In recent years, data driven decision making has seen a sharp increase in interest among

retailers, slowly detracting from the more traditional retail business model. Before the
incorporation of big data analytics in the retail industry, the traditional business model
within retail was more company centred, with retailers making the decisions for how goods
and services were being distributed. (Morris 2016) The traditional framework saw
businesses letting the majority opinion dictate how retailers would deliver goods to
consumers, rather than providing value to consumers with a variety of options.

Whereas the traditional retail model was more company centred, with consumers letting
retailers dictate what channels were available for products to be purchased as well as what
products were being offered, the new approach is all about the retailers developing a better
understanding their customers by analysing their behaviour. (Morris. 2016) Bringing more
variety in choice, tailoring product recommendations based on what suits customer needs
through historical data and maximising profit margins. Data analytics deals with taking
historical data and drawing insights from trends in consumer behaviour. The incorporation
of data analytics into key business operations has transformed the industry standard to a
more varied consumer centric approach. To better understand the impact of data analytics,
we will evaluate the role of 2 different data driven technologies the retail industry has
adopted.

The first is cloud computing, which is a method of storing vast amounts of data (also known
as big data) through data centres whilst remaining easily accessible through the cloud. The
large amount of unstructured data available can then be analysed using algorithms to
provide context to the data and reveal market trends both present and future and most
importantly, predict sales growth by understanding consumer behaviour within the retail
industry. As a 2019 study into the effects of data analytics in the retail industry conducted
by agile analytics explains, a business equipped with the right big data tools, can derive
insights which keep retailers ahead of its competitors, allowing them to develop a consumer
centric strategy to gain considerable market share, One such retailer which has taken
advantage of this phenomenon is Walmart, the largest global retailer. Walmart’s established
private cloud computing hub known as the data café, has made use of cloud computing to
store over 40 petabytes of data which includes but isn’t not limited to: 200 billion rows of
transactional data per fortnight, pricing data, mobile data and online data. (Marr 2017) For

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an article into how data works within Walmart for SAS, Jaya Kolhatkar, vice president of
global Walmart Labs referred to the data café as “one huge data opportunity” and “it’s what
allows us to serve our customers in new ways.” Additionally, Kolhatkar also comments on
the hundreds of Big Fast Data Teams within Walmart, consisting of data scientists,
developers and business analysts, who are all primarily tasked with using this data
effectively, whether that be through writing algorithms to contextualise raw data, or
creating visualisations which highlight trends.

However, with this in mind, due to the high costs that comes with investing in cloud
computing and big data analytics, smaller businesses are struggling to compete against a
multinational retail corporations such as Walmart, who are equipped with all the necessary
tools to make informed data driven decisions within the company. In 2018, the UK alone lost
over 85,000 retail jobs due to the variety of options and ease of access for online shopping
due to businesses not being able to adapt to the change to digital. (Corbett 2019) Some
retailers have tried adapting to the change by introducing a click and collect option in hopes
of drawing consumers to come in store and end up buying additional products, but in an age
where personalisation and convenience are key, making the shift to a more omni-channel
model and adopting a more data driven approach seems necessary.

The other, and probably most prevalent data driven technology in the retail industry, is data
mining software, specifically predictive analytics, and machine learning. As previously
explained, cloud computing and other data warehousing methodologies are implemented as
a means of continually gathering data to create a centralised cloud-based location for easy
access to historical data. Data mining software is an extension of cloud computing, as it is
the software used to contextualise this unstructured data through patterns to extract the
insights hidden within the large amounts of raw data. Predictive analytics is thus the most
important aspect of data driven decision making for retailers, and was a tool used by
Walmart to make decisions as well. However predictive analytics can be used in many ways
and the following three examples further highlight the value predictive analytics can add to
different retailers, as well as some ethical concerns regarding the impact of data analytics in
the retail industry.

Data analytics in the retail industry is ultimately about how retailers can further optimize
the customer’s experience. (Marr 2015) As Deloitte China explained in a 2017 report on

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 transformation of traditional retail, “customer spending is become more and more
diversified, so new retail strategy should focus on consumer engagement.” This would
explain the need for customer services to become more engaged with the customer, as
this would make them feel more open to sharing cookies, which helps to develop a more
accurate understanding of consumer preferences and tailor personalised advertising on
their social media platforms. As Klaus Boeckle of SAP states in a 2014 article about tailor
made shopping for the BBC, "If you know what your customers are buying and what you
have in stock you can provide the right special offers to suit them.” This would create
more opportunities for retailers to approach customers with offers, advertising would
have a greater reach, and only reach those who are interested in the product already.
However, businesses need to remain aware of the ethical concerns surrounding targeted
advertising, as some may feel it is too invasive. It is the equivalent of everything being
known about you the minute you walk into a department store. (Wall 2014) As Owen
Geddes, CEO of Appflare explains “the customer will always be asked permission first.”
(Wall 2014) Thus, terms should clearly state how the personal data is to be used and
whether it will be anonymous to clear up any confusion. Ultimately, the more data
retrieved, the better the service will be.

An extension to advertising is product recommendations based on search history or

purchase history using machine learning and predictive analytics. A story went viral in
2012 when a New York Times article revealed Target studied customers' shopping
patterns and tried identifying which patrons were pregnant based on what a woman
buys and when. (Moylan 2012) Target’s data mining was able to identify pregnant
women well before they would volunteer that information themselves. This study is an
obvious indication to the accuracy of insights generated through data mining and value
of targeted advertising, which in this case was prenatal women. however whether
someone is pregnant or not remains a private matter. A regular Target customer in
downtown Minneapolis stated on the matter, “That’s Orwellian, when things get too
personal it’s not good.” (Moylan 2012) Data science is allowing retailers to generate
some incredible insights which would greatly benefit both the retailers and the
consumers, but retailers should remain cautious of what and how they are going to use
personal data.

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 Finally, retail stores can also make use of analytics to control expenses by predicting
future sales which informs the level of demand to ensure there isn’t an over-abundance
of supply. (Marr 2015) By using historical data to make more informed decisions, retail
businesses can maximise profit margins by controlling the units of stock purchased for a
certain product from their suppliers. This is especially important with edible products
with an expiry/use-by date, such as milk and bread. By forecasting demand levels, sunk
costs can be greatly reduced, maximising operational efficiency as well.

Retailers are finding innovative ways to draw insights to better target consumers, in an age
where consumers value variety. Understanding consumer behaviours would make the
consumer experience more valuable, consumers would receive offers and recommendations
more in line with their personal taste, which would encourage them to purchase the
product, ultimately allowing retailers to generate better profit margins.

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References

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retail-vs-new-retail/#:~:text=Traditional%20retail%20models%20have

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(Sas.com. 2020.) How Walmart Makes Data Work For Its Customers. [online]

Available at: <https://www.sas.com/en_au/insights/articles/analytics/how-

walmart-makes-data-work-for-its-customers.html> [Accessed 22 June 2020].

(Marr, B., 2017.) Really Big Data At Walmart: Real-Time Insights From Their 40+

Petabyte Data Cloud. [online] Forbes. Available at:

<https://www.forbes.com/sites/bernardmarr/2017/01/23/really-big-data-at-

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(www2.deloitte.com. 2017.) Transformation Of Traditional Retailer In The Era Of

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(Moylan, M., 2012.) Target's Deep Customer Data Mining Raises Eyebrows. [online]

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