How could smart use of big data help retail businesses get ahead of the game?
Many retail businesses across Europe are struggling to keep up with pure-play online competitors and rapidly changing consumer behaviors. However, they may be sitting on a ‘gold mine’ of Big Data that, with the right tools, could give them the chance to fight back.
Middle-market high street retailers and department stores – particularly those without a clear value proposition or those susceptible to online pure-play due to a legacy of under-performing stores in secondary locations – are starting to face tough competition.
In the UK, the high street is going through apocalyptic changes. Historical retail powerhouses such as Homebase, New Look and Mothercare have been forced into restructuring deals and HMV has fallen into administration, while other household high street brands, from Toys R Us to Maplin, have simply disappeared.
However, while e-commerce hits traditional stores hard, many already possess the tools to start the fight-back – often without realizing it. While they may not have the nimble, online-only infrastructure of newer competitors, they are able to harness an enviably rich set of data. This data can provide invaluable insight into a number of areas such as customer behavior, staff and store footprint efficiency and the effectiveness of distribution channels – and could provide the starting point to reclaim the retail landscape.
Unlocking retail's people power
Often one of the first outward signals that a business is in financial trouble is a cut in staff numbers. In the UK, the Centre for Retail Research reported that nearly 150,000 retail jobs were lost in 2018, and predicted many more to come. While Europe isn’t yet experiencing loss on the same scale, alarm bells are starting to ring as the massive German upmarket department store, Kaufhof cut 2,600 jobs as part of a merger with Karstadt, with a further 4,000 to 5,000 staff jobs threatened.
While reducing headcount is one way for companies to quickly cut costs, without adequate long-term planning, it can often result in additional strain being placed on remaining staff and fails to tackle crucial inefficiencies. It’s about knowing the right solution for the business.
A different approach to headcount reduction is a ‘return on invested labor’ (ROIL) approach, when a company assesses its in-store staffing levels using detailed customer transactional data to provide insights into optimal resourcing levels. These insights can be fine-tuned all the way down to department level, and for different parts of the day. This approach doesn’t look simply at reducing staffing, but precisely pinpoints sub-optimal labor resourcing, and where significant sales are being lost, enabling smarter resourcing decisions to be made.
We use ROIL to make sure labor is correctly ‘invested’ in areas and times of the day where there are customers to serve. This approach provides greater visibility of where a retailer can put on more staff and cut back in areas or times of day where footfall does not justify the investment.
This is also true when applied to corporate management, using tools to effectively map out how a large retail business is structured and rapidly identify inefficiencies, which can be tackled swiftly and smoothly.
Transforming the retail footprint
Today’s successful multi-channel retailers require agile organization coupled with a lean footprint. However, most retailers find it difficult to even begin evaluating their network, which often involves the integration of operational, financial and strategic factors, as well as an understanding of country-specific legal constraints.
The main challenge for retailers is getting full value from their store portfolio. Stores will not go away completely – they just have to work in concert with the wider offering. The aim is to make stores more of a destination for customers and a means to fulfill orders that come in from other channels. For businesses, the challenge is to decide which stores to keep and what their role is.
Insights from network-wide transactional data can help redefine a retailer’s footprint - from the number of stores needed to maximize purchasing power, to their location and even the most effective store layout.
THIS COULD RESULT IN A COMPLETE OVERHAUL OF A RETAIL NETWORK’S DISTRIBUTION FOOTPRINT, INCLUDING:
- Using logistics hubs with smaller ‘infill’ urban warehouses
- Leveraging shared logistics synergies
- Pooling last mile concepts
- Improving in-store picking processes
In an increasingly digital retail market, the use of smart data-driven insight to inform business decisions could mean the difference between survival and failure. The good news is that most retail businesses are already sitting on a gold mine of data gleaned from transactional behavior, customer loyalty schemes, and operational analytics. They just need to learn how to use it to their advantage.
The AlixPartners Approach
We use a combination of experience, expertise and industry-leading tools to advise retail businesses on the best way to use data to drive operational and commercial advantage, including:
- Transaction data analysis to generate insights needed for brand supplier negotiations and inventory deployment.
- Harnessing people power through visual insights into the structure of a whole corporate organization, to identify efficiency improvement opportunities.
- Store Rationalization Models providing recommendations to retailers with diverse store footprints.
- Blended pricing, promotion and marketing expertise with advanced decision sciences and cutting-edge tools to create and execute effective pricing strategies across all digital marketing channels and promotion programs.