9 Ways Big Data Analytics Create Value In Competitive Retail
"Big Data," once mysterious, awe-inspiring, and intimidating, is quickly being unlocked through scientific analysis, to take its place as an extraordinary source of information and basis for profit. Calling big data, "the next frontier for innovation, competition, and productivity," analysts at the McKinsey Global Institute predicted that, by using big data in retail, a retailer could increase his/her operating margin by more than 60 percent.
McKinsey analysts also noted that big data would not only become a key basis of competition, hailing new waves of productivity growth and innovation, but that leaders, as well as data-oriented managers, would have to become involved with the implications of big data.
Concurrently, retail intelligence solutions will become more indispensable and valuable for collecting and analyzing the data, establishing valuable benchmarks, and facilitating the turning of data into actionable insights.
The Benefits of Big Data Analytics for Retail Businesses
Big Data is present in every industry and business function -- the result of years of collecting data and storing it. Now, both established competitors and new entrants are using data analytics and leveraging these scientific approaches to innovate, compete, and capture value, both long-term and up-to-real-time information.
For example, from analyzing checkout slips, a merchant will know when and what you bought, what you buy frequently, how much you spend, what kind of demographic you represent, how you use your loyalty card, and much more.
Big data is also being used to personalize communications and outreach, such as in the following scenarios:
- Sending information and ads to those who have already indicated a strong interest in certain products.
- Providing coupons or information to consumers when they are in front of a particular display at the store.
- Messaging people when they are physically near your store, or in the area, to encourage them to come in (geolocation).
McKinsey stated that retail isn't the only industry that can benefit from big data analytics. Finance, insurance, and government sectors will recognize great gains from big data analytics too.
So How Do Big Data Analytics Create Value for Retailers?
Big data creates value for retailers in the following nine ways:
- Makes information transparent and usable at much higher frequency.
- More accurate and detailed performance information can be collected.
- Controlled experiments to make better management decisions can be conducted.
- The data can be used to forecast.
- The data can be used to take actions in real time.
- Narrower segmentation of customers and the ability to offer more precisely-tailored products or services (personalization) will be possible.
- Development of the next generation of products and services (such as putting smart sensors in products to create innovative after-sales services) will be enabled.
- There will be an increase of talent in retail businesses of those who know how to work with Big Data analytics.
- More jobs will be created.
Concerns about Big Data
Big data analytics is quickly becoming a hot topic where privacy, security, intellectual property, and liability will be important issues that must be addressed. Companies will increasingly need to integrate information from multiple data sources, often from third parties. This is good news, not only for companies in retail intelligence, but those in data analysis, social media analytics, and every kind of support service business.
Bottom Line: It's an exciting time to be involved in retail as big data analytics offer many paths to profit to those who are wise enough to harness the data and benefit from these opportunities.