In today’s competitive market, retail executives often find themselves suffering from one of the most perplexing questions of the digital age: “What do we do with all this data?” With the amount of information generated, gleaning meaningful, actionable insights is a challenge. This mountain of data gives way to “analysis paralysis” in many organizations as they seek to find which factors truly affect their businesses.
Below are common challenges retailers face in leveraging data to make better decisions, along with quick tips to make better use of data and analytics.
Challenges Hinder Retailers From Effectively Leveraging Data
Analysis paralysis is just one of the challenges retailers face in the era of big data. In fact, only 16 percent of CFOs trust the insights given to them, according to Forrester. Common reasons include the following:
- Not having a well-defined data strategy: Relying simply on the past or pre-conceived ideas of what data to collect, how to evaluate it and how to act on the results is a mistake that can cripple even the most successful retail chains.
- Finding meaning in volumes of data: From operational, sales and performance data to external factors like consumer sentiment and exchange rates, executives often struggle to determine which data sets will produce desired insights.
- Accessing quality data: According to a survey conducted by CrowdFlower, at least 79 percent of a typical data project is spent on gathering, validating and cleaning data, which leads to rushed analysis and questionable insights.
- Failing to incorporate external data: Planning with internal, historical data alone is like planning in a vacuum — there are too many external factors to success to ignore. External insights are critical to understand what's actually driving consumer demand.
The Risks of Failing to Incorporate Data Are Mounting
Retailers must use data to foresee challenges and opportunities before their competition and adapt accordingly; failure to do so could mean doom. The recent wave of long-standing companies that have filed bankruptcy, including Toys"R"Us, RadioShack and Payless ShoeSource, would have benefited from forward-looking insights on customer behavior and economic impact. Better, proactive use of consumer and economic data could have given these companies the foresight needed to optimize inventory, prices, channels, and online and offline experiences.
Best Practices Make Data Accessible and Actionable
Overcoming the challenges to making data usable requires commitment at all levels of an organization, but the results can equal cost savings, increased revenue and more satisfied customers. Here are a few best practices that will help to pave the way for success:
- Start with a specific business problem to solve. Analysis paralysis often results from trying to do too much at once. By honing in on one single initial goal, retailers can focus on answering the questions that matter most to improving business performance.
- Identify the industry’s and company’s top economic external indicators. Leading external indicators signal what companies can expect six, nine and even 12 months ahead. These vary by company, and often are not readily apparent, but general factors affecting the retail industry include inflation, wage growth and private sector job openings, as they shed light on consumers’ ability and willingness to buy.
- Look for relevant insights for quick wins. Early wins will help the entire company see the benefit of incorporating data into their everyday operations. Consider finding an industry insights and analytics partner to maximize the team’s time on insights instead of data gathering, cleaning and point-in-time analysis.
Relying on what worked in the past to drive success in the future is no longer an effective retail strategy. With the ability to accurately predict the drivers of demand, retail executives have the opportunity to use external data in everyday decisions to have a meaningful impact on bottom line results.
Rich Wagner is the president and CEO of Prevedere, a provider of cloud-based business intelligence solutions.