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Retail Analytics: Understanding Customers

Overview of Retail/FMCG industry in India: The Indian retail sector has been at the helm of Indias growth story. This sector has evolved dramatically from village fairs, street hawkers to malls and plush outlets and is still growing strong. India is the seventh-largest retail market in the world, and is expected to grow at a CAGR of over 13% till FY12. In FY07 retail sales reached Rs 13,300 bn and amounting to around 33% of India s GDP at current market prices. According to the Central Statistical Organisation estimates, the total domestic trade (both retail and wholesale) constituted 13.0% of countrys GDP in 1999-2000, which has gone up to 15.1% in FY07. [SOURCE: ICRIER, CSO] During the past years, the retail Indian market has seen considerable growth in an organised manner. Major domestic players have entered the arena, and have plans to expand in the future years, across verticals format and cities. For example, various companies like Tata, Hindustan Unilever, Bharti, Biyani group, Adani Enterprise, have been investing considerably in the always booming Indian retail sector. Also, a number of multinational corporations have also set up retail chains in collaboration with various Indian companies. The Indian retail sector is highly fragmented; also the unorganised sector has around 13 million retail outlets that account for around 94-95% of the total retail industry. However, moving forward, the organised sectors growth potential is constantly increasing due to globalisation, economic growth, and trending lifestyle. Moreover, high consumer spending by the young population about 31% of the country is below 14 years and sharp rise in consumable income, are driving the Indian organised retail sectors growth. Small towns and cities are also witnessing a major shift in consumer lifestyle and preferences, and hence emerged as attractive markets for retailers to expand their presence. Although the growth potential in the sector is immense, it comes with many challenges that could slow down the pace of growth for new entrants. Tough regulations, ever increasing real estate costs, lack of basic infrastructure, high personnel costs, shrinkage and highly competitive domestic retailer groups are some challenges. Moreover, resource constraints at shopping malls are also delaying completion and thus disrupting many retailers entry strategies.

Current Scenario

Introduction to Business Analytics in Retail: Retail Analytics for understanding customer is the systematic study of customer data with the main objective of optimizing customers utility, while improving the return on the marketing program investments. The term analytics refers to the applied use of statistical techniques to gain understanding and value from unstructured and structured information in an enterprise, departmental and third-party databases and repositories, line ofbusiness etc. From a practical approach the objective of anymarketing analytics is to study customers shopping and consumption behaviour, to uncover their tastes and preferences, and to identify any particular patterns. Firms can utilize this knowledge to better serve their customers, by offering more relevantpromotions; customized products and services; and reducing promotional differences. Retail analytics also allows themanagement to measure the effectiveness of marketing campaigns and initiatives, and hence increasing accountability.Analytics can also provide a critical and timely input to managerial decision making, to make it more data driven.

Prerequisites of Analytical Retail Regardless of any analytical process or application, there are some key prerequisites of analytical progress in retail that are common to virtually every organization. First is data, you cant do analytics without somewhat clean, integrated, high quality, and accessible data. Fortunately, retailers increasingly have vast amounts of data available, from point of sale (POS) transactions, from websites, from current loyalty programs, from credit programs, and from enterprise resource planning (ERP) and other such business applications. Data must be accessible to be analyzed; so many leading retailers provide access to data in the form of a constructive data warehouse. Many companies have proliferated warehouses and multi-purpose data marts, but since, integration is critical for advanced analytics, most sophisticatedretailers prefer building an enterprise data warehouse (EDW) which helps in key analytical applications to draw data from. The EDW includes customer, supply chain, product, pricing, and financial data and hence making it much easier to interrelate data across other functions. Many of the retail analytics professionals noted that, their lives became much easier when their companies adopt an EDW. Importance:

Data Analytics is needed in the field of retail because it gives us so much information about the customers, their pattern which we cannot ignore. This is important to know why something happened, why it happened and what should be done to prevent the bad things or repeat the good things. We also know other details about the customers like who they like are. Profiling & segmentation, when are they coming back, why are they coming back, what are they purchasing, are they upgrading or downgrading in their subsequent purchases etc. Similar analysis can be done at merchandise level or store level, or at any other level.Just collecting data and generating reports will is not enough, it will not increase your sales or customer loyalty, but they provide the dealers the appropriate tools to understand the customer behaviour. It is data analytics and to utilize this knowledge of customers behaviour that increases the sales and customer loyalty.

