Retail Analytics E-Commerce

Group 9
IIM Lucknow
Anju R Gothwal PGP28250
Animesh PGP29181
Malory Ravier IEP15003
Mayank Khatri PGP29220
Richa Narayan PGP29207
Shashank Singh PGP29493
Chandel
Tushar Gupta PGP29197
AGENDA
1) RETAIL ANALYTICS
Industry Practice Types of Analytics
Information Providers
2) ANALYTICS IN ECOMMERCE INDUSTRY
Web analytics basic metrics, top tools
Data Handling Software in Trend- HADOOP
Major Analytics Applications in Ecommerce

3) ANALYTICS IN ECOMMERCE COMPANIES

Amazon
Flipkart
Ebay

4) RESEARCH PAPER STUDY

Customer Segmentation and Promotional Offers
RFM
Lifetime Value

5) RECOMMENDATIONS
 1) RETAIL ANALYTICS

2) ANALYTICS IN ECOMMERCE INDUSTRY

3) ANALYTICS IN ECOMMERCE COMPANIES

4) RESEARCH PAPERS STUDY

5) RECOMMENDATIONS
 Industry Practices - Types of Analytics RETAIL
ANALYTICS

CUSTOMER ANALYTICS MARKETING ANALYTICS

MERCHANDISING AND
Customer Acquisition Marketing Mix PLANNING
Customer Loyalty Brand Health Shelf space optimization
Behavioral Segmentation Multichannel Campaign Product Pricing
Optimization
General Merchandiser - Store Location Decisions
TESCO Apparel Chain SEARS CANADA
Fashion Retail BELK
DEMAND AND SUPPLY RISK ANALYTICS
CHAIN PREDICTIVE ANALYTICS
Detecting Fraudulent Determining Customer LTV
Inventory Planning activity
Demand Forecasting Revenue forecasting
Detecting Process Errors
Product Flow Optimization Product Recommendations
Detecting Store Theft
Department Store Trend Analysis
Online Retailer - AMAZON
METRO GROUP
Information Providers -RETAIL ANALYTICS

Market research companies providing retail intelligence

IRI: Information Resource Inc.
Leader in delivering powerful market and shopper information, predictive analysis and the
foresight
Keeps systems on big retailers, collect info, sell data and trends, simplifies and supports
manufacturers and all
Services Provided
Market, consumer and shopperintelligence
Retail tracking information
Online and offline marketing ROI strategy and effectiveness
Predictive analytics and modeling
Enterprise-class business intelligence software platforms and solutions
Pricing, trade promotion and brand portfolio maximization
Store level and merchandising insights
Strategic consulting and thought leadership

AC Neislen: Another Player in the arena

 1) RETAIL ANALYTICS

2) ANALYTICS IN ECOMMERCE INDUSTRY

3) ANALYTICS IN ECOMMERCE COMPANIES

4) RESEARCH PAPERS STUDY

5) RECOMMENDATIONS
 Web Analytics E Commerce
Web Analytics involves mainly studying consumer behavior and traffic online
Ecommerce applications study consumer purchase to boost sales, attract more customers,
build brand
BASIC METRICS TO TRACK
MEASURE DESCRIPTION
Visitors No of visitors tells how business is doing
Page Views Maximum viewed Tells the popular content
Referring Sites Tells the interests of customer
Bounce Rates Tells why people leave the site
Keywords and Phrases Tells about customers requirements

TOP ANALYTICS TOOLS FOR ECOMMERCE:

TOOL CAPABILITIES APPLICATIONS

Google Analytics Monitors traffic from social media, emails Measures effectiveness of marketing
program
Adobe Site Catalyst Real time segmentation Increase checkout conversion rates
IBM Corementrics Enterprise level Solution, provides Know how website affects visitors,
actionable information advertisement ROI
Webtrends Digital marketing intelligence Increase Conversions, Search and social
DATA HANDLING - Software in trend - HADOOP
HADOOP: Open source software project
Accomplishes two tasks: massive data storage , faster processing

ADVANTAGES:
Handle huge amount of data - great volumes and varieties esp. from social media and
automated sensors
Low cost - the open-source framework is free and uses commodity hardware to store large
quantities of data
Computing power - distributed computing model can quickly process very large volumes
of data
Scalability - can easily grow your system simply by adding more nodes. Little
administration is required.
Storage flexibility - can store as much data as you want and decide how to use it later.
Inherent data protection and self-healing capabilities -Data and application
processing are protected against hardware failure. If a node goes down, jobs are
automatically redirected to other nodes to make sure the distributed computing does not
fail. And it automatically stores multiple copies of all data.

