Retailers are known for being innovators, and today´s top innovative retailers are those who use business intelligence technology to gain a competitive edge, say two researchers for Wipro Technologies.
Srinivasa Rao and Saurabh Swarup of Wipro, whose work I have cited in two earlier posts, suggest in a white paper that there are two specific areas of storefront operations that can benefit from data warehousing (data structured for the purpose of being analyzed) and data mining (searching for patterns in your data).
In their report, "Business Intelligence and Retailing," the analysts term the first area of storefront operations "market basket analysis," which is used to study natural affinities between products. A classic example of market basket analysis, they say, is the "beer-diaper affinity," which states that men who buy diapers also are likely to buy beer.
This is an example of two-product affinity, but in real life, say Rao and Swarup, market basket analysis gets more complex and results in previously unknown affinities among a number of products. Such analysis has various uses in the retail organization, a common one being in-store placement of products. Another use is product bundling, where groups of products are sold in a single package deal.
The second area where data warehousing and data mining can aid storefront operations is in analyzing out-of-stock situations. Not only does such analysis probe the reasons that a retailer runs out of a particular product, it also calculates how much revenue is lost due to the empty space on the shelf where a certain product should be found.
The wisdom gained by analyzing huge amounts of data, Rao and Swarup say, should reach every corner of the retail organization, with the objective being that employees convert this wisdom into action.
Srinivasa Rao is a technical manager with Wipro; Saurabh Swarup is a consultant to Wipro. Both work in the Business Intelligence and Data Warehousing Group.