Meeting the Demands of the Smarter Consumer

Picture the situation: a woman walks into a clothing store to buy a new pair of jeans. Using a kiosk at the front of the fitting rooms, she snaps pictures of herself in many pairs, uploads them to her Facebook site, then solicits her friends opinions over Twitter to help her decide which one to buy.

Pure fiction? Not in today's interconnected world. In fact, a major apparel chain in Europe already offers this service for its clientele.

Consumers are fast becoming more connected, empowered and demanding. Thanks to the Internet and new social media technologies, consumers now have instantaneous access to a wealth of information about retailers and their products. Given the average online user is three times more likely to trust peer opinions over retailer advertising, this represents a significant power shift when it comes to influencing consumer purchasing decisions.

Leading retailers are taking note. In a recent IBM study involving more than 1500 CEOs in 25 countries, 93 percent of retail CEOs surveyed considered it a top priority to "better understand, predict and give customers what they really want."

The challenge lies in enabling a seamless shopping experience €“ one that provides the right products in the right place, ensures consistent cross-channel promotions, and delivers timely and relevant communications to the right targets.

The problem isn't a lack of data. Data pours in from multiple systems, channels and regions. Retailers must extract meaning from this data to properly steer their marketing and merchandising decisions in the face of new market pressures. This can be demanding when you consider that 80 percent of new data growth is unstructured content, such as Tweets, blogs and text messages.

Smarter systems like business analytics better position retailers to capitalize on this consumer information to create and sell products in ways that resonate with individual shoppers. With critical performance insights across the business, retailers can understand product sales and customer shopping habits to optimize targeted marketing programs; better manage their extended supply chains; and compete more effectively for the empowered consumers' mindshare.

A Smarter Shopping Experience

Success depends on building customer loyalty by providing excellent service and differentiated merchandise across channels. Retailers must enable customers to shop however, whenever and wherever they want. They must also match inventory and brand experience on the Web, in stores and via mobile devices.

Analytics helps retailers spot trends early, enabling them to quickly reforecast assortments and shape offers to deliver focused promotions to customers, provide consistent service across all channels, and optimize inventory.

Rooms To Go, the largest independent furniture company in the United States, integrated information across three regional databases to more readily identify shopper buying patterns €“ such as which cocktail tables tend to sell best with a particular sofa €“ enabling staff to optimize floor planning. Advertising costs have been considerably reduced, since marketing staff are now better able to target promotions to most likely buyers. To date, this in-house analytics approach is driving over US$120,000 in annual savings.

A Smarter Merchandising & Supply Chain

 

Understanding consumer buying patterns is one thing. Having the right merchandising & supply chain to meet consumer demands is what really sets the retailers apart. This requires a €˜demand-driven' supply chain that is robust enough to avoid critical store operational issues, such as delayed shipments, excess stock or worse, empty shelves.

Analytics provides retailers with complete visibility across the supply chain. Managers can identify key metrics and be notified when performance is off-track and make immediate corrections. Future results also become more predictable. Alerts can identify conditions that typically lead to problems, enabling staff to take pre-emptive action to prevent inventory shortfalls, shipment delays and other events that hurt performance.

Elie Tahari offers a perfect example. Through sales analysis, the high-end global fashion retailer can rapidly identify the popularity of items across product lines. These insights help them predict upcoming demands €“ such as a particular dress style, color and size range €“ and adjust the supply chain to ensure timely delivery and optimal inventory across targeted store locations. Net results €“ the retailer has boosted sales by more than 10 percent, while cutting operating costs, including over 30 percent savings in managing their supply chain.

Building Smarter Operations

Today's consumer-driven marketplace demands retailers that are lean and nimble. This means swapping out inefficient processes in favor of new approaches capable of driving optimal performance. Rather than setting targets at specific numbers, decision-makers may want to tie performance to events and risk factors. Rather than planning on an annual basis, retailers may consider adopting shorter planning cycles focused on achieving specific goals.

Through real-time information visibility, analytics empowers decision-makers to evaluate current and historical performance, forecast the impact of changes to plans, then implement action plans that best deliver anticipated outcomes.

Philips Consumer Lifestyle, a worldwide leader in electronic lifestyle products, uses business analytics technology to streamline and improve its worldwide planning and forecasting process. With stronger insights into the financial effects of changes to sales plans, Philips is better able to optimize margins, sales volume and turnover because they know exactly what product and market combinations they need to focus on.

It's a Shopper's Market

Smarter consumers are more interconnected, intelligent and instrumented. Any retailer that hopes to keep pace with these consumers needs foresight and insight to succeed. They must consolidate data and optimize operations to facilitate quick decision-making around marketing and merchandising. Most importantly, they must offer premier customer service across channels.

Smarter retail chains entrust analytics to deliver deep analytical insights into customer preferences and buying patterns, together with a dynamic supply chain that can deliver compelling merchandise and an outstanding shopping experience.

 

It has truly become a shopper's market. If embraced properly, it can also mean a retailer's goldmine.

 

Patricia Vekich Waldron is worldwide distribution executive, business analytics at IBM.