Other S/W involved Tableau, TeraData etc.

 Major Analytics applications E Commerce

Personalization helps to increase conversion rates

HBR say personalization increases ROI by 8 to 10 times
Personalization Ex: Gilt Group ecommerce company uses targeted emails to give
offers matching customer search

Improving Customer Analyzing buying pattern to make online purchase seamless process

Experience Optimizing services like customer call

Develop models for real time pricing of millions of SKUs

Pricing Parameters considers are competition, inventory, required margins
etc.

Used to predict consumer behavior ex. Used by Amazon to predict

Predictive Analysis customer purchase
Vendors like Atterix, SAS, Lattice provide such services

Supply chain intelligence for real time communication between

Managing Supply different stakeholders like vendors, warehouses, customer etc.
Chain Helps achieve faster delivery, higher fulfillment, low inventory
 Platforms for Predictive Analytics
Predictive Tools that integrate
with e-commerce platform
Tools and Plugins
No headache of integration
Springbot, Custora, Canopy
Labs
$199-$300/month
Platforms
Open Source Product Full Featured Site
Suitable for an Most functionality
analytics team Point solutions for
Hiring the right skilled various areas
resources a challenge Consulting options
R, KNIME, PredicitionIO provided
Free SAS, SAP, Predixion
Approx. $10,000 for
single user license
 1) RETAIL ANALYTICS

2) ANALYTICS IN ECOMMERCE INDUSTRY

3) ANALYTICS IN ECOMMERCE COMPANIES

4) RESEARCH PAPERS STUDY

5) RECOMMENDATIONS
 Analytics Practices Amazon

ATTRIBUTES PRACTICES
In-house/ outsourced All analytics done in- house
Major Tools Open Source
Tweaked to Amazons needs
Amazon uses its native analytics platform Hadoop with Elastic Map
Reduce and S3 database
Amazon also uses Glacier for archiving data and Kinesis for stream
processing of high volume real time data streams

Major Metrics One of the most Metrics driven company almost everything measured
and evaluated
Analytics major heads 1. Customer Analytics
2. Seller Analytics
3. Trust Analytics
4. Supply Chain Analytics
Notable attributes They also monetize the platform by offering it to other companies
 Customer Analytics - Amazon
PRODUCT RECOMMENDATIONS
Hybrid Recommender Systems a mix of both content and collaborative filtering
Main metrics analyzed are
1) Customers past purchases
2) Items customers have rated and liked
3) Purchases compared to similar purchase by other competitors
4) Items in virtual shopping carts
Generates approximately 29% sales from recommendations
CUSTOMER SERVICE
No attempts to up sell over customer service calls
Data network allows Amazon to call the customer in under a minute after he places a
service request
Reports and Views are extensively used to have selected customer information on screen
Customers are only last name and address to fetch all their data
Customer service reps are well informed due to big data analytics; leads to
individualized and human
 Seller Analytics - Amazon
Amazon treats its over 2 million sellers as its customers, provide all the technology and
services sellers need to run their business
Personalization with sellers, proactive, data driven recommendations to each and every seller
on the platform
Tens of millions of recommendations to entire seller base in a day through emails and the
native platform Seller Central
Business reports are also available for purchase for in depth insights
Examples of some recommendations
1) Almost out of stock Recommendation on how much to add to inventory based on forward
looking demand for the product adjusted for seasonality and festivals
2) Search Results When customer encounters no search results or results of low relevancy,
the results are surfaced back to the seller and recommend to carry products customers are
looking for
3) Fulfillment by Amazon Recommendations based on the characteristics of how difficult the
products are to fulfill
4) Performance Feedback Metrics on satisfying customers, serving their needs and getting
products to them fast and easily
5) Sharpness of Pricing Surface up the sellers of all different products a seller is carrying on
Amazon, determine whether it makes sense to lower prices for customers
 Supply Chain Analytics - Amazon
Monitors, tracks and secures 1.5 Billion items laying around 200 fulfillment centers
50 million updates are made to the database per week
Entire data is crunched every 30 minutes and the results are transmitted to all the terminals
INVENTORY CONTROL
Amazon uses non-stationary stochastic model for optimizing inventory
Has developed algorithms for joint and coordinated replenishments
Algorithms also support fulfillment, sourcing and capacity decisions
Forecasting is done at an SKU level for each fulfillment center
DEMAND
Analytics on customer wish lists, gift registries and pre-orders to anticipate demand apart from usual
forecasting techniques
Wish lists are publicly visible, software crawls wish lists to aggregate data about customer demand
LOGISTICS
Patented Method and System for Anticipatory Package Shipping
Anticipates customer needs before they express them
Analyzes
a) Customer Ordering History d) Feedbacks
b) Wish-lists e) Searches
c) Average Shopping Cart Content f) How long a cursor hovers over a product page
Results in very fast delivery, sends off packages to a shipping hub or a truck near the customers address
 Control and Trust - Amazon

