How data-driven innovation is becoming a core asset for competitive advantage in the retail industry

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The retail industry has long been focused on data usage in many parts of its businesses: managing transactions in detail via electronic points of sale (EPOS), analyzing these transactions in data warehouses, tracking responses to advertising, optimizing supply chain and store restocking systems, and many more.

Nevertheless, with a development of big-data market retailers are facing disruptive innovation trends which are re-shaping the way they relate with customers, as well as the way they work and compete.

According to an IBM study together with the University of Oxford, 62% of retailers in 2012 agreed that the use of advanced data analytics was improving their competitiveness.

Retailers are competing in a consumer-empowered industry and that the only way to keep the pace is to leverage their information assets. Consumers are much more informed than they were in the past and loyalty involves many more factors. Therefore, keeping pace with the new technology-savvy consumers and influencing their choices through personalized marketing is becoming a new standard of competition.

In 2012, Morrison, a UK groceries chain, decided to adopt Smart Steps, a cloud-based innovative service from Dynamic Insights - a Telefonica Business Unit. Smart Steps uses customer location data in an aggregated and anonymized form to monitor crowd movements or "footfall". By using this service, it was able to improve strongly their ability to target and identify customers and has reached an increase in new or reactivated customers visiting Morrisons' stores by 150%.

In addition demand forecasts become strategic to efficiently manage storage and good returns system. Keeping pace with the new technology-savvy consumers and influencing their choices through personalized marketing is becoming a new standard of competition. Hence, the innovative use of data technologies is improving the accuracy of forecasting by 20% to 40%, as experienced by some large retailers.

Otto, a large German retailer, prevented 2 million article returns and saved €10m, thanks to accurate demand forecasting based on predictive analytics and greater efficiency in stocks management.

Finally, last generation data-driven, cloud-based solutions are starting to displace expensive CRM systems, because they require lower initial investments and rely on flexible, pay-as-you go delivery systems with immediate returns.

IDC, Data-driven innovation in the Retail Industry, 16 May 2015

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