Business intelligence (BI) can provide organisations with decision-making power, enhancing communication and planning abilities across the organisation. Nowhere is this more applicable than in the retail sector.
Julian Field, marketing director at Knowledge Integration Dynamics (KID), looks at some of the challenges facing this sector, and at the ways in which BI solutions are tackling these.
International research shows that the retail sector is the greatest consumer of business intelligence (BI), with user adoption as high as 30%, relative to the global standard of 7%.
This is not surprising, given the currency, complexity and volumes of data generated in the retail environment.
Until recently, retail was booming, but given the advent of the NCA, soaring interest rates, high food prices and the general competition for cash, times have got tight for retailers, so the squeeze is on for performance, and for the tightest of margin management.
In addition, retailers today compete on the basis of their processes, which entails incorporating their supply chain partners into their extended systems. So retailers must increasingly provide their partners with visibility into inventory levels, performance metrics and other supply chain data to collaborate in developing efficiency improvements. BI technical requirements have to address such business imperatives as:
* Security and user/role-defined access to the data warehouse;
* Data freshness and common metadata definitions;
* Benchmarks and performance targets;
* An increasing requirement for data with low latency – ideally, as close to realtime data as possible; and
* The ability to interrogate data at a relatively granular level, so as to be able to drill down to the performance of individual stock-keeping units.
Current challenges to the retail industry
The changes rumbling through the retail sector are evolutionary and demand greater flexibility and analytical power from BI solutions than the sector required in the past. These include:
* Increased merchandising efficiency;
* One-to-one marketing;
* Promotion analyses;
* Supply chain collaboration; and
* Cost reduction as retailers try and shave off fractions of percentage points in order to boost margins and overall profitability.
Retailers are applying great effort to squeeze higher margins out of better category management and are seeking ways to leverage insight from the new data available to
provide customised offers.
Retail organisations require increased analytical rigour on promotional activities with the intention of boosting margins, and they are enlisting the help of suppliers to reduce supply chain costs. Retailers are steadily expanding beyond sales and merchandising and financial data, their traditional sources of information for retailers.
Rather, they are beginning to pull from a variety of new source systems, including supply chain data and customer-specific data, to give them a more comprehensive view of their cost structures and areas of potential profitability.
Leading retailers are also beginning to open some of their BI systems to vendors, enlisting them to help wring costs out of the supply chain. This allows partners, suppliers and vendors to contribute to an overall improvement in cost-effectiveness and efficiency.
BI requirements in retail
Retailers must balance a complex set of business parameters – including product mix, pricing, inventory levels, labour levels and marketing expenditure, to name a few – over the long term, through periods of economic growth and downturn. Faced with aggressive competition, rising marketing costs and slim margins, retail companies must leverage BI solutions that provide them with the ability to define, track and respond to the essential business parameters that are critical to running a retail enterprise.
A BI platform can help retailers ensure success in maintaining this balance, by improving visibility and analysis of classic retail challenges such as: how to improve product movement through the stores, increase sales per square foot and improve management of the upstream supply chain.
A successful BI solution will also allow retailers to use data from existing transactional IT systems, including point of sale (POS) and enterprise resource planning (ERP), to provide a comprehensive view on the entire business.
Enhanced analysis of transaction-level and customer data allows retail decision-makers to uncover trends in customer buying patterns, more effectively track inventory levels and ensure that the right products are available to their customers at the right time.
And, in so doing, BI can help retailers overcome this tight period.