CREDIT CARD FRAUD DETECTION

Uses a scoring approach to identify the most likely fraud situations
Some of the situations analyzed are
1) Purchase of easily resold goods on gray market such as electronics
2) Use of different billing and shipping address
3) Use of fastest shipping option

WAREHOUSE THEFTS
Constantly Updates database of high ticket, most likely to be stolen
items
 Software Used - Flipkart
QLIKVIEW Parent Company: Qlik, based at Pennsylvania
Improved Inventory Management tool to optimize Stock Levels

CHALLENGES
Integrate Complex Data from disparate sources
Deliver Analytical data to staff in various departments
Improve inventory utilization

Initial Usage: Open source Business Intelligence (BI) but the problem faced Scalability
ADVANTAGES
Provided transparent and up-to-date information for analysis
Embedded data-driven decision making at Flipkart
Improved Inventory Utilization

Information gathered over telephonic conversation with IIM L alumnus working in Flipkart
 Software Used - Flipkart
BIGFOOT - Computerized Maintenance Management Software (CMMS)
1) Managing the maintenance operational needs of organizations
2) Bigfoot CMMS' full functionality paired with its intuitive design allows to implement the solution
and get results quickly.

KEY FUNCTIONS
preventive and predictive maintenance
inventory management, work order
asset, and equipment management
purchasing
built-in reporting and analysis
ADVANTAGES
The system can support any number of facilities and multiple languages
Increases staff productivity and reduce maintenance costs today
Support integration with other systems like ERP, bar code, custom interfaces, advanced reporting
solutions building Automation solutions, and Active Directory
Bigfoot CMMS can be configured for different user types, security settings, site and location
details, and user access settings
 Analytics Practices eBay

ATTRIBUTES PRACTICES
In-house/ outsourced Most of the analytics done by the in- house analytics team
Few practices are outsourced
Major Tools SAS
Excel
Major Metrics Exit Rate, Transactional and operational metrics

Analytics major heads 1. Buyer Analytics

2. Seller Analytics
3. Trust Analytics
Notable attributes Analytics used by Marketing team for segmentation of customers or
predicting churn rate for customers is handled differently
AB Testing for measuring efficiency of new feature

Information gathered over telephonic conversation with IIM L alumnus working in eBay
 Major Metrics - eBay
EXIT RATE
Which is the page which marks the termination of users session
Find the dissatisfying elements of the page if the page is not meant for user to exit the
session
Improve the elements from pages in order to increase the length of session and reduce
chances for abrupt end of user sessions
TRANSACTIONAL METRICS
Number of bought items
Revenue from bought items
Frequency of transaction
OPERATIONAL METRICS
Conversion from home page or search results to cart due to some features
Easy payment options increasing number of sales
One click payment option or reach cart at least steps
Customer engagement and avoid exit rates
 Buyers Analytics- eBay
BUYERS ANALYTICS deals with the analytics used to design or experiment with the process flow
related to purchase of a product
E.g. Homepage, Search, View Item window, Checkout, Cart, Wish list etc.

