Did you know that in 2020, physical retail store sales hit a staggering $18.5 trillion, accounting for 90% of global retail sales? Despite extensive media coverage declaring brick-and-mortar stores as dying, a growing body of evidence shows the opposite is true.
E-commerce accounts for less than 10% of all retail sales. Additionally, e-commerce giants like Amazon are investing heavily in brick-and-mortar stores with acquisitions like Blink Home. Amazon is also upping the retail game with its own Amazon Pop-Up, Amazon 4-Star, and Amazon Go physical stores.
Traditionally, the retail sector has lagged behind other industries in adopting technology, which holds true in its acceptance of BI technology.
But the competitive game is changing for retail.
Keep reading to find out how retailers can use BI to drive sales and remain competitive in a brick-and-mortar store.
What Is Business Intelligence?
Retail companies now capture massive volumes of data about their products, customers, and sales. However, turning this data into actionable insights can be a challenging process. This is where business intelligence software comes in.
Business intelligence (BI) enables organizations to collect accurate, reliable data from diverse sources to gain valuable decision-making insights.
In its simplest form, BI is a set of processes, technologies, and architectures that convert raw data into meaningful information. It combines business analytics, data mining, and data visualization tools to help organizations make data-driven decisions.
Over the past decade, BI has evolved to include more processes and activities that help organizations turn data into profitable business actions. These processes include:
- Data Mining: The use of statistics, databases, and artificial intelligence reveals trends in large datasets.
- Data Visualization: Turning data into visual representations such as graphs, charts, etc., to make it easier to consume.
- Querying: Asking questions and using BI to pull the answers from the datasets
- Reporting: Sharing the results of data analysis with stakeholders so they can make decisions and draw conclusions
- Performance Benchmarking: Comparing current performance to the industry standards to determine a company’s position in the market.
In practice, businesses can use BI to improve performance or solve an existing problem. For example, a company that wants to manage its supply chain better can use BI analytics to determine where and why delays occur.
Strategies to Use BI in a Brick-and-Mortar Business
Business intelligence can help organizations mine data and analyze it to identify performance gaps and make informed decisions.
To achieve this, companies need to invest in robust BI solutions and devise viable business strategies. Here are seven strategies businesses can implement to use BI for increased efficiency in brick-and-mortar stores.
1. Floor Plan Optimization
One of the main reasons retailers opt for business analytics is to design a floor plan conducive to sales.
A carefully laid out store plan can tempt customers to shop for longer and even buy more without even realizing it. To help customers buy more, it’s critical for a business to choose a layout that allows customers to shop with ease.
A well-planned store layout allows companies to maximize revenue for each square foot of their allocated space. Businesses can achieve this by arranging merchandise efficiently to encourage customers to shop more and with ease.
That said, a perfect floor plan should strike the right balance between customer experience and revenue per square foot. However, many businesses ignore the importance of store plan design and end up making costly mistakes.
For example, some retailers “cram” the retail floor with lots of merchandise. While this increases selection, it also reduces customers’ flow space. But with a BI tool, businesses can create a floor plan that takes customer experience and revenue per square inch into account.
Using BI software, retailers can determine whether the selected floor plan is sufficient for the floor size and product types.
A BI solution will analyze various data sets (section visits, number of stops, visits duration, etc.) and recommend a floor plan that will make it easier for customers to find what they want with ease. Additionally, a BI-optimized floor plan also promotes up-selling and cross-selling.
2. Optimize Product Placements
Retailers worldwide employ much expertise, including software solutions, to design the perfect floor plan for their stores.
With this expertise, research and feedback have emerged a new area of study: product placement psychology. Making your product descriptions catchy isn’t enough to guarantee a sale. Retail store product placement is the art of determining where merchandise should appear in a store through effective planning and design.
Much goes into play when determining the store’s “hot spot” for product placement. Retailers need to think about the items that sell best, the amount of square foot needed, optimal lighting, and their customer base’s demographics.
Getting this information can be extremely difficult for retail companies that rely on manual methods of extracting data.
However, companies that leverage BI tools often benefit from product placement optimization. A robust BI tool can analyze in-store traffic, the store’s size, and consumer behavior to determine the perfect spot to place critical products.
By analyzing BI analytics, retailers can also gain valuable insights into consumer behavior around specific products. This data can help retailers to either change product placements or altogether remove some products from the stores.
3. Better Inventory Management
Inventory management is the foundation of any well-functioning retail business. It encompasses all activities related to stock handling—from sourcing to storing to selling inventory and finished goods.
Any retail company that holds stocks is up against a multitude of inventory management challenges. From inefficient tracking to overstocking issues to warehouse inefficiencies, managing inventory can present many challenges to retailers.
However, investing in a BI solution can improve inventory management and remedy most of the stock-related challenges that retailers face today. With a business intelligence system in place, retailers can:
- Maintain optimal stock levels
- Prevent costly inventory build-up
- Improve order management and order processing
- Improve service levels with the right product availability
- Reduce inventory costs
BI allows retailers to classify their merchandise based on ABC analysis, also known as Selective Inventory Control (SIC).
This approach identifies the items that have a high impact on inventory costs and groups them into separate categories for easy management and control. It also divides the inventory into three categories A, B, and C, where A is the most valuable and C the least important.