Opportunity: Achievingcompetitive advantage from retail analytics is enormous. With the various analytical tools, retailers can: Develop close relationships with customers, based on the understanding of their behaviour and patterns Deliver the targeted advertising,promotions and other offers to customers that will motivate them to buy the targeted products Charging the exact price that customers are willing to pay Using the marketing investments wisely Distribution centres, locate stores, warehouse and other facilities in optimal locations

Challenges: Data Perspective: The biggest challenge most retailers face now is in extracting insights from the huge customer data base, beyond this replenishment chain. Analytics which is backed by robust data management, has the capability of burrowing retail industry into these mountains of huge data, too tedious now for any human effort, and of discovering patterns, invisible to the statistically unaided eye. But this data offers these retailers the capability to transform their businesses. Right across the retail industry, there is abelief that more work must be done to extract value from internal customer data assets .In other cases, they believe that the internal data they already have is of a better quality and there is a tangible reluctance to utilise a broader set of external sources such as social media or attitudinal or behavioural data. Three main challenges that seem to be dampening their interest in the emerging external data sources: the ability to link external data to individual customer potential data privacy concerns like theft, duplication etc and reputational impacts of tapping and scanning into customers external data the lack of clarity through which pieces of external data are going to add greatest value to the business

Managerial Perspective: Retail managers could have perhaps the most to gain from successfully collecting the massive data; customers are sharing about themselves, via transactions, shopping as well as by sharing their views and opinions about products via social media and other online forums. But ironically though, the retail industry is under tremendous pressure to stay competitive, the industry as a whole lags behind other industries in its use of data analytics. Many retailers are finding themselves paralyzed or perplexed by the amount of data streaming into their networks. But several factors are dramatically altering the retail landscape that will require companies to overcome the various data challenges and make broader and deeper investments in big data analytics Manufacturers have begun by-passing retailers, and forming direct relationships with consumers via online sales and social communities like facebook etc butbefore this growing trend, the retailer alone, owned the relationship with the customer, But now the relationship is shared between the retailer and its suppliers as the customer can buy from the supplier at much cheaper price. Offline and online consumer behaviour is merging with online retailers like Flipkart, Ebay, Amazon etc, thus threatening the business models of traditional brick and mortar companies. Also, Consumers are not increasingly visiting physical stores but using smartphones and tablets to search the web, to find the best prices for the products, they go into the store to investigate or even order online. Retailers have shifted away from focusing on customer acquisition and focusing more on customer retention.

Thus Analytics can help pinpoint changes in consumerbehaviour that matter, and indicate what organizations can do to retain desired customers or expand their share of wallet. Tools Used: In our study of retail analysis we majorly used excel to calculate and refine the data. We also created a dashboard for plotting the graph. The two techniques used for comparative analysis are: a. Regression b. Predictive Analysis Overview of the data:

In our study of Indian Retail Market we considered the personal care product SOAP. In which we used 4 major companies namely HUL, Godrej, Wipro, R&B, and others. Products under HUL o o o o o o o o o Lux. Lifebuoy Liril Hamam Breeze Moti Dove Pears Rexona

Products under Godrej o o o o o o o Cinthol Godrej-turkish Godrej no 1 Godrej Vigil Godrej Shikakai Crowning Glory Godrej fairglow

Products under Wipro o o o o Santoor Chandrika Wipro baby soft Yardley

Product under Reckitt Benckisner o Dettol

Other Products o o o o o o o Camay Ganga Himani Johnson n Johnson Margo Medimix Vigil

Methodology: In our study we have considered 4 major beauty soaps brand and other similar brands.The brands under study includeHUL, Godrej, Wipro, R&B and others. We analysed the data that was avaulbale for the soap industry and on the basis of the data available, we planned the useful information that can be obtained using SAS. We used SAS for backend support where data was processed and useful information was obtained from the data.This data which was processed was then exported and fed into the frontend tool named Spotfire.Here the dashboard was formed using the data that was exported.This was then made into visulazations for the management. The link of this was published so that the data can be viewed with the link from anywhere.