ANALYTICS FOR HOMEPAGE

Arrange the homepage according to the purchase history, likes and comments of customers
Analyze the increase in number of clicks on home screen and difference in navigation flow
Analyze the increase in number of visits on home page during one session
Analyze number of items listed on homepage to be selected for wishlist or cart
ANALYTICS FOR SEARCH
Add a pop up/layer when clicked on an item from search result
Give multiple options on pop up: Checkout, check details, compare
Analyze increased or decreased number of clicks and conversions to cart in order to see
efficiency of the new feature and hence decide on whether to continue with the feature or not.
 Seller Analytics - eBay
SELLER ANALYTICS include
1) Assortment Analytics 2)Ratings of Sellers

ASSORTMENT ANALYTICS
What are the suggested assortments for a seller
Which sellers to be listed so as to maintain the assortments
Major trends like most number of clicks for an item and most selling items
Analyze if the most clicked items is most selling or not? If No, why not?

RATING OF SELLERS
Categorize sellers into groups and hence decide on what types of deals to be done with the
sellers
Analytics used for recommendation of established and flourishing practices of high rated
sellers to the less performing sellers
Categorize sellers as High and low trusted or performing enabling recommendation and
listing of items from good sellers to enhance customer experience
 Trust Analytics - eBay
TRUST ANALYTICS include
1) Fraud Analytics 2) Credit Cards Analytics 3) Product Health Management

FRAUD ANALYTICS
Which are the sellers or Buyers who are included in fraud
For Example A Buyer may buy a product but deny paying multiple times suggesting fraud
A seller may claim shipment but actually delay the shipment and increase customer waiying time
reducing their customer experience
Such accounts for Buyers/ Sellers needs to be blocked for significant duration
Model allow to create a new account
Analyze the fraud accounts either new or old to unlist /block them
CREDIT CARDS ANALYTICS
Analyze the credit rating history of customers
Identify the exposure of the card and decide on highest allowed purchase amount. The allowed exposed
amount is at risk
Analyze the probability of loosing this money if the customer defaults

PRODUCT HEALTH MANAGEMENT

Analytics on products categories to increase customers experience and hence loyalty by fostering trust
for the product, seller or e-bay as whole
 Notable Practices- AB TESTING -eBay
AB testing
is to check the efficiency of the introduced eBay product or feature
is widely used by Ebay and probably the only major player using it

DIVISION OF CUSTOMERS INTO TWO SEGMENTS

Control Group (30% customers)
Test Group (30% customers)
STEPS IN AB TESTING
Introduce a feature - Eg. Increase the size of a button
Enable the feature for Test Group and keep it disabled for the control Group
Notice the change in behavior - Had the number of clicks increased significantly to
measure the positive response of the introduced feature. If yes continue with the feature to
enhance customer experience
Decision Making - If the result in not significantly better then retract the introduced
feature
 Notable Practice - RFM Analysis -eBay
Recency | Frequency | Monetary
for Customer segmentation and Promotional Offers
Analytics used to segment customers and then direct suitable promotional in order to increase the
overall revenue generated by each customer
Recency last visit to site Frequency how frequent is purchase and in what quantity
Monetary amount of money spend
Recorded data in form:
Customer ID | Category of purchase | Date of purchase | Quantity of purchase | Amount of purchase
Recency Frequency Monetary

Get Recency, Decide number of clusters &

Frequency & Calculate the segment customers
Monetary score combined score according to score.
out of 5 Apply promotional schemes.

