Canadian Tire Talks Analytics and Artificial Intelligence
Canadian Tire attributed analytics, assortments, embracing digital, and closer collaboration across business units to a healthy second quarter 2017, in which profit beat analysts' expectations.
"It's deep, deep analytics that are enabling the teams to become much better at what they do, and I think they would all say that they feel much more confident about their ability to achieve things now because of the way they go about making decisions," said Stephen Wetmore, president and CEO, Canadian Tire Corporation Limited, noting it's not just good fortune that increased sales in the quarter.
Canadian Tire Corporation, Limited same store sales were up 1.8%, while Canadian Tire Retail saw retail sales increase 2.2% and same store sales were up 1.4% compared to the prior year. Profit rose to $2.81 per share, beating the average analyst estimate of $2.52 per share, according to Thomson Reuters. The company's bottom line growth of over 14% met expectations and operating CapEx was down $56 million in the quarter over the prior year.
Despite record rain in April and May delaying spring and summer purchases, retail sales grew 3% in the second quarter. According to the company, it built a sales plan that more effectively balanced seasonal and non-seasonal categories.
"Our efforts to insulate the business from disruptive weather patterns are paying off," said Allan MacDonald, President, Canadian Tire Retail.
Retail analytics were used to plan flyer and promotional events, helping the company act more deliberately in response to the weather.
"In the past, we may have responded too swiftly or relied on intuition when the quarter started softly, but today we have a better understanding of consumer and category sensitivities in response to outside influences like weather," said MacDonald. "We have a lot to learn, but our analytics teams are making progress every day, helping us take deliberate action with confidence."
A New CIO
As the company moves forward, Rex Lee takes over leading the IT team as Senior Vice President and CIO. Eugene Roman will take on the new role of Executive Vice President of Digital Excellence. Roman has been appointed to the new position to help "push the limits" of the company's digital capabilities in the back office, store, and online.
Lee's attention as CIO will turn to improving the efficiency and workflow of operations, supported by the company's technology investments, as it works to decommission all systems, streamline reporting, and eliminate laborious cost structures. He was previously the SVP, Technology Solutions, Canadian Tire, accountable for leading, architecting, developing and operating next-generation retail and financial services capabilities across the company.
Artificial Intelligence and Machine Learning
Canadian Tire said it had major breakthroughs with its machine learning and artificial intelligence investments in the quarter.
The company launched its new search engine, which is aimed at improving customer experience through its unique ability to find what our customers are looking for.
The company's digital interactions with customers increased across all banners, with Web traffic and e-commerce sales "continuing to grow rapidly."
"In an online world where search means everything, we've made quantum gains in search effectiveness through an internal project code-named Atlas," said MacDonald. "This first major foray into artificial intelligence and machine learning has dramatically improved this critical function."
Atlas is being used in approximately 50% of the retailer's Web traffic and a full rollout across all banners is planned for the end of 2017.
"Statistically when we track our customers going through our search engine, and we've kept our existing search engine alive so we could actually compete, the statistical significance between the two is material," said Wetmore. "So, our conversion rates are material, sales increases are material. It's the future of retail. It's just going to continue to evolve. We're well beyond second base here."
Roman noted the path to purchase is the company's most important factor.
"We talk about customer experience, we talk about product availability, we talk about seasons. If we can create a better path to purchase for our customer, we connect the dots to the customers, and you know the results of that, revenue goes up, customer satisfaction goes up, and we serve Canadians better."
The company is also working to improve system operations and turn these types of processes into something that a machine can do to "get the links between the pieces of data that are necessary in order to come to the conclusions, rather than manual processes."
For example, testing of the company's finance system used to take up to three hours, but now it's down to a couple of minutes.
The company plans to use AI and Machine learning in cost reduction, revenue generation, and decision making.
The company said it is at a point where its data is actually capable of being mined in a relatively easy fashion.
According to Wetmore, Lee and Roman have shown everyone across every discipline, both operations and shared services, "the importance of questioning everything they do and asking themselves, can I analyze some data that may get me to a different position in some of the assumptions that I've been making for years and years?"
Additionally, the top 80 or 90 executives in the company have all attended a very intensive course on the use of data analytics.
With properly trained staff, the retailer has now turned to working on analytics projects. For example, years ago the company put more than 50 Mark's stores inside Canadian Tire stores and now it's going back and analyzing that move and reassessing if they put the Mark's stores in the right locations.
"We probably look like children based on the data that we used at the time," said Wetmore. He noted that is a small example. "We've got hundreds and hundreds of [data analytics usages] going on at a very, very high level in terms of their impact on the organization."
Deliver to Home
Canadian Tire Retail is also testing "deliver-to-home" and is on track to execute the test either in the fourth quarter or early in the New Year. Canadian Tire stores currently offer only click and collect-in-store, although online shopping is available at its other banners. The retailer plans to test its ability of delivering from store and the impact on the dealer model.