Global Retailers Build Profits with BI

Increase profit levels and exceed customer expectations with BI technologies

By Lori Schafer

Many retailers have implemented the basic “plumbing” technology of ERP (enterprise resource planning) and transactional systems; now, it’s time to strategically use the data that those systems generate to make better business decisions and grow the top and bottom lines. All industries – including retail are laser-focused on BI and predictive analytics as the top technologies to enable growth. The process of analyzing data and making solid business decisions based on hard facts takes retailers out of the realm of guessing about possible outcomes and places them squarely in the world of knowing what’s going to happen. 

BI technology has leapt from the back room of IT shops into the forefront of boardroom-level discussions because of the potential for positive impact on earnings and shareholder value. Every executive around the table is responsible for expanding corporate profits, and these technologies support executives in their efforts.

BI technology can be approached either as an integrated suite of solutions or as a point solution. Retailers, who are pressured to show high-impact results, may first choose the point solution for assortment planning, size optimization or markdown optimization. But selecting an integrated suite offers the best of both worlds: Begin with one element, gain a payback and then fund the next initiative.

One of the many ways BI technology has a swift and direct impact on a retailer’s bottom line is through price optimization. Price optimization technology allows retailers to maximize margin and inventory goals by establishing optimal initial pricing, promotional pricing and optimized markdowns.

Increase profits by optimizing pricing 
Price is the most important profit lever a retailer has to work with. A 10 percent price increase can double profits – a far greater impact than increasing sales by 10 percent (resulting in only a 33 percent increase in profit) or reducing fixed expenses by 10 percent (which results in a 20 percent increase in profit). Understanding price elasticity and how to optimize pricing from the start is paramount in moving the profit needle for retailers in all categories.

Because of its power to improve the profit landscape, price optimization technology is often considered self-funding. It quickly pays for itself and puts savvy retailers in a position to adopt additional sophisticated technologies that create an impact further upstream in the business process. An example of this type of technology is advanced assortment planning, which allows tailored local-market assortments.

Price optimization technology has become more mainstream as it has evolved beyond first-generation software applications. Retailers using second-generation price optimization solutions gain many benefits from predictive analytics, such as robust forecasting across all merchandise types and enhanced scalability – and some solutions even enable optimization from zone-to store-level pricing, an important factor for many retailers. Driving these second-generation systems are vast amounts of SKU-level pricing data, making data integration another important part of selection criteria.

Providing these solutions through hosted “software as a service” delivery systems means that smaller, emerging retailers can gain the same competitive advantages as larger organizations. In today’s fiercely competitive environment, that kind of edge gives up-and-coming retailers a much-needed boost.

A more sophisticated consumer, a more competitive landscape and higher shareholder expectations all mean that retail is more demanding than ever. Retailers must take advantage of the latest technologies to get ahead in today’s global economy. BI and predictive analytics give retailers the edge they need to achieve their goals today – and tomorrow. 

Bio:

Lori Schafer is the Executive Advisor for Retail Solutions at SAS.