The Overwhelming Power Of Analytics In Retailing And B2C: Part One

Iver van de Zand

Women With Shopping Bags --- Image by © Tim Pannell/CorbisOnline grocery shopping and personalized bonus cards – we all face these incentives every day. Each is strongly driven by the overwhelming power of the analytics that are behind them. This article will share my experiences on these topics, providing examples of retailing and B2C customer journeys that I have been a part of. The below examples are not at all exhaustive; they are also not about the future, but what happens and is in production today.

One thing that makes the retail market segment so interesting is the extreme sensitivity to community influences. A small thing might happen in society that can immediately affect buying behavior: today people are connected everywhere and at any moment. A simple anecdote on social media is shared so quickly that it can influence consumer choices instantly. One simple bad review about, for example, a yogurt brand can raise or lower the selling of this product the next day. If the retailer wants to act upon these influences, he needs state of the art insights and online operational analytics.

Retailers are analyzing you

Your bonus card, combined with your social media credentials, tell the retailer a whole lot more about you than you might realize. Analytics, clustering, and predictive modeling inform the retailer about your family composition, your eating and clothing preferences, how many children and pets you probably have, and even what kind of holidays you like. By smartly combining your information with reference groups, the amount of trustworthy information a retailer can predict is huge.

Now imagine that the retailer recognizes you based on your cellphone signal when you enter the store. This information is linked online to your bonus card and social media credentials: the retailer knows exactly who is in the store. Then based on the same cellphone signal, the retailer can follow (!) you through the store using geo coordinates. It means the retailer knows you are in front of the vegetable section, and also knows – based on the bonus card info – that you like carrots a lot. The electronic banner automatically flips to a message about a special offer on “carrots that taste very good with a new white wine that you might want to try.” A message targeted at you.

Imagine?? Well, forget about “imagine” – this is done today and you are part of it.

Supply chain challenges

Imagine this scenario. The latest game controllers are very popular, so our retailer decides to order additional stock from one of his vendors. Using buying behavior and predictive algorithms, the retailer knows he will sell the controllers. Early in the morning, the stock manager receives a message that the vendor’s truck driver is stuck at the border and will be very late. Order intake quickly searches for alternative vendors and places an online order. That order will influence consumer prices and, using business analytics, the retailer can immediately predict the effect this price change will have on today’s revenue. It also automatically adjusts the retailer’s forecast and rolling plan, even from its subsidiaries if they exist. Using basket analyses, the new type of game controller might influence the sales of USB cables, too, so the retailer decides to order additional USB sticks and the system automatically adjusts distributed forecasts and rolling planning. Imagine? Not at all!

Product offers

Apart from understanding the buying behavior of a customer (using bonus cards and others), retailers spend a huge amount of effort in understanding where the demand will be. Trend forecast algorithms combine social media posts, web browsing behavior, and ad-buying data to predict what will cause a trend or buzz. Social media discussions on the clothing habits of a popular band might cause specific trousers to become popular. These sentiment analyses get even more complex if you realize that there is a heavy demographic component embedded together with economic indicators. Offerings on detective books will increase significantly if two things occur – the weather gets colder at the same time a significant crime is discussed on social media.

In-memory computing and interactive insights make the difference

Retailers and B2Cs in today’s market dynamically follow and influence customer buying behavior. They have to because the consumer is so well informed and has so many alternatives for buying. Retailers have to act instantly on changing behavior. To do so, the amount and complexity of information that needs to be analyzed is so big, only in-memory computing can handle it. Bear in mind that an individual retailer is never on its own, but part of a brand, meaning individual shop performance is rolled-up to the corporate level. This corporate level manages online shop performance indicators, compares the various stores, and delegates rolling budgets down to the shops on a daily basis. These budgets vary daily given the changing demand analyses we talked about above.

These dynamics also require online interactive analytical capabilities. Information on buying and demand behavior varies daily and is analyzed permanently. Ever changing sources, unknown structures of new information, or simulation models require the analyst to interact with the data all the time.

In a future article, we will deep dive into some of the other use cases for business analytics in retailing and B2C market spaces. One of them is basket analysis. Using predictive modeling combined with business analytics, it’s already possible online to utilize the buying behavior of the consumer.

Showrooming, where customers browse in brick-and-mortar stores but use their mobile devices to find better prices online, is another challenge for retailers. Learn more in Marketing’s New Mandate: 5 Core Principles for Driving Business Value.


Iver van de Zand

About Iver van de Zand

Iver is the Director of  the SAP Global Analytics Hub for business intelligence and predictive analytics focusing on enablement for pre-sales, collaboration, content generation, and best practices. He works closely with global leadership and stakeholders across SAP incorporating the latest insights, tools, and best practices in order to optimize the use of SAP resources, improve cross organisational collaboration, and drive efficiencies in business execution. Iver is also a member of the Lumira Advisory Council (LAC) and the International Business Communication Standards (IBCS) community that focuses on data visualization standards and Hichert principles.