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PwC | Retailing in the digital era 1
PwC | Retailing in the digital era 2
Introduction
With consumers as the principal drivers of change The fact that such insights are based on hard
in the industry, decision-making has become more numbers makes analytics a very powerful tool for
complex than ever before. Every day, retailers enhancing the objectivity in decision-making.
are faced with a range of difficult questions The response to a recently conducted, PwC
concerning the best course of action for their sponsored survey, typifies the growing acceptance
businesses. These can include: of analytics as an essential component of
Who are the most valuable customers and how decision-making across businesses. In this survey
to retain them? conducted by the Economist Intelligence Unit
How to price offerings in order to maximise (EIU), senior executives around the globe and
profits? across industries* were asked if big data has
Which customers should be targeted in the next changed decision-making in their organisations.
campaign? Almost 90% responded in the affirmative, as is
Which products need to be recommended to evident from the pie chart below:
customers?
What should the inventory level be, in order
Has big data changed decision-making in
for the business to neither go out-of-stock, nor your organisation?
carry excesses?
Uncertainty has become a defining feature of the
retail business model. The key to solving such
business challenges, as well as a broad variety of
others, lies in the effective utilisation of analytics
practices, a discipline that involves extensive use
of data, statistics and machine learning to uncover
valuable insights from data and help make
optimum business decisions.
Product recommendation
Retailers can use customer purchase history and past transaction baskets to recommend products that
they are most likely to buy.
A collaborative filtering model is used for making automated predictions about customer interests by
collecting shopping behaviour data of similar customers.
5%f
control on the level of personalisation that they
offer to their customers. Social media analytics
of
records personal events such as birthday and
anniversary celebrations. In addition, they
can capture information relating to a new
relationships or break-ups. With retail promotions
on social media at an all-time high, it remains
to be seen how comfortable customers will be
with receiving discount coupons for baby care
products after announcing the birth of a child on
The targeting solution involves designing social media, or with being presented coupons
customised coupons and offers for customers for recreational therapy after updating their
belonging to various groups. relationship status to single?
This not only helps increase the campaigns
response rate but also enhances customer
experience through improved relevance of
promotions. Additionally, the retailer is able
to achieve a higher ROI from its marketing
activitieshigher incremental sales by targeting a
smaller but interested set of customers.
With the digitisation of processes, retailers have
benefitted immensely from the implementation of
Vendor selection
Variety of
Adherence to delivery Minimum order
Automation Hygiene
standards packaging quantity
Delivery lead
Delivery network Credit period
time
The analytic hierarchy process (AHP) model incorporates judgments on qualitative and quantitative
aspects. Thus, it enables multiple evaluators to make rational choices from among multiple alternatives
based on multiple relevant criteria.
The AHP model facilitates collaborative decision-making. The aggregated results, which are perceived to
be more neutral, find greater acceptance across the organisation. Additionally the model can be used as
a tool for vendor negotiation on specific business aspects.
Inventory planning
Inadequate inventory planning can lead to frequent stock-outs (loss in revenue) and over-stocking
of products (rise in costs). Retailers can avoid these scenarios through accurate estimation of future
demand and maintenance of optimum inventory levels.
Events
Sales promo events
Festival seasons
Competition activities
Forecasted demand
The solution is based on a combination of time-series forecasting and regression techniques that account
for the effects of seasonality and time. These include related demand trends as well as the impact of
demand drivers such as price, economic environment and festive events. As a result, it is possible to
obtain estimates of future demand across different product offerings.
Assortment optimisation helps improve store sales by ensuring the right display of products across
shelves and preventing loss in revenue from stock-outs.
The first step for retailers is to do an internal assessment based on the following areas:
Business applications:
Business Understanding
applications: where analytics
Understanding where ensuringisthat
currently being used
the best practices and what is the
are continuously
analytics
maturity levelisof
currently being
analytics used
usage and what
across is
functions refined and promoted. However, it is also
the maturity level of analytics usage across important to understand that the relevance of
functions the analytics department is dependent on the
Data: Understanding how various applications adoption of analytics throughout the organisation
capture and generate data, internal as well Retailing
and how quickly they providein the digital era
feedback. 15
as external; and how sophisticated the use of
unstructured data is In order to successfully embed analytics in an
organisation, it is important to create linkages
Technology: Enlisting technologies that exist
for data consolidation, storage, ETL, discovery, between application workflows, business
pre-processing, modeling and data quality intelligence reports as well as analytical models.
management For example, for vendor selection, approval
Processes: Finding whether the management will come after someone looks at the vendors
and governance processes are optimal or not performance reports and vendor selection
model. This enables adoption of the prescriptive
Based on the organisations performance in these decision-making process driven by analytics.
areas, retailers can ascertain their maturity in Using embedded analytics can help the business
analytics and define an appropriate roadmap for executives in taking the best decision concerning
the future. their existing workflows.
The best way of realising the benefits of analytics A change management exercise is also required in
is by pooling in a dedicated team of business order to convince various stakeholders across the
analysts, statistical modellers as well as data retail organisation about how analytics can help
analysts and establishing an analytics centre of them make better decisions.
excellence within the organisation. It can be a
one-stop shop for all the analytics requirements
across the various functions. This will help in
establishing analytics as a recurring process and
Bibliography
PwC
Total retail: A change is underway
Retail 2014: The anytime anywhere universe
Gut & Gigabytes
Key contacts
Sudipta Ghosh
Analytics Leader
Email: sudipta.ghosh@in.pwc.com
Saurabh Bansal
Email: saurabh1.bansal@in.pwc.com
Suparno Nandi
Email: suparno.nandi@in.pwc.com
PwC | Retailing in the digital era 16
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