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Corporate Express is using its market basket application to track the baskets of all of its online customers, and can identify which SKUs are most profitable or poor performers when purchased in combinations.  Liz Claiborne analyzes financial, sales, and inventory data across 30,000 points of sale worldwide — department stores, specialty stores, and catalogs/Internet — to uncover revenue optimization opportunities.  Limited Brands currently uses MicroStrategy for customer analysis, financial analysis, inventory management, sales analysis, and category management reporting across all of its brands (including Victoria’s Secret, Express, Bath & Body Works, and Henri Bendel).  Netflix is a heavy user of big data… The company issued a $1M analytics challenge in October 2006: come up with recommendation software that could do a better job predicting the movies customers would like than Netflix’s in-house software, Cinematch. To qualify for the prize, entries had to be at least 10 percent better than Cinematch. (for more detail see notes at end).  BestBuy had a clickstream analysis problem — 3.5 billion records, 71 million unique cookies, 1.7 million targeted ads required per day. How to make sense of this data? They hired Razorfish to implement a analytic solution on Amazon Web Services and Elastic MapReduce. Solution was a 100 node cluster on demand; processing time was reduced from 2+ days to 8 hours.

In a business with razor-thin margins, small, mid and large retailers are constantly looking for the performance improvement edge. Retailers are racing to become better at slicing and dicing reams of data they collect from multiple channels – online, stores, call center, catalogs and smartphones. They are using business analytics to get insight into retail KPIs (outcome measures) or Metrics (operational activities that serve as leading or lagging indicators). The goal is to drive significant topline and bottomline improvements through improved merchandising decisions, more timely responses to information requests, cost reduction initiatives, enhanced employee productivity, and better service to customers.

Types of Big Data Analytics in Retail
We analyzed the typical retailers and found some interesting patterns of how raw data is being converted into signals and actions. Most of the Retail Analytics and Big Data retail tend to cluster around the following areas:     Customer Analytics and KPIs Merchandizing KPIs — Eliminate Stockouts and Overstocks Store Operations Analytics and KPIs Vendor and SKU Management Scorecards and KPIs

improve repeat purchase. in order to most effectively target customers. . All to maximize profits and customer loyalty. metrics as taking temperature or measuring shortness of breadth. Think of KPIs as overall health vs. We view KPIs as clusters of metrics that in aggregate provide a report card.  Marketing Analytics and KPIs Returns. Fraud and Loss Prevention Analytics and KPIs It’s important to distinguish between retail KPIs and metrics. Customer Analytics and KPIs Objective: Understand Your Most Valuable Customers. Target Them to Maximize Profits and Loyalty Every retailer is focused on understanding and leveraging all customer touch points. Metrics on the other hand are simply snapshots of an activity. drive cross-sell. KPIs are variables that are not directly observed but are rather inferred (through a mathematical model) from other variables that are observed (directly measured). from granular instore transactional data to online store and web search information to mobile data. KPIs are like latent variables statistics (as opposed to observable variables).

Track the impact of promotions on customer baskets as they move through your stores and provide a holistic view of all of their behaviors. and consumer preferences. stores. Expectation and sentiment tracking. and know what products they purchase and why. Tap into their transactional data to connect the dots between customers. Enable business users in marketing and . Identify their unique characteristics. and list pulls to create targeted microsegments – highly-refined groups of customers based on user-defined characteristics. products. you can align effective tactics to tailored customer segments to surround them with a holistic shopping experience. personas. buying patterns. Area Type of Analytical Insights             Customer and Market Basket Analytics and KPIs –Understanding and leveraging all customer touch points   Behavior profiling Preference modeling Affinity tracking Attachment Rates Basket-Register Correlation Brand Switching Core Item Frequency Core Items Customer Loyalty Demographic Baskets In-Basket Price Items per Basket Revenue Contribution Shopper Penetration What Can You Do With Customer Analytics? The most important assets for every retailer are customers. Once you understand your customer at this level.Providing state-of-the-art customer analytics. Move beyond basic segmentation. The challenge is to look for ways optimize the value from each relationship. retail business analytics enables retailers to integrate and analyze the ever-expanding universe of data to obtain valuable insights about customer behavior. and promotions.      Discover who your customers are.

and communicate more effectively with vendors. or working hand-inhand with vendors.merchandising to seamlessly integrate insight with promotion planning. rapid decisions Retailers face immense pressure to balance inventory levels with in-stock positions while maintaining assortments that are relevant and fresh. Drive larger baskets. End goal – increase sales. weekly flyers. seasonal trends. cancel shipments for bottom-selling products. and make powerful. Buyers and merchandise managers need to be constantly on-the-go either in team meetings.          Merchandise Analytics and KPIs — Eliminate Stockouts and Overstocks   Department Contribution Hot Item Report In Stock % Inventory Turns Lineal Feet Mark Down % Pull-Through Reallocations Seasonal Buying Sell-Through Weeks of Supply The Merchandise Analysis scenarios are designed to improve inventory decisions. and fashion styles. not in a back office. make markdown decisions based on seasonal sell-through. Merchandizing KPIs Objective: Significantly reduce costs. store assortments. and more. eliminate the expense of stock-outs and overstocks. traveling overseas for a buying trip. The old paradigm of paper reporting or even web/desktop is now becoming obsolete. and customer loyalty. all to ensure that customers get the right products. customer profitability. Not Behind a Desk. Boost offer performance. Whether at their desk or on-the-go. this job requires mobility and constant connectivity to respond to consumer demand. Give Store Operations the Right Information at the Right Time to Make the Right Decisions. Mobility empowers field . Store managers are more effective when they are out on the selling floor. Store Operations Analytics and KPIs Objective: Keep Store Managers on the Selling Floor. planograms. Users can quickly accelerate shipments by evaluating top-selling products.

on the selling floor. filtered information delivered when and where it is needed helps store personnel identify anomalies in their operations and drive immediate action in the areas of labor scheduling. and store design. customer service. and Sales per Payroll Hour are all provided in the mobile BI app. at regular intervals throughout the day. and Strengthen Negotiations. and more. merchandise display. Store managers can now run daily analyses of store performance where they can aggregate by Store sales. Area Type of Analytical Insights           Asset Turnover Competitor Stores Comp Store Sales Front Store Sales Inventory Turnover Labor Cost Analysis Reallocation / DSD Register Usage Analysis ROA Sales & Margin Sales / Square Foot Store Operations Analytics and KPIs  Store traffic information delivers detail on a store’s performance: Units per Transaction. Improve Performance Across the Supply Chain . promotional signage. the data is refreshed in real-time so they can deal with just-in-time replenishment more cleverly. how their sales are performing compared to last year. Mobile store operations reporting keeps the store managers where they should be: in the store. pricing. Drive Improvement.managers in stores to make near real-time decisions regarding inventory. Vendor and SKU Management Scorecards and KPIs Objective: Analyze Vendor Performance. giving them the information and tools to improve performance. staffing. Store managers can see. Average Transactions (Units and $). promotions. potential stock shortfalls caused by local market conditions. Conversion Rates. SKU sales and sales per employee. In some advanced retailers. Relevant.

customer micro-segmentation. driving efficiencies in cost containment and improving sales performance. A scorecard helps jointly improve performance by providing a common view of the following:         How are my products / categories performing? Where do I have issues with product sales. location-based marketing. enabling you to make rapid decisions to optimize performance and to strengthen your negotiations on price and quality. valuable business insight.Managing vendors in today’s environment requires you to know what is happening in the supply chain real-time. . in-store behavior analysis. new techniques are emerging around crossselling. Marketing Analytics and KPIs Marketing is going through tremendous changes. enabling timely. As more customers move online and social becomes a big factor in how people are influenced to make a purchase. or excess inventory? How am I performing operationally in delivering product? What is the true profit contribution of each product? What are the results of my promotion efforts? How can I be more effective with the use of promotional funds? How are my products forecasted to sell? How many products to produce? What is the profit contribution of private label products? A Vendor Portal provides a platform for collaborating with vendors. returns. sentiment analysis and enhanced multichannel consumer experience. Area Type of Analytical Insights           Category Management KPIs  Assortment Optimization Category Contribution Category Scorecards Item Definitions Market Comparison Pricing Modules Role Analysis Season Changeover Share of Shelf SKU Rationalization Vendor Performance A comprehensive Vendor Scorecard provides the right information to take the right action at the right time.

A list of classic marketing KPIs is provided below. text messaging or a devicespecific application by clicking from a list of venues. Promotions via large-scale e-mail targeting (many retailers have 25 to 50 million household lists) is still a big challenge for many retailers. Fraud and Loss Prevention Analytics and KPIs . Foursquare is trying to become a sticky portal by moving from social connection to promotions/coupons to even payments. Another interesting emerging area of retail big data is sentiment analytics. is very influential. As a result. Each check-in awards the user points and sometimes ―badges‖. the company reported it had 10 million registered users. Competition for the 16-35 age group customers is intense. Area Type of Analytical Insights            Marketing Analysis KPIs  Attrition and Fading Ad Blocks Channel Share Coupon Distribution End-Cap Efficiency Feature vs. location data and differential pricing. Social discussion of brands. Foursquare is a web and mobile application that allows registered users to connect with friends and publish their location. Open rates on targeted e-mails with custom catalogs with tailored personalized storefronts are 10 times more effective than those that are not targeted. Display Marketing Areas Market Share Price Points Promo Lift Seasonal Events Site visitors. Yelp and Facebook are playing a bigger role in influence and purchase decisions.Retailers are using big data to integrate marketing promotions. Users ‖check-in‖ at venues using a mobile website. and endorsement of them. Click-thrus Returns. peer sentiment. Combination analytics from integrating profiles. and ignoring a channel that can influence so many consumers so quickly would be unwise. Consumers have always been influenced by the opinions of others. Emerging social marketing services like Foursquare are changing the dynamics of real-time customer interaction in that age group. recommendations and comments on Twitter. products and services. there is a race among market departments to leverage the voluminous streams of data in social media to drive effective promotions or messages at various touch-points. As of June 2011.

Customers love this policy and are eager to migrate to vendors that provide for years.1 billion in 2010. and keeping necessary reserves. Margin declines can no longer be offset by improvements in selling. than shoplifters. Retail theft jumped by $3. retailers are facing a set of challenges that require a new set of solutions to address them.8 billion. loss prevention is often a big focus. A list of classic Loss Prevention KPIs is provided below. Amazon. which accounted for $12 billion. But the challenge is predicting return trends by product and sku.Ease of returns has always correlated well to customer satisfaction. according to National Retail Federation. In the coming years. Notes (and Interesting Factoids)  Backorders Cancels Distribution Shrink Hot Customer Hot Staff Hot Stores Markdowns Natural Losses Return Rates Shrink Analysis Vendor Rationalization . or 18 percent. Retailers will need to selectively employ a set of levers that they have utilized in the past to manage costs in the short-term. Paperwork errors or vendor fraud accounted for $6. Tesco. the increased adoption of big data has the potential to increase sector-wide productivity. general. and a series of more-advanced levers to build a sustainable competitive advantage. Thanks to Amazon Prime or Zappos’s 365 day return policy the dynamics of the industry are shifting. or 33 percent of lost goods. often working with organized groups of thieves.6 billion to $37. In a low margin industry. More goods (44 percent) were swiped by employees. and administrative (SG&A) costs and reduced inventories. In an industry with notoriously tight margins (typically 2-6% range). Area Type of Analytical Insights           Loss Prevention KPIs Bottomline The use of IT and digital data in the retail industry has been instrumental in boosting the profitability and productivity of players like Walmart.

5. and $500. uses collaborative filtering to generate ―you might also want‖ prompts for each product bought or visited. Healthcare Analytics Challenge — California physicians group Heritage Provider Network Inc. ZIP codes. 7. Amazon. Contestants were asked to model individuals’ ―taste profiles. Metrics on the other hand are simply . housing values. Typical problems retailers face:      Low repeat purchase Fading and attrition No cross-selling or low expansion into new categories Pricing inefficiencies Post-promotion inventory gluts 9. is offering $3 million to any person or firm who develops the best model to predict how many days a patient is likely to spend in the hospital in a year’s time. This contest was cancelled in May 2010 after a legal challenge that it breached customer privacy with the first contest. The data set — 100 million entries will include information about renters’ ages. 3. claims that 50% of users have made purchases as a result of location-based ads (targeted ads combined with preference. We view KPIs as clusters of metrics that in aggregate provide a report card.1. Unlike the first challenge. Interestingly several people think that ―what your friends thought‖ feature to be extremely accurate in predicting and suggesting movies…more than the recommendation feature. all things kitchen and cooking. As one our comments noted….000 to the leader after 18 months. profile and location) 4.‖ leveraging demographic and behavioral data. The goal is to reduce the number of hospital visits. The Netflix movie recommendation contest (blending of different statistical and machine-learning techniques) has been widely followed because its crowdsourcing lessons could extend beyond improving movie picks. a provider of location-based marketing. $500. Netflix announced a second recommendation contest. gender. has a database of 60M households tracking variables like income.000 will be awarded to the team in the lead after six months. a multi-tier membership reward program to understand buying patterns. Neiman Markus uses behavioral segmentation. 8. Placecast. the contest will have no specific accuracy target. Williams-Sonoma. etc. by identifying patients who could benefit from services such as home nurse visits. 2. economic modeling. It’s important to distinguish between retail KPIs and metrics. genre ratings and previously chosen movies. number of children. They leverage these variables in e-mail targeting programs. 10. The researchers from around the world were grappling with a huge data set — 100+ million movie ratings — and the challenges of large-scale predictive modeling. Contestants will receive ―anonymized‖ insurance-claims data to create their models.

To maximize profitability. retail companies must better understand how customers access and use their different sales channels. Analyzing such information for a single view of operations is difficult but critical to maintaining competitive advantage. KPIs are like latent variables statistics (as opposed to observable variables). Retail companies are already using the Datameer Analytics Solutions (DAS) for operations and customers analytics. order and inventory management. KPIs are variables that are not directly observed but are rather inferred (through a mathematical model) from other variables that are observed (directly measured). Think of KPIs as overall health vs. and transactional data-from multiple sources often determines success or failure. Barnes & Noble. big data is everywhere. Datameer leverages the power. While traditional BI solutions have been an historically important tool for the retail industry. Barnes & Noble was able to easily and cost effectively:   Make massive amounts of data available to its audience Reduced analysis time from weeks to hours Leveraging Big Data Analytics to Maximize Profitability and Streamline Operations Such initiatives generate enormous volumes of complex data that come in different formats. According to what you read. By using SQL-MapReduce® processing. the complexity and volume of data needed in today's environment out strips conventional BI capabilities. forecasting inventory. metrics as taking temperature or measuring shortness of breadth. But actual facts about how businesses are leveraging big data to improve operations are few and far between. How well companies integrate all types of data such as customer information. flexibility and cost effectiveness of Hadoop to bring Big Data analytics to retail marketing and operations.snapshots of an activity. One of the most interesting examples of how big data analytics can improve business operations comes from the retail giant. Blogs: Big Data in Retail Julie Lockner | Tuesday September 6. 2011 Twitter Facebook .

Data analytics vendors were credited for educating their teams on enabling technology. AZ. and how one bad blunder in retail can kill a brand overnight because of of social media giants such as Facebook and Twitter. We turned the topic of conversation to data analytics.e. IT has become a department with a seat at the table making strategic decisions on how to be more competitive. Share 0 Comments The retail industry manages more data and more production databases than any other vertical industry recently polled in an ESG Data Management Research study. In fact. But vendors take note– if you are selling retailers a powerful analytical database that can return complex queries in less than a microsecond–get ready to answer the question–”So what?” Speaking with execs who have already made investments in technology such as Teradata and MicroStrategy. control costs. Victoria’s Secret) learned about common challenges retailers are facing with respect to the changes in consumer buying patterns.. the question is–why change? Why do something different? During a Big Data panel discussion. Even 1010Data demonstrated how business users could join two several billion row tables in less than a second using an easy to use spreadsheet-like interface. and maintain brand relevance to the consumer. One respondent stated “Analytics is where data. framed the Hadoop discussion by illustrating a use case that is driven by low-latency requirements. maintaining security and compliance topped the charts. Yet while managing data growth and issues related to database size was a top issue in all other industries. and lines of business work together to turn information assets into a competitive advantage. 35% of retailers manage more than 200 deployed production databases as compared to only 15% of the rest of industries polled. loyalty programs. . IT is no longer a cost center in Retail. Domino’s Pizza.” When they were asked. When I asked the attendees how many organizations look at data analytics as a key priority–most agreed. we brainstormed about how analytics could make a difference in retail. and mobile point of sale devices collect and store credit card numbers and personally identifiable information–a big target for both external and internal fraud and theft. It is no longer just about keeping the lights on. Safeway and Limited Brands (i. For three days. Online webbased e-commerce applications. the challenge of one-to-one marketing with the onslaught of multiple customer touch points. CTO Sears Holdings. I was honored to be the resident analyst invited to attend and present at the CIO Retail Summit hosted by CDM Media in Scottsdale. but not how the technology can solve business challenges. Phil Shelley. CIOs and IT executives from top brands like Sears. “Are vendors really helping here?”–not so many were quick to nod their heads in agreement. Not to mention how security and compliance can be controlled when applications are deployed on public clouds or on mobile devices in the hands of store clerks. Technology will continue to evolve and change how consumers find information about products and make purchases. technology. Most attendees were still experimenting with the technology to see where it solves a business problem.

the shift to real-time marketing. they will need to step it up and first show retailers how. if vendors want to make it happen sooner rather than later. and a soft economy. However. With the vast amount of consumer and product information.Hadoop and big data anlaytics will no doubt play a significant role in the world of retail. retailers will find ways to use cost-effective solutions to change their competitive landscapes. .