Published by Malay Mail, image from Malay Mail.
With the rapid growth of e-commerce and online shopping, the retail industry is witnessing a major transformation through the use of data analytics and Big Data technologies to stay competitive in the market.
A decade ago, customers visited physical stores in person to make purchases, but now, customers are more likely to interact with brands through several platforms such as social media and e-commerce.
What’s more, amidst the Covid-19 outbreak, there has been a surge in online shopping with 41% of customers increasing their frequency of buying online — as more people are working from home and avoiding crowds.
In fact, according to Lazada Singapore (an international e-commerce company), customers have been buying four to ten times more food staples, 3.5 to five times more paper products and two to six times more personal care and household cleaning supplies.
The connection that lies between customers and these platforms leaves a trail of valuable data. With this data, retailers can understand their customers at the deepest level and are able to offer them the right products and services at the right prices and right time.
This process is what data scientists called retail analytics.
Why do retailers need analytics?
Today, it is no longer enough to just open a store and expect profits to roll in. As a customer-centric industry, retailers are constantly under pressure to serve customers better and retain them for longer periods.
According to a report by Research and Markets, the global retail analytics market is expected to expand at a rate of 18% from 2019 to 2025 and will be valued at over US$9.5 billion (RM40.2 billion) in five years.
In fact, according to a study by Snowflake Computing and Harvard Business Review, companies that make data-driven decisions have the best chance for longevity. Yet across industries, they found that only 5% of retail and consumer packaged goods (CPG) companies are data-driven. This situation is problematic as it can cause business loss.
Basically, the goal of this analytic is to influence short-term sales or to set-up the decision-making infrastructure for long-term success.
For instance, the US fashion retailer Forever 21 has filed for chapter 11 bankruptcy protection, joining a growing list of companies that have failed to navigate the shift towards online shopping or e-commerce.
Another reason why Forever 21 faces bankruptcy is because they took a long time to get fresh styles of clothes to the market at a time when fast fashion was picking up and shoppers were hungry for newness.
Its sales then dropped as Forever 21 was pitched against Zara (a Spanish apparel retailer).
As for Zara, they believe that their secret to success lies in big data and an agile supply chain. For example, store managers use customer feedback to identify what they like and dislike, and what they are looking for.
That demand data is instantly funnelled back to Zara’s designers, who begin sketching on the spot.
This process of gathering all the sentiments of their customer is what IT experts called Customer Journey Analytics, as it is used for retailers to know what the customers are saying about them. This is an emerging technology where high-quality information from the unstructured text from various social media platforms, websites, as well as feedback and review forms, is collected.
Since they can hear the voice of their customers from every part of the world, retailers can serve them better. Plus, as they are producing merchandise that meets the customers’ demands, they are hindered from fashion waste problem or overproduction.
Do you know that the fashion industry is often cited as one of the world’s worst polluter?
The thing which is unbeknownst to many — burning unsold merchandises. This is a common practice in the retail world although it is not widely publicised, as brands are not obligated to disclose such information.
Some of them admitted that demolishing those merchandise is just part of its strategy to preserve its reputation of exclusivity. For them, selling their extra merchandise with high discounts and donating is a way to devalue their brand.
Destroying perfectly usable merchandise to maintain prestige is perhaps the dirtiest secret of them all, say the experts. Due to this irresponsible activity, the clothing industry is responsible for about 10% of global greenhouse gas emissions according to the United Nations Environment Programme.
Thanks to Artificial Intelligence technology, the fashion industry today can analyse fashion buyer choices and make predictions about what they will want next. Thus, the issue of overproduction which at the end of the day will just cause more trouble can be avoided.
Moreover, another way that has been practised by Zara to prevent overproduction is utilising various predictive algorithms that can aid them in making wiser business decisions. As we know, Zara is a huge manufacturer that produces huge volumes of clothing for different demographics globally.
Owing to this, they must decide wisely the right quantity of clothes that they should produce since people from all over the world are different in size, body shape and colour preferences. This is where retail analytics comes in, by gathering their customer’s purchase behaviour in a specific region and segment it into different categories (age, gender, price range, colours and other attributes).
In turn, Zara can forecast the quantity and type of clothing that will get sold in that specific region, for the next season. This perhaps can save them millions of dollars by reducing the number of overproduced clothes.
To retailers who are interested in implementing retail analytics in your business, here are some important tips for you:
- Focus on the data and metrics that matter most to your business.
- Choose the right analytic tool. According to experts, two of the best tools available online are iVend Retail and Epos Now.
- Monitor your analytics consistently as it allows you to spot issues or areas of improvement early on before they become larger problems.
All in all, with digital transformation accelerating at a quick pace, retailers are relying more and more on AI-enabled solutions to mining useful insights.
As for now, retail analytics perhaps will soften the blow of the current Covid-19 outbreak to those who are affected, especially in the retail industry and even give retailers certainty and confidence to plan new ways to delight the panic customers.
Nurafifah Mohammad Suhaimi is Research Assistant at EMIR Research, an independent think tank focused on strategic policy recommendations based on rigorous research.
