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February 16, 2018

8 Insights Retailers Miss Without Data Analytics

Data analytics is revolutionizing the retail industry right now, but not every store operator in on board. Some either dismiss or downgrade the abilities of analytics. They believe the technology is optional at best and a waste of time and money on the part of retailers that do adopt.

The origins of this attitude are understandable. There are numerous retail technologies that have promised everything but only delivered cost and confusion. Approaching new technology with caution is important, but the opportunities and upsides must be acknowledged as well.

With that in mind, consider eight important insights that retailers would miss without data analytics. At the same time, consider all that would be gained by having these insights moving into future fiscal years:

  1. Understanding the In-Store Experience – Tracking where, when, and how customers move through a store reveals a lot about how that store could enhance the experience. Without data analytics store managers must rely on observation alone. Using data to go deeper reveals exactly where and how to upgrade the store. 
  1. Ability to Avoid Obstacles – When margins are slim retailers cannot afford distribution disruptions or production problems. Analytics makes it easier to monitor and manage the numerous inputs and suppliers that individual stores rely on. With only raw data to go on it's much harder to spot obstacles and red flags with any advanced warning. 
  1. Knowledge of True Customer Preferences – All stores track what products sell and what products don't. Retail analysis allows stores to go deeper and understand what products sell together, what price points motivate sales, and how certain types of customers shop. Capturing customers away from online retailers is going to require this kind of nuanced approach to sales. 
  1. Guidance Over Inventory and Stocking – Retailers must make tough choices about what gets shelf space, what sits in storage, and when orders need to go up or down. Trying to calibrate the ideal inventory is difficult and uncertain without tools that can dive into the data and instantly tell managers what they want to know. 
  1. Customized Marketing Messages – Physical retailers rely heavily on online marketing, but standing out requires a customized approach. Analytics reveals what messages, delivery formats, and sales offers appeal to which kinds of customers. Without analytics, marketing continues to be a scatter-shot approach. 
  1. Staffing Mix Insights – Having too much, too little, or the wrong kind of staff are all detrimental to a store. Using analytics to compare performance and staffing information together reveals the right mix for the store at all times. Ultimately, staffing costs drop even as sales potential rises. 
  1. Comparisons Between Stores – Retailers with multiple locations must understand how individual stores affect the success of the whole enterprise. Comparing and contrasting data across locations is a huge undertaking, but data analytics can handle the heavy lifting. The focus shifts from creating comparisons to devising strategies. 
  1. External Factor Analysis – Stores are subject to numerous forces beyond their control – weather, sales at other stores, traffic etc. Data analytics makes it easier to integrate this kind of external data with the internal data already being analyzed. Without a tool that streamlines data management it would be impossible to fully understand the forces that add or subtract from success.
Missed insights lead to missed opportunities which lead to lost competitive advantages. Retailers are adopting analytics in reaction to the transformation of the retail landscape. Those that discount data as an asset are missing out on the advantages that tomorrow's retail relies on. The question is not whether analytics are worthwhile. The question is whether it's possible to compete without them. 

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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