Retail businesses constantly undergo digital transformation, and with the increase in popularity of online shopping, social media, and mobile apps, retailers now have access to vast amounts of data. However, collecting this data is just the first step. The more important question is what businesses should do with this data.

Business Intelligence (BI) is a process that uses software and technology to collect, analyze, and transform data into actionable insights. BI involves gathering and integrating data from various sources, both internal and external, to generate reports, dashboards, and visualizations that provide a comprehensive view of business performance and trends. The ultimate goal of BI is to improve decision-making and drive business growth and profitability by providing key stakeholders with the information they need to make informed decisions.

BI employs various tools to analyze available data and deliver quick, actionable insights about an organization or business's current state. For example, retailers can use BI to determine how many customers they gained or lost in a given period, or to analyze the sales numbers of a recently launched product.

However, it is important to note that BI does not prescribe what retailers should do or what the consequences of a particular decision may be. Instead, it is a descriptive process that informs managers of what is happening now and what led to the current state based on historical and current data. In short, BI aims to answer the question of how businesses can make prudent decisions based on data.

Applications of BI in the retail industry

Leveraging business intelligence (BI) in the retail industry doesn't require the resources of a large corporation like Wal-Mart. With a comprehensive software system, any retail business can collect and analyze data to gain valuable insights. Here are some ways to apply BI in the retail industry.

Create a personalized shopping experience

It's no secret that improving customer engagement can lead to higher sales. The challenge lies in figuring out how to create a fantastic shopping experience, and the key to achieving that lies in understanding your customers on a deeper level.

One way to improve cross-selling and up-selling opportunities is to track customers' browsing habits and buying decisions, which can reveal their preferred products, shopping preferences (online or in-store), expectations, and preferred brands. With this information, you can create a personalized customer journey by tailoring special offers based on what they're searching for.

Research by Forbes shows that 44% of shoppers are more likely to make repeat purchases when they've had a personalized buying experience. Macy's, a leading omnichannel retailer, is an excellent example of how personalization can foster customer loyalty. The company collects and analyzes data on customers' shopping habits, buying frequency, tastes, and preferences to create personalized loyalty programs and offer special incentives. As a result, Macy's projects its digital sales to reach a whopping $10 billion by 2023.

Effective marketing campaigns

Business intelligence plays a crucial role in crafting effective marketing campaigns in the retail industry by harnessing the vast amount of data collected from hundreds of transactions. With the help of relevant questions, such as the best-selling products, consumer demographics, and top-performing retail outlets, retail brands can identify key performance indicators (KPIs) and make informed decisions.

By leveraging business intelligence, retailers gain a better understanding of their customer base and can create personalized marketing messages at a granular level. This leads to more confidence in marketing campaigns and a higher chance of success.

Data from various sources, such as web browsers, social media, email campaigns, and user forums, can be analyzed to predict buying trends and create a detailed customer persona. By combining these insights, retailers can develop targeted marketing campaigns to reach the right audience with the right message.

Streamline supply chains

The retail supply chain is a complicated network that involves various stakeholders, from production to the delivery of products to warehouses. Due to this complexity, it is susceptible to inefficiencies and suboptimal performance from some stakeholders or departments.

Thankfully, business intelligence tools can provide valuable insights from the data generated by your daily retail operations. This can help you identify logistical bottlenecks that require immediate attention to optimize your supply chain operations.

According to McKinsey & Company, businesses that use retail business intelligence to streamline their supply chain operations can reduce their supply chain expenses by up to 10%.

Better inventory management

In the retail industry, managing inventory levels can be a challenge. Overstocking and understocking can both lead to negative consequences. To avoid these issues, retailers can use business intelligence tools to gain better insights into their inventory and customer data. These tools provide a centralized database that combines data from various sources, such as point-of-sale systems, enterprise resource planning (ERP) systems, and warehouse management systems.

By accessing real-time inventory data, retailers can achieve better inventory management by:

• Identifying demand patterns and increasing supply to reduce the threat of understocking.
• Knowing which stores require additional inventory allocation.
• Finding ways to dispose of low-selling products.
• Creating accurate inventory projections based on available stock and sales reports.

Optimize prices

In today's market, customers are knowledgeable about finding the best value for their money. They compare prices online while shopping for a particular product and tend to be loyal to retailers offering competitive prices and discounts. Therefore, a store's pricing strategy is crucial to maintain a profitable bottom line.

Unfortunately, some retailers rely on outdated pricing strategies, using past trends or hunches to set prices for their products. However, with the use of BI, retailers can set the right price point that increases their revenue while providing value for their customers.

Retail business intelligence considers various factors to determine the price point for a product, such as seasonality, market pricing, competitor prices, and customer buying patterns. The optimized price may be either lower or higher than the initial price. The frequency of price adjustments is an ongoing process that retailers must make data-driven decisions.

Customer segmentation

In the retail industry, customer segmentation is a valuable business intelligence tool that involves grouping customers based on their distinct characteristics, behavior, and purchasing patterns. By analyzing customer data, retailers can create tailored marketing campaigns and promotions that cater to the unique needs of each customer segment.

There are several ways that customer segmentation can benefit retailers:

• Targeted marketing: Retailers can create personalized marketing messages for each customer segment, using customer segmentation data. For example, a retailer might send an email campaign promoting outdoor gear to customers who have previously purchased camping or hiking products.
• Targeted marketing: Retailers can create personalized marketing messages for each customer segment, using customer segmentation data. For example, a retailer might send an email campaign promoting outdoor gear to customers who have previously purchased camping or hiking products. Product recommendations: By analyzing customer purchase history, retailers can provide personalized product recommendations to customers. This not only enhances the customer experience but can also increase sales.
• Customer retention: By understanding customer behavior and preferences, retailers can identify customers who are at risk of leaving and create targeted retention campaigns to keep them engaged.
• New product development: Customer segmentation helps retailers identify gaps in their product offerings and develop new products that meet the unique needs of each customer segment.

Overall, customer segmentation is a potent business intelligence tool that can help retailers create customized shopping experiences and establish lasting relationships with their customers.

Tips for retail business intelligence success

The market for business intelligence solutions is vast, with numerous vendors and tools available for retailers to choose from. To ensure success with retail BI, retailers should start by conducting a thorough evaluation of their needs and requirements. Here are some tips to consider:

• Clearly define your objectives for using BI.
• Select a solution that is specifically designed for the retail industry.
• Develop a comprehensive change management plan and strategies to obtain buy-in from all stakeholders.
• Employ knowledgeable personnel to execute the solution, or engage the services of IT experts with experience in similar projects.
• Choose a vendor who offers both technical and strategic support for the entire lifespan of your BI solution.
• Develop post-adoption guidelines for data quality maintenance and business intelligence governance.

Business Intelligence in retail industry

Extracting insights from big data is essential for retailers to gain a competitive edge. Business intelligence (BI) offers a practical solution for retailers to analyze data and identify core issues affecting their operations.

BI tools play a crucial role in optimizing pricing structures, inventory management, supply chain operations, and customer-facing initiatives such as marketing campaigns, store appearance, and employee performance. Retailers understand that uncovering customer patterns and providing a personalized shopping experience is critical for effective BI.

To ensure successful adoption of BI in the retail industry, retailers should set clear objectives, select a solution tailored to their needs, implement a change management plan, hire qualified personnel, choose a supportive vendor, and create post-adoption guidelines. For more tips and advice, consult with our experts!