Tech Guest Viewpoint: Shape Demand with Predictive Analytics
If you talk to retail industry stakeholders about their business priorities for 2015, you will likely hear about their continued focus on omnichannel. But the overall environment is starting to feel different than in years past. Words like “transformation” and “action” are being used to recap the 2014 business landscape. We’re moving past defining omnichannel and now focusing on implementation.
This new era is exciting because of what the consumer and technology have made possible. Consumers are sharing more clues about themselves every day through social streams, purchase history and search patterns. Technology is enabling retailers and brands to harness and leverage this data like never before.
In 2015, the retail industry will take more control of the customer-centric supply chain through predictive analytics. Retailers and brand owners will more fully utilize consumer-generated data, build a model for influencing consumer buying behavior and share that data with their key trading partners to gain the coveted single view of the consumer.
Predictive analytics essentially provides a crystal ball, allowing the retail sector to identify patterns that lead to innovative and personalized customer engagement strategies. By applying statistical modeling and data mining to study recent and historical data, predictive analytics allow for more accurate forecasting. This ultimately makes the consumer feel like retailers and brands know them, are working with them and are being helpful, not just selling to them. The amount of data being created each day is staggering, yet according to HRC Advisory, 91% of retailers do not effectively use consumer data to create an omnichannel shopping capability.
Adopting a more agile retail supply chain that is able to withstand and anticipate constant readjustments dictated by consumer data is a necessity for omnichannel success. While implementing plans for 2015, retailers and brands should keep in mind one of the most critical enablers of an effective customer-centric strategy: inventory visibility.
Implementing item-level RFID based on industry standards leads to precisely the kind of inventory visibility needed to know what’s available before leveraging predictive analytics. Some of the world’s leading retailers have already piloted successful programs using EPC-enabled RFID for replenishment items to increase inventory efficiencies.
They have successfully linked product information exchanged between trading partners to physical products traveling throughout the supply chain. Improving on the capabilities of the U.P.C. barcode, RFID allows for up to 99% inventory accuracy and more frequent, less manual readings to accommodate an omnichannel strategy. RFID helps the retailer understand “what do I have?” and “where is it located?” Want to move old inventory? RFID’s pinpoint accuracy lets a retailer sell every last item at higher margins regardless of channel.
The inventory visibility meshed with the insights and context gained from predictive analytics will ultimately advance the retail industry’s pursuit of a personalized consumer experience in the year ahead. Through more industry-wide collaboration to develop best practices for sharing consumer data, suppliers, retailers and brands can move forward to close the gap between consumer expectations and what the retail industry is actually capable of delivering.
Ultimately, predictive analytics offer retailers and brands the steering wheel again, making it possible to shape demand, deliver upon consumer needs and ultimately gain stronger consumer loyalty.
Melanie Nuce is VP of apparel and general merchandise at GS1 US.
Jennifer in need of cheer at Big Lots
Big Lots hypothetical core customer Jennifer isn’t feeling so cheerful this holiday season as the nation’s leading closeout retailer is eyeing a low single digit fourth quarter comp increase.
The company said its expects a low single digit fourth quarter increase after reporting a third quarter 1.4 percent comp increase and loss from continuing operations within a previously forecast range. The company said it had a loss from continuing operations of $3.1 million, or six cents a share, compared to $1.9 million, or three cents a share, the prior year. Total company sales were essentially flat at slightly more than $1.1 billion.
Big Lots president and CEO David Campisi said he was pleased with the company’s results and same store sales performance.
“For the third consecutive quarter, our comps were positive as we continue to gain traction and build sales consistency in our business,” Campisi said. “Jennifer, our core customer, is responding positively to our improved merchandising strategies like the recent expansion of our food category, our furniture lease-to-purchase program, and our emphasis on the quality, brand, fashion, and value components of our assortments."
Despite the absence of robust top line growth, Big Lots is meeting and exceeding its profit objectives. The company increased the upper end of its guidance range for the fourth quarter to $1.80 a share from $1.76 a share previously.
Survey: Omnichannel boosts customer expectations
Omnichannel retailing is increasing the reach companies have to their customers, but the strategy is also increasing customer expectations.
According to a survey of marketing decision-makers in omnichannel consumer products organizations from SAP, 86% of respondents agree that omnichannel has meant that customer and consumer expectations of the organization have increased. Eighty-six percent also agree that the benefits of investing in an omnichannel approach to consumer sales clearly outweigh the challenges.
As a result of having a multi-channel strategy to sales, most companies say that their organization has experienced increased sales (74%), increased consumer loyalty/acquisition (64%), competitive advantage (62%) and better consumer experience (57%). Just 16% of businesses say that they are currently meeting all business and analysis needs for consumer experience via omnichannel.
The survey data further suggest that simply operating a large number of channels is not a competitive strategy moving forward. Rather, the key focus for consumer products companies now is to apply data gleaned from directly consumer interactions, via information inquires, online purchases, social engagement and more, to improve the consumer experience.
“Consumer expectation has been, and will continue to be, the catalyst for omnichannel strategy development,” said E.J. Kenney, senior VP, global head of Consumer Industries, SAP. “However, organizations have the opportunity, by collecting and harnessing omnichannel data, to not only meet consumer expectations but pre-empt and lead them. This leads to a clear competitive advantage against organizations that are less adept at cultivating a high degree of consumer intimacy while simultaneously developing the operational capacity to respond quickly and profitably to consumer needs.”