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Retail Data Everywhere but not a Penny to Pinch

This year has seen Black Friday cross the pond in a big way to infiltrate the UK retail industry in the same way that it's become embedded in US culture. It highlights just how prominent price promotion has become and shows the polarisation of retail into budget and luxury providers. So what does this mean for the mid-tier players who have bridged the gap between cost and quality for so long?

Huge amounts of retail data is going un-usedThis year has seen Black Friday cross the pond in a big way to infiltrate the UK retail  industry. It’s appeared very quickly but there’s a feeling that the hardline, Christmas-ready price slashing will be an annual event that’s here to stay. With a market who are more and more price driven, all retailers have to look harder at themselves to understand their place in the ecosystem. Complex retail data has led to differentiated strategies in the past and now brings the opportunity to be deeply analytic with granular costs and margins.

The gradually increasing power of the discount shopper is a reflection on the state of the UK retail industry and how deeply it has become overwhelmed by price promotion. The last few years have seen budget players such as Aldi, Lidl, Poundland and Primark rocket to success (sales growth of 32%, 20%, 12% and 22% respectively*) while players who are not quite either budget or luxury have been left floundering. The market is slowly revealing the extent of its polarization to budget and luxury providers, but where does that leave “middle ground” players such as John Lewis and Tesco who balance cost leadership with high quality? Is it adapt or die or is there still room for these trail-blazers of the 90s and 00s to innovate and maintain their positions?

These previously dominant market players have seen their most remarkable fall from grace in the collection, analysis and application of data. Long before “big data” became the à la mode buzzword, large retailers were learning from and predicting the behaviors of thousands of customers. Despite having had the ability to predict that you’re pregnant before you ever take a test and offer you just the deal you want at the ideal time, sales are declining, profits are suffering and confidence (both customer and investor) is waning for this struggling segment.

So what to do with all this retail data?

But given that a retailer can look into the minutiae of a customer’s life, isn’t it surprising that many retailers don’t spend more time analyzing the detail of cost and profitability internally? The price led invasion of the discount competition should be a drastic wake up call that all retailers should be scrutinizