Globally, the retail industry has undergone drastic changes over the last couple of decades. Whether in terms of an explosion of choices or a more personalised shopping experience, retail chains are now forced to offer a differentiated experience to shoppers, not only to woo new customers, but also keep their regular ones from moving to rivals.
The picture, however, is very different in India. While large format chains have existed for some time, many are yet to offer loyalty-based benefits to regular customers. However, as better-informed and digitally-savvy customers seek a more personalised shopping experience, Indian retailers too have to look for ways to analyse customer behaviour and their requirements to better serve them.
The usage of analytics in the retail sector is linked to maturity of the industry. In comparison to the West, there is a vast difference in terms of evolution itself. Customers tend to be anonymous, and retailers have very little idea in terms of who is buying what and how they should sell products to them, or how appropriately the retail space is being used, how products are stacked and how accessible and visible these products are. These are some basic things that if the retailer can get right, will ensure that sales go north. This is where analytics solutions can play a crucial role.
From the point of view of a retail company, the key aspects that they would like to understand is who are its customers and what do they buy. Today, loyalty programs do not exist or even if they do are very minimally used. So, customers become anonymous and it becomes difficult for the retailer to segment them and see if they can be targeted with specific campaigns, promotions or product mixes.
This is an issue on both sides. While the consumer doesn’t understand the benefits of loyalty-based purchasing, the retailer also fails to introduce offers that will attract people and get more business.
Retailers in the country often face supply chain management issues. In a vast country such as India, the supply infrastructure is often not geared to handle the huge demand. There aren’t many retail chains that own warehouses where they can look at transhipping products from various suppliers and then leveraging the warehouse to supply on demand at the various outlets, reducing their cost of carrying goods and inventories and making the right choices while carrying inventory. This, again, is a big stumbling block from a retail industry point of view. This would mean that retailers hardly plan forward in a scientific way as they hardly have an idea about forecasting demand based upon past experiences and the current market situation. Customers often browse through but do not buy the products. These are situations that the retailer needs to be prepared for and not be overstocked or under stocked.
The retail customer, those in India included, are also moving online. Before making a purchase online, they often compare prices on the web, browse stores and even seek advice from friends and family over social networking sites. And they want a seamless shopping experience across multiple sales channels, be it web, mobile or physical stores. Owing to these factors, major retail organisations are now seriously looking at customer behavioural analytics so as to get a holistic view of customers in terms of channels, behavioural segmentation, responses, marketing strategy and marketing execution. Modern retailers are now exploring solutions to analyse data from sales and marketing, payment/refund, customer service, warehouses, merchandising and promotion as well as those from social networks such as Facebook and Twitter.
With a well-knit retail analytics portfolio, Indian IT companies are now offering solutions in critical areas of customer and marketing analytics, stock planning and supply chain analytics to help increase business profitability of retailers.
There is a growing realisation and we have started to see some level of investment. The first level of investment that is happening now is on product positioning, promotions and stock-in stock-out situations within the outlet itself.
But going forward, there is an inherent understanding that we need to get into higher levels such as forecasting. There is a significant opportunity within standalone stores and supermarkets as well. These stores also realise that they need analytics and what works for a large retail chain works for them too as the factors influencing business remain the same. However, it is important that they are provided such solutions on a service model rather than an on-premise application because the cost implication will be too high for them to afford it.
(The author is Associate Vice-President, Business Intelligence & Analytics Services, Sonata Software.)