not adopt data analytics not only miss out on the benefits afforded by implementing analytics programs – they also miss out on the opportunity to gain an advantage over the competition.
If your teams are struggling to make sense of your existing data and/or are ready to modernize your business intelligence platform for future growth, connect with our data experts for a quick consultation.
Sources:
[1] https://www.statista.com/statistics/960904/retail-analytics-market-value-by-function-us/
[2]https://www.superoffice.com/blog/customer-experience-statistics/
[3] https://www.intelliverse.com/blog/the-power-of-personalized-product-recommendations/
[4] https://www.emarketer.com/content/why-data-is-key-to-retail-success
