How Business Intelligence (BI) Solutions Benefit the Retail Industry

When you work in retail long enough, you realise that ensuring items fly off the shelf is not just about selling effectively. It involves knowing what your customers want, when they want it, and predicting both even before they can anticipate it.

Previously, this would have required years of working with customers, figuring out their buying patterns, preferences, what makes them tick, and correlating those insights with your seasonal sell-through rates. But today, you could use retail business intelligence (BI) software to streamline collecting, analyzing, and utilizing data to gain key insights, enhance decision-making, and improve operational efficiency.

If you haven’t used BI retail solutions before and are looking for proof points in the retail industry before investing in one, this blog is for you. By the time you finish reading this, you’ll not only know what BI retail solutions are but also why all the big players in retail are using one every day. Let’s get into it.

What is Retail Business Intelligence? 

In the simplest terms, a BI retail solution simplifies the process of extracting usable insights from your business data. It collects data from your ERP, inventory, and warehouse management systems, analyzes them, and doles out actionable insights to help you understand customer behaviour, track sales performance, and identify trends and patterns quickly. It also presents these insights in an easy-to-understand format so that you can make more sense of your data.

But do retailers need it? Yes, we think they do. Here are some reasons why top retailers are using BI retail solutions in their business.

Why top retailers use BI retail software

To create hyper-personalized customer experiences: If you’re a retailer, you’ll probably agree that customer insights could make or break your sales season. After all, it’s how you know products your customers prefer, and when they are more likely to buy them.

Getting these insights without a retail BI solution would be difficult, given you’d have to rely on what your customers say in surveys or customer interviews. After all, getting valuable information from customer surveys and conversations would depend on your surveying skills and circumstances. For perspective, 42% of customers confess to not completing surveys to limit interactions with brands.

Retail BI solutions help you avoid the hassle of understanding customer sentiment by interacting with them. They give you a detailed and reliable view of customer behavior based on their store and past brand interactions. So, you are privy to information such as your customers’ product preferences, based on sales rates, and even their intentions, based on their on-site behavior. All this information helps you create personalized shopping experiences that your customers genuinely like. And such customers (56% according to a survey) are more likely to return. 

Top retailers using BI retail software to improve customer experiences:

1. Starbucks utilizes BI retail software to predict customer purchase interests and offer personalized promotions, increasing sales volume.
2. Walmart gains insights into the interplay between online behaviour and in-store/online activities with BI retail solutions, optimizing strategies based on purchasing patterns and user journeys

To Optimize Inventory and Supply Chain Management : As a retailer, chances are you’re unconsciously following the Goldilocks rule for inventory management. Meaning you’re doing your best to ensure that your inventory levels are just right. Not too much to raise holding costs and not too little to risk stockouts. And that’s a challenging job, especially if you’re relying on manual management methods.

Think about it. If you’re relying solely on manual management methods, a single lapse in judgment could cause delays in replenishment or excess inventory. Sudden demand shifts could create major ripple effects across your operations.

BI retail solutions help you reduce the margin of error by 20-50% by using AI-tech. They offer real-time tracking, demand forecasting, and centralized visibility, so you always have a pulse on what’s moving, what’s not, and what’s needed next. You can anticipate demand surges, reduce carrying costs, and coordinate better with suppliers,  without needing to manually crunch the numbers.

Besides, BI retail management tools like Increff also give SKU-level tracking reports. This helps you avoid phantom inventory errors and supports better demand forecasting.

Top retailers using BI retail solutions:

1. Kate Spade also uses BI retail management solutions for demand forecasting. This helps them stock optimally during peak sales.
2. Target uses BI retail management solutions to streamline its supply chain and improve demand forecasting accuracy.
3. To Improve Sales Performance and Profitability

Great retailers swear by this one cardinal rule: good assortment planning precedes sales. And good assortment planning depends on accurately predicting customer demand patterns. Manual ways of demand pattern prediction are prone to errors due to manual data entry, static calculations, overreliance on past sales data, and human bias. Meaning assortments based on these predictions run the risk of selling less, or worse, not at all.

BI retail solutions, on the other hand, help you make better data-led dynamic assortments. You get to track trends month-on-month based on live sales data and can tweak assortments accordingly. Many modern retail BI software like Increff also provide style performance dashboards, giving you real-time insights into sales performance at the SKU level, along with a dashboard to identify top performers.

Lastly, software like Increff helps you make sales comparisons across different time frames and across product attributes like color, size, and category. This allows you to understand seasonality and regional sales variations and informs your demand pattern prediction algorithms better.

For example, a prominent apparel brand saw a 26% boost in sales quantity and a remarkable 34% revenue growth after adopting Increff’s merchandising software, which was fueled by Increff’s powerful business intelligence capabilities.

Other top retailers using retail BI software:

1. Loewe’s uses BI retail management software to optimize their supply chain and refine product assortment at specific locations.
2. Walmart also reportedly uses AI-powered BI retail solutions to analyse historical sales data, local demographics, and macroeconomic trends to adjust inventory levels dynamically and reduce stockouts.

4.  Enable Strategic Marketing and Campaign Optimization

Big retailers that surpass their sales revenue year on year make sure to invest as much time in marketing as in sales. After all, this is the only way you’ll stay on your customers’ top of mind and perhaps their to-buy when sales season comes. 

Most retailers rely on spray-and-pray marketing. The assumption is that simply broadcasting a sales announcement will bring all interested customers to them. The problem? Customers expect brands to personalize their marketing. Additionally, a  McKinsey report found that brands that pushed incremental sales through targeted promotions saw a 1 to 2% lift in sales and a 1 to 3% improvement in margins.

BI retail software helps you market to your customers strategically by helping you understand your customers’ behavior based on their geography, interests, and past behaviors, and segment them. So, instead of sending the same marketing message to a customer in LA and Sydney, you could send them a tailored promotion based on their location. Similarly, you’d market a different product line to a millennial customer versus a Gen Z customer.

All of this helps you get more customers to the store, improving your sell-through rate.

Top retailers using BI retail solutions for marketing:

1. Amazon uses retail BI software to personalize product recommendations and execute targeted marketing strategies to sustain high sell-through rates season on season.
2.  Starbucks is also known to employ BI retail solutions to analyze demographic and consumer behavior data to personalize marketing campaigns.

5 Tips for Successfully Implementing Retail BI Software in Your Company

1. Define your business objectives: Doing this on the onset will help you determine which data sources to prioritize, KPIs to track, and how to measure success. 
   
2. Choose the right BI software : BI retail solutions are an investment. Choose software that aligns with specific operational needs, and consider compatibility, scalability, and user-friendliness. This helps you avoid overspending on features you might never use.

3. Prioritize data quality: Remember, your BI retail management software is only as good as your data. So, create a system to ensure data quality. Set up robust data management practices, regular audits, and strict data governance policies for accurate insights. 

4. Schedule employee training: The last thing you want is to see your expensive BI retail management software collect dust. Employee training and support help you avoid that. They enable effective software utilization and make the adoption of new tech quicker and seamless. 

5. Evaluate progress regularly: Finally, monitor and evaluate your BI retail solution’s performance against the previously defined KPIs. This helps identify gaps and opportunities to optimize BI usage as well as calibrate the system regularly to get a good return on investment.

Final Word

By transforming data into actionable insights, retail BI software empowers retailers to make data-driven decisions that enhance customer experience, optimize operations, improve sales, and gain a significant competitive advantage. Embracing BI allows retailers to not only keep up with trends but also to shape them, unlocking new avenues for growth and innovation.

Looking for retail BI software that works with your business? Connect with us.