To analyse the current market demand considering volume units sold as a tool and also understanding competitors sales pattern

Brand HUL Godrej Wipro R&B Others

Sales(Units) 17658 2845 1635 876 25134

Analysis: Using the above chart and the table, we anaylse that HUL is the leader in the market and the second position is far away from the market leader.The others have a major portion which gives a new brand a chance to foray into the market and make its position by consolidating the market position by taking over small players which can be a good market strategy for the company to expand and grow across the segment.


Understanding the geographical demand of our product so as to understand the target customers

Analysis: The above graph and table shows the data for sales region wise.The chart clearly shows that the maximum sales is in the Eastern region and least in the western region. Also the sales combined of north and south hardly reached the eastern region sales. This gives us an opportunity to foray into the market in South and Western region where weather is comparitively more hot than northern region and hence demand is more season specific than the eastern region where the temperature is similar throughout the year.

3.Understand the tastes and preferences of the customer on the basis of segregation of quality of the soap


Sales Volume 13435.62 23744.77 6702.68 4266.935

Analysis: The above graph shows the marget segregation on the basis of quality of soap.The demand is maximum for the popular soap followed by the premium soap. Also, we visulaize that the sum of premium soap, economy soap and sub-popular soap is combined sum of the popular soap.This gives the new player to think that if it enters into the popular soap category then it will have to face a lot of competition and it may be dificult to enter in this area.The other option is to enter into premium category or the economy category If it enters into the premium quality and if establishes itself as a premium category soap , then entering into a popular category will be easier for it as it will have a brand name in itself.

4.Analysing the impact of promotional ideas used by major players in the market on their sales, so as to enhance our advertising skills

Analysis: In the above visulaization, we can view the varios promotional ideas used by the company and the way it has impacted the business.We observe that the major player HUL has used Value added pack more than Banded offer to increase its sales.Other players in the analysis have used very little amount of the budget to increase sales through promotion. The other players have used the market to get into the share of major players by using Value added packa and banded offer. This clearly shows that the sales of major players are not effected much by the promotional offer but it helps the others to increase sales.The new brand can use these methods as it is a new player and it requires to enter and get loyalty from customers by first entering into the market and then by compete with big players.


To understand the market demand on the basis of selling propositions.

Analysis: Using the above visulizations, we observe the Selling propositions used by the companies in the market.We observe that the major variation in choice for products is for the households having more than 4 children.This shows that there is a great demand and variation within households having many children.This includes the major non urban population where joint-family still exists and there are no nuclear families which is still an urban trend. Using this we observe that the demand is much more in smaller cities and eastern region which is less developed and more service class people stay who demand for popular category soap.The pie chart shows that beauty selling proposition has entered into the male gender category and this has a huge potential for a new player as more and more of this trend will come to the country which is a trend of the developing countries especially in south east asia.

6. To understand our loyal customers in order to provide them special offers and indulge them in loyalty program.

Analysis:We observe from the graph that the customers are most loyal to a particular brand which is more than the sum of other three brands.This is in sync with the sales figure which showed that the sales are maximum for HUL.This observation leads to the face that the others players have very small number of people loyal to that brand and hence there is a huge potential for a new player whoch can foray into the market by creating a product that is unique and which can lead to loyal customers for higher top line and bottom line.

7. To understand the market demand and availability on the basis of price so as to target the expectation of market with new product. This will also help us to target our customers.

Analysis: The above chart shows that Market demand by brand and market demand by the type of price.The pie chart above shows that the market demand is maximum for the Pears followed bt Lifebuoy.Now a major observation here is that Pears falls under premium category whereas Lifebuoy falls under economy and popular category.Other brands include cinthol and dettol which falls under popular and economy category.This observations leads us to believe that the demand is huge in popular and economy category which can also be observed by the market demand pie chart which constitutes more than 80%. This will lead to consolidation of the players in the average category.As there will be increase in income and habits, there will be shift In the premium category where a single players dominates currently.This leads us to believe that a new player if can come in the premium category to establish itself, it will have a large share of economy category people who will foray into premiuim category as purchasing power of people increases.

8. To measure the Affluence index on the basis of Social Economic Condition, Education and Household size of the sample data.

Analysis: The affluence index was created to find the socio economic conditions of the household so that we can categorize each household into a certain category for the benefit of analysis and finding target customers.There were various measures that were considered to arrive at the affluence index through which we categorized demand, market segmentation etc for the observation.