Influence of Frequency Ideal number of

category is not outweighs other segments-
considered two factors Managerial Decision

Which parameters should be focused for the target customer segments

Current Scenario Recommendations

 1) RETAIL ANALYTICS

2) ANALYTICS IN ECOMMERCE INDUSTRY

3) ANALYTICS IN ECOMMERCE COMPANIES

4) RESEARCH PAPERS STUDY

5) RECOMMENDATIONS
 Customer Segmentation and Promotional offers
RFM Analysis : Suggested Improvements
Instead of rating similarly for all the product for Recency, Frequency and Monetary.
Ratings can be done differently for different category. For E.g.
Home & Kitchen Apparel Tech
n_Bought_Item n_GMV n_months* score n_Bought_Item n_GMV n_months* score n_Bought_Item n_GMV n_months* score
0<=n<0.35 n<2.5 n<3 1 0<=n<0.35 n<2.5 n<3 1 0<=n<0.35 n<2 n<2 1
0.35<=n<0.5 2.5<=n<3 3<=n<5 2 0.35<=n<0.5 2.5<=n<3.25 3<=n<5 2 0.35<=n<0.5 2<=n<2.5 2<=n<4 2
0.5<=n<0.75 3<=n<3.75 5<=n<7 3 3.25<=n<3.7 0.5<=n<0.75 2.5<=n<3.5 4<=n<6 3
0.5<=n<0.75 5<=n<7 3
5 3.5<=n<4.2
0.75<=n<1 3.75<=n<4.5 7<=n<10 4 0.75<=n<1 6<=n<9 4
0.75<=n<1 3.75<=n<4.5 7<=n<10 4 5
1<=n 4.5<=n 10<=n 5
1<=n 4.5<=n 10<=n 5 1<=n 4.5<=n 9<=n 5

This is so because a customer buying apparel 3 month back may not be term as recent but
buying cell phone 5 month back may be termed as recent because of difference in life
cycle of the product or category of product
Assign weights to Recency Frequency and Monetary instead of equal weights

Home & Kitchen

Apparel Tech
Factor Weight Depending on the category
Factor Weight Factor Weight
one may want customer to
Recency 1 Recency 2 Recency 2 be more recent, or more
Frequency 2 Frequency 1 Frequency 1 frequent or more revenue
Monetary 3 Monetary 3 Monetary 3 generator per purchase
Customer Segmentation and Promotional offers
RFM Analysis : Suggested Improvements
Rate the Recency, Frequency and Monetary as High or Low for each customers and then
define the segments based on the combination of these values
Ideal Clusters based on RFM
Recency Frequency Monetary Clusters
H H H BEST
H H L VALUABLE
H L H SHOPPERS
H L L FIRST TIMES
L H H CHURN
L H L FREQUENT
L L H SPENDERS
L L L UNCERTAIN
Divide your customers into these 8 segments
Now if one wants to convert his valuable customers into best customers he
knows that he can target the Monetary value of the customers and direct
promotional which would increase the per purchase spending of the
 Customer Segmentation and Promotional
offers
- based on Customer Lifetime Value
THREE APPROACHES
1) Segmentation by using Lifetime Value
2) Segmentation by using Lifetime Value components
3) Segmentation by using Lifetime Value & other information
Eg: socio-demographic factors or transaction analysis

APPROACH I (LIFETIME VALUE)

Customers are sorted in descending order of LTV
Percentile score is generated
Target customers (constraints usually financial budgeting determines how many customers to be
targeted)
 Customer Segmentation and Promotional offers
- based on Customer Lifetime Value
APPROACH II (LIFETIME VALUE COMPONENTS)
Three components
1) Current Value
2) Potential Value
3) Customer Loyalty
Three axis is derived
Scoring of each customer for each component on a scale of 0 to 1
Segments based on scoring
Eg: A customer with High Current value, Potential Value & Customer loyalty must be retained

Internal Data: Customer

External Data: Acquisition Current Value; Potential Value;
Profile; Behavior Data; Survey
data; Co-operation data Customer Loyalty
Data
 Customer Segmentation and Promotional offers
- based on Customer Lifetime Value
APPROACH II (LIFETIME VALUE COMPONENTS)
Calculation of Present value
Present Value= Amount paid by customer cost
Calculation of Potential value

Probij : Probability that the customer i uses service/product j out of n services/products

Profitij : Profit that the company has when customer i uses product/service j
Calculation of Customer Loyalty
Customer Loyalty = 1- Churn rate
Probij and Customer loyalty can be calculated through models like decision tree, neural networks
and logistic regression (Training data set : Validation data set :: 30 : 70)
 Customer Segmentation and Promotional offers
- based on Customer Lifetime Value

APPROACH III (LIFETIME VALUE & OTHER COMPONENTS)

Behavioral segmentation in terms of usage volume
Heavy users
Medium users
Light users
Brand buying behavior
Brand loyal
Brand switchers
Customer profitability

Marketing Strategy based on the segments

 Customer Segmentation and Promotional offers
- based on Customer Lifetime Value

CROSS SELLING AND UPSELLING

Segmentation based on current value and Customer Loyalty
Current Value
Churn probability Low High
High II IV
Low I III
SEGMENT I (Loyal but less profitable)
Companies may have large opportunity for upselling
SEGMENT II (Unattractive)
SEGMENT III (Loyal and profitable)
Best for Cross selling of products
SEGMENT IV (profitable but likely to Churn)
Unfit for cross selling but company would like to retain them
 1) RETAIL ANALYTICS

2) ANALYTICS IN ECOMMERCE INDUSTRY

3) ANALYTICS IN ECOMMERCE COMPANIES

4) RESEARCH PAPERS STUDY

5) RECOMMENDATIONS
Tactics for Building and Sustaining a Data Analytics
TeamAs per our study we have found that the companies doing major analytics
work have in house teams hence we suggest in- house centralized
analytics team

One core analytics team located at one spot

in the organizational chart

Ability to allocate resources as needed

Team gets exposure and experience on
multiple parts of the company

Jack of all Trades, Master of None

Expertise can be built once the analytics

practices have been set

In the long run, the company should move to

decentralized analytics team to leverage
expertise in each of the domains
Building an Analytics Culture
Make intellectual curiosity a priority
Technical skills alone are insufficient
Find techies who also can communicate visually
Express ideas about how a business use can best consume the output of data analysis
Business Savvy Analytics
Focus on important and the right level of granularity
Ensure Cross-Training
Expert doing a lunch and learn with the team or writing documents with tips and tricks
Look for domain expertise in your industry
They add the perspective of reality
Keep top talent in steady rotation
Domain experts gain a stronger understanding of the impact of actionable insights on a
companys day-to-day decision-making
Cultivate a touch of conflict
Biggest breakthroughs come from disagreement
 References
Customer segmentation and strategy development based on customer
lifetime value: A case study
Su-Yeon Kim a, Tae-Soo Jung b, Eui-Ho Suh c, Hyun-Seok Hwang d,*
Realizing the Potential of Retail Analytics Plenty of Food for Those with the Appetite Thomas H
Davenport
Explore RFM Analysis using SAS Data Mining Procedures
Ruiwen Zhang, Cary, NC; Feng Liu, University of North Carolina at Chapel Hill, NC
How Predictive Analytics Is Transforming eCommerce & Conversion Rate Optimization (
http://conversionxl.com/predictive-analytics-changing-world-retail/? hvid=352IDw)
http://techcrunch.com/2013/08/31/how-amazon-is-tackling-personalization-and-curation-for-sellers
-on-its-marketplace
/
http://www.ecommercebytes.com/pr/? id=794560
http://www.infoworld.com/article/2619375/big-data/amazon-cto--
big-data-not-just-about-the-analytics.html
http://blog.sqreamtech.com/2013/12/how-retailers-are-using-big-data-to-improve-sales-and-custom
er-service
/
http://aws.amazon.com/elasticmapreduce /
https://gigaom.com/2011/10/18/amazon-aws-elastic-map-reduce-hadoop /
https://datafloq.com/read/amazon-leveraging-big-data/517
http://www.predictiveanalyticsworld.com/patimes/amazon-knows-what-you-want-before-you-buy-it
/
Thank you