Retail Business Analytics
Retail Business Analytics, and Why is it Important for 2020?
and Video Analytics are Going to Save Brick-and-Mortar Stores
What is Business Analytics?
In a nutshell, business analytics (BA) is a method used to explore a company’s data, visualize that data, and through software and analysis, make strategic business decisions based on the data.
The process can be broken down into 5 steps:
- Storing the data into a warehouse
- Cleaning and organizing the data
- Analyzing the data (using software)
- Visualizing it (graphs, charts, etc.)
- Interpreting the data to gather business insight.
Business analytics is crucial, almost vital, for mid to large-sized companies looking to make sense of their company’s data, and more importantly answer questions such as “why did this event occur”, and “will this occur in the future?” This article will focus on how business analytics affects, specifically, the retail industry and why it will become incredibly important in 2020.
What is Retail Analytics
Retail analytics makes sense of retail related data (inventory, sales, etc.) and provides valuable insight to a retail company as to what should be done to increase overall performance. For instance, by gathering customer and prospective data (i.e., how frequently a buyer spends more than $50 at your store) a retail company can organize and visualize that data into charts and graphs. After analyzing this data, upper management can make smart business decisions based on why specific trends occur and can predict future events.
How Does Retail Analytics Work?
Suppose you run a large fashion company that sells luxury clothing. As a business owner you receive an Excel spreadsheet showing various data-entries such as customer location, gender, age, height, etc. Let’s just focus on sales and say that 10,000 units of clothing were sold in the last month. Of those 10,000 units, 20% were worth over $500. 50% were between $200-500. And the remaining 30% were worth less than $200. You also receive data that shows 60% of those purchases were made online via the desktop version of your website, as opposed to the mobile-version.. You discover that the reason for this is because users like to do more thorough research before purchasing an expensive piece of clothing.
In this case the upper management of your company may be advised to spend more money and effort in promoting the desktop version of the site and promoting products between $200-$500, as that is what a large number of your customer base spends. This is an oversimplified example of retail analytics, but it shows how business analytics works in the retail market.
How do I go about gathering the right data?
Now that you know the importance of retail analytics, and an overview of how it works, you are ready to start collecting data. Some companies invest in gathering ANY type of data they can get their hands on, while others may only want data in specific areas such as productivity.
The first question you should ask yourself is, what areas in my business do I want to improve on? You may want to maximize your profits for selling small t-shirts. In which case you will want to collect as much data regarding the cost of production, cost of shipment, marketing costs, how many units are sold by other companies etc.
Some data-gathering techniques include **have to get more info from axity:
- Interviewing customers, employees, industry experts, etc.
- Gathering financial data from the accounting department
- Gathering a list of employee productivity (i.e., how many hours they work vs how much value they add) from the HR department.
The right kind of data always has a purpose, and is gathered to answer a specific question.
Make sure your data is accurate. Having the wrong-type of data can lead to unreliable and irrelevant business insights which can cost up to millions of dollars in lost revenue. A lot of the time people that are not data specialists, make mistakes in their numbers. Not because they are poor employees or contractors, but because data analysis is not their speciality.
How do I organize and visualize the data?
For a smaller sized company one of the easiest ways to go about organizing your data is by punching numbers into an excel spreadsheet and creating visuals off those numbers. You don’t have to purchase fancy software to organize day-to-day data, you simply need to have the right kind of data in a neat and organized fashion.
You can start entering data of any type--qualitative, and or quantitative. Let’s take a look at some example data-types you can start tracking.
- Employee performance
- Company assets, liabilities, and equity
- Admin costs
- Social media conversions
- Website click-through-rate
For each type of data you can make notes, label them under various categories and create a well-organized spreadsheet with all your numbers. The beauty of using excel is that it is relatively easy to learn and can be a money saver for your company.
For larger sized companies with large amounts of data, consider outsourcing the work to a professional data management and analytics company. A professional analyst can provide the right kind of questions you should be thinking about with the right kind of software to record, and analyze your data sets.
How do I go about making the right decisions with my data?
In order to make the right decisions with your data, you must first understand the problem at hand. What makes business analytics and intelligence so useful is that it helps business owners answer the following types of questions:
Let’s go back to the fashion company example and suppose you, the CEO / COO / CFO, are concerned with whether or not your digital marketing efforts are paying off. You request a report from the marketing director showing you the numbers. The report indicates that your website is receiving 10,000 new clicks per month off of Google alone with a Click-Through-Rate (CTR) of 20%. Meanwhile by running social media ads you receive 50,000 new clicks a month with a CTR of 45%. With the help of retail analytics you discover that people are more curious about clothing when they see an ad that portrays a specific emotion, rather than stumbling across the clothing in an article or blog post. This answers the why. Assuming the numbers are stable for the past several months you can predict it will continue to be this way for quite some time, answering the will this happen again and what will happen next. Good decisions are made by understanding good data.
After collecting and analyzing the data you and your staff can be advised as to what your options are and have confidence knowing you can make the right decisions with the right analysis.
What Makes Retail Analytics so Important for 2020?
Back in 2012, IBM stated that “90% of the data in the world today has been created in the last two years alone.” This statistic will continue to be the same for 2020 as consumer data continues to grow exponentially. Another thing to keep in mind is that more and more brick-and-mortar retail businesses are vanishing and being replaced by e-commerce sites. If you work in the brick-and-mortar business, you must use every tool you have in order to continue to succeed, and if you’re in the e-commerce world you also have to make the best, most accurate, decisions in order to stand out against the growing number of online retail companies.
Everything from how frequently a customer shops, to what specific times a customer shops will be more readily available and easier to understand in the coming year. Investing in data, and more importantly, hiring analysts who can understand and make predictions off that data, will ensure long-term growth for your company in the coming decade. This is what makes business analytics as well as intelligence so important for 2020.
A Data-Driven Approach to Company Success
If you are interested in learning more, contact axity for more information.