By using business intelligence analytics, organizations can predict over-stock situations before they become a significant problem. A robust business intelligence solution will combine data from sales and replenishment patterns to produce inventory reports that can be used for forecasting.
4. Take Marketing to the Next Level
According to a 2019 Gartner Spend Survey, companies spend at least 10% of their marketing revenue. With many marketing platforms, social media tools, and customers existing online, marketing has become an increasingly data-driven industry.
But to get the most out of any marketing strategy, organizations need to have a system in place that can analyze the data and provide useful insights into the consumers buying behavior. And this is where business intelligence tools come in handy.
BI tools work to make a company’s marketing strategies more composed and effective.
By using BI analytics for marketing, companies can gain in-depth insights into their customers’ preferences, interests, and attitudes. These insights can help them design better marketing campaigns, target the right audience, and advertise on the right platforms.
For example, retailers can use BI analytics to determine which marketing platform is bringing in more traffic. If the retailer wants to capitalize on Facebook ads, a BI solution will provide all the relevant metrics, like page views, likes, on-page actions, etc.
Additionally, a BI tool will also offer many data points that marketers can leverage to improve their posting strategy. BI analytics can identify trends and data patterns that can help to increase Facebook likes and click-through-rates (CTR)
BI tools can also help marketers understand their audience, identify trends in consumer behavior, measure a marketing campaign’s effectiveness, and know what their competitors are doing.
5. Conduct Competitive Analysis
A competitive analysis is a strategy that allows businesses to identify major competitors and research their products, pricing, sales, and marketing strategies.
By having a sneak peek into what the competition is doing, a company can structure its products and pricing to help it achieve a competitive advantage.
Conducting a competitor analysis requires companies to have advanced analytic tools to mine, extract, analyze, and present data in an easy-to-digest format. This can be achieved with the use of business intelligence tools for competitor analysis.
BI tools can help retailers track, analyze, and learn from their competitors’ strategies. Data obtained can help them fire up their marketing strategies and win big. BI analytics can also provide retailers with a benchmark against which they can measure growth.
6. Conduct High-Level Performance Analysis
One of the critical goals of business intelligence is to organize and distribute metrics on its performance.
Often, companies want to improve different aspects of their businesses but can’t put the finger on what metrics to use to measure performance. But the key to measuring business performance lies in a company’s ability to choose the right KPIs.
Depending on what a retailer is measuring, KPIs can help determine where a company is in terms of sales, inventory movement, growth, and customer satisfaction. Typical retail performance metrics to measure may include:
- Inventory turnover
- Gross margin (as a percentage of the selling price)
- Sales per square foot
- Gross and net profit
- Year over year growth
The role of BI in measuring performance is to provide data sufficient for decision-makers to determine whether the company is meeting its goals and objections.
For instance, if inventory turnover is one of the retailer’s key KPIs, the company can use BI software to extract and analyze inventory data for the period under consideration.
In this case, a BI solution can provide all the data required to measure the stock turnover ratio. It will provide valuable data such as the cost of the products, the number of products purchased, and the cost of inventory that has been sold over the specified period.
Additionally, a BI solution will also provide reports on an ad-hoc basis after an abnormality has occurred. For instance, if inventory levels fall below the required minimum, a BI system will notify the retailer before the problem escalates.
7. Enhance Customer Experience
Excellent customer service is essential. It adds business value, helps retain customers, promotes brand loyalty, and reduces employee turnover.
However, excellent customer service can be challenging to achieve, especially if a business has fewer employees and a large customer base. It can be challenging for a retailer to engage employees and keep customers happy while also running a successful business.
Businesses can mitigate these problems and keep customers happy by automating customer service the right way. Automation can provide businesses with valuable data to guide their decisions and structural choices.
For example, by using customer analytics from a BI tool, retailers can understand their customers better, meet their expectations, and identify opportunities for improvement. These analytics can help marketers make informed business decisions related to marketing.
Advanced data analytics also bring greater customer satisfaction. For example, after goods are delivered, a business may want to know whether their customers were satisfied with the products and the delivery process.
A BI system should allow businesses to quickly measure fulfillment rates and delivery times with the collected data. Data obtained from the business intelligence software can help to:
- Assess fulfillment rates
- Determine whether deliveries were made on time
- Analyze trends to improve forecasting
- Ensure efficiency in order processing
- Assess the likelihood of customers returning
Businesses can dig into the numbers and implement strategies that will improve customer satisfaction. It can also help marketers create a data-driven customer journey map, drawing insights from analytics about how customers interact with a website, products, or business.
Business Intelligence and the Future of Retail
No organization can deny the inevitable benefits of BI.
It can eliminate the guesswork in retail operations, optimize floor plans for maximum revenue per square inch, give insights into what the competition is doing, revamp marketing, and foster business growth. For these reasons, BI has been dubbed a transformation force in retail.
Specialists assess that BI adoption will be so widespread that every retail desktop will have a BI icon. As the roll-out begins for it to be applied in all retail operations, it’s time to get yours on board too!
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About the author
Zoe is a content marketing strategist for SaaS brands like FollowUpBoss, Mention.com and more. Bylines: Ecwid, ProProfs, Score, etc. On the personal front, Zoe is a pho enthusiast and loves traveling around the world as a digital nomad.