Retail Analytics

Transcribed on January 14, 2025 at 6:20 PM by Minutes AI

Speaker 1 (00:07)
Home through your audience, B Gen Z and brand management, what your brand stands
for, and CRM, especially where data analytics fits in very well.
Retailers used to rely mostly on their instincts and hunches, honed through years of
experience to make decisions about which items to sell, which locations will likely draw the
most demand, how much inventory to carry, and when to adjust prices.
And while retailers are often proud of their acumen, instincts no longer are enough,
especially in an industry with narrow profit margins, consumers are too fickle and market
conditions are too numerous for humans to accurately account for all those variables.
Data analytics software can help make decision making more precise and profitable for
retailers by augmenting and in some cases, correcting those well educated hunches.
Retail analytics involves using software to collect and analyze data from physical, online
and catalog outlets to provide retailers with insights into customer behavior and shopping
trends.
It can also be used to inform and improve decisions about pricing, inventory, marketing,
merchandising, and store operations by applying predictive algorithms against data from
both internal sources, such as customer purchase histories and external repositories such
as weather forecasts.
In addition, retail analytics can measure customer loyalty, identify purchasing patterns,
predict demand, and optimize store layout so that, for instance, retailers can place items
on store shelves that are often bought together or offer personalized discounts to
frequent shoppers that will result in higher average basket sizes and more frequent visits.

Speaker 2 (02:03)
Retail is a highly competitive business, complicated by the relative novelty of online
commerce and retail profit margins have always been thin, leaving little room for error.
Even slight adjustments in product selection and inventory management can greatly
reduce stockouts or, at the other end of the same spectrum, the need for steep discounts.
Those adjustments in turn can have an enormous impact on the bottom line.
For example, fashion retailers can use data analytics to decide which styles and sizes to
order for different locations and in what quantities based on demographic.
Benefits of Retail Analytics Retail analytics is a set of tools that retailers use to help them
increase revenue retail, reduce overhead and labor costs, and improve their margins.
Some of the ways retail analytics can accomplish these goals are reducing stockouts and
the need for retail analytics helps users understand demand trends so they can have
enough product on hand, but not so much that they resort to steep discounts to get rid of
excess inventory.

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For example, analytics can help determine how quickly demand falls for fashion items that
are driven by the popularity of social influencers.
Improving analytics helps retailers understand their customers preferences and thus
capture more demand than their competitors.
For example, using purchasing history, a book retailer can alert customers who have
shown interest in American history when a new book by historian Ron Chernow becomes
available for pre order Improving Pricing Data analytics can help retailers set the optimal
prices for their goods by synthesizing a variety of factors, including abandoned shopping
carts, competitive pricing information, and the cost of goods sold.
Retailers can thus maximize profits by avoiding setting prices higher than the market will
bear or lower than what customers would be willing to pay.
Improving product analytics can help retailers decide how to allocate products in different
geographic regions, distribution centers and and stores, reducing needless transportation
costs.
For instance, a sports apparel retailer can use analytics to see that even a 2 degree
difference in temperature affects sales of thermal undershirts and can allocate more of
those items to a distribution center closest to areas projected to have colder temperatures
in a given winter.

Speaker 1 (04:50)
Retail analytics tools make use of many different retail data sets.
There are four main types of data that will most often get mobilized in retail analytics.
Lets take a closer look.
Descriptive Analytics Descriptive analytics is widely used.
This is the data that tells you about your performance.
Data is aggregated from your inventory systems, POS systems, ERPs, etc.
To tell you exactly what is going on in your business in real time.
Diagnostic Analytics Diagnostic analytics get to the bottom of why things are happening
the way they are.
They are great for diagnosing problems as and when they occur.
Diagnostic analysis combines statistical analysis with algorithms and machine learning to
identify anomalies and flag up issues.
Predictive Analytics Predictive analytics is all about forecasting.
It mobilizes descriptive and diagnostic data to make accurate performance forecasts for
the future.
Retail Predictive analytics use AI and intelligent communications to figure out what's next.
Prescriptive Analytics Lastly, Prescriptive analytics, the most advanced analytics method,
actually advises us on what to do under different circumstances.
Prescriptive analytics will make recommendations based on what has happened in the
past and what is likely to happen in the future.

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This is achieved through simulations and AI algorithms which produce these
recommendations on the basis of the best possible statistical outcome in any given
situation.
Wanted to share some use cases which we use in retail.
We'll be covering most of them in the future weeks.
For all of these cases there the important thing is to get the right data and then do
advanced analytics with tools, optimization and machine learning, artificial intelligence.
Thanks for going through first lecture of this week about understanding the basics of retail
and marketing.
This lecture covers the introduction to retail analytics section of first week.
Let's go through some definitions which you probably know but good to keep in mind.
Retail the sale of goods or services from a business to a consumer for their own purpose.
Retailer is on Other hand is a company that buys products from a manufacturer or
wholesaler and sells them to end users or customers.
Retailing includes all the activities involved in selling goods or services to the final
consumers for personal non business needs.
Total retail sales in the United States were projected to amount to US$7.9 trillion in 2026,
up from around US$6.6 trillion in 2021.
These figures included E commerce and retail sales.
Retail establishments come in many forms such as grocery stores, restaurants and
bookstores.
There are around 4 million retail establishments in the United States.
Top global retailers by market cap.
Market capitalization measures a company's size by the total value of its outstanding
shares of stock.
Many of the leading retailers by market capitalization are based in the United States.
In 2023, Amazon lead with a market capitalization of $1.33 trillion greater than the runner
up Walmart.
Walmart, the largest retailer by Revenue held second place in 2023 market capitalization
with $423.2 billion.
Home Depot placed third with a 2023 market capitalization of $321.2 billion.
Here's all the framework which is part of retail function.
First one is called buy which has merchandising.
It has two sub functions, planning and buying.
The second sub function is supply chain.
In sell if we talk about brick and mortar, it's stores and for pure play digital players it's E
commerce.
Enable has lot of functions which enable buy and move anf offcourse sales to happen.

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Lets spend few minutes to understand each of them in details.
You can think this as asking five questions.
First one is what to buy.
Basically what product is retailer going to sell the customer.
This decision is backed by planning function and backed by lot of market research.
The second one is where to buy.
There are so many people selling the same product.
So there's where vendor management comes into play and then how much to buy.
Category management and financial planning works on that space.
You don't want to buy too much or too less.
You might end up with lot of inventory.
It's important for you to determine how much to buy is very important.
The next question is very important.
Once you have decided on product, let's say you buy 1000 units.
Allocation comes into picture.
Where will you put these products?
Which stores and planning for right space?
How do I present my product to customer add?
Last one is how do I sell my product?
What should be the price I should sell?
Markdowns are clearance.
So how many times I run the promotion or give rebates Next one is another important
function which is responsible for moving product from one place to another.
Although it feels like that supply chain is a closed loop as you can see on first picture here
from supplier distributor to all the way to consumer.
If you look at right side of the chart with consumers now having multiple choices to buy
online and pick up at store or curbside pickup supply chain has to answer lot of questions
decisions of transportation how to fulfill these demands.
This applies to the retailers who have stores and have to manage store operations which
starts from unloading the products to putting them on shelf and all the other activities
which comes along with it.
Think it more as a store but a virtual one.
You are still responsible for everything we saw in earlier slide but virtually pricing is right.
Running all the promotions and then customer experience should be very similar across
different channels.
Last function I want to talk about is marketing.
It's very important as this function.

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Retail Analytics
Notes created on January 14, 2025 at 6:20 PM by Minutes AI

Retail Analytics Overview (00:07 - 10:06)

• Retailers traditionally relied on instincts for decision making.

• Decisions included item selection, location demand, inventory levels, and pricing

• Data analytics software enhances decision making.

• It corrects and augments educated hunches.

Benefits of Retail Analytics

• Increases revenue and reduces costs.

• Helps understand demand trends to manage inventory effectively.

• Improves pricing strategies.

• Synthesizes factors like abandoned carts and competitive pricing.

Types of Retail Analytics

• Descriptive Analytics

• Aggregates data from inventory systems and POS systems for real-time

• Predictive Analytics

• Uses historical data to forecast future performance.

Retail Definitions
• Retail

• Sale of goods or services from a business to a consumer for personal use.

• Retailer

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 • A company that buys from manufacturers or wholesalers to sell to end users.

Market Overview
• Projected total retail sales in the U.S. for 2026: $7.9 trillion.

• Leading global retailers by market capitalization in 2023:

• Amazon: $1.33 trillion

• Walmart: $423.2 billion

• Home Depot: $321.2 billion

Retail Function Framework

• Buy

• Involves merchandising, planning, and buying.

• Sell

• Includes brick-and-mortar stores and e-commerce platforms.

Vendor Management (10:06 - 12:25)

• Many people sell the same product.

• Vendor management is crucial for determining how much to buy.

• Category management and financial planning play a role.

• Avoid buying too much or too little to prevent excess inventory.

Product Allocation
• After deciding on a product, allocation is important.

• Determine where to place products in stores.

• Plan for the right space to present products to customers.

Sales Strategy

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• Consider pricing strategies for selling products.

• Markdowns and clearance strategies are essential.

• Decide on the frequency of promotions and rebates.

Supply Chain Management

• Supply chain appears as a closed loop from supplier to consumer.

• Consumers have multiple buying options, including online and curbside pickup.

• Supply chain must address transportation and fulfillment decisions.

• Retailers must manage store operations from unloading to shelving.

Marketing
• Marketing is a critical function in the overall strategy.

• Ensure pricing and promotions are consistent across channels.

• Customer experience should be similar across different purchasing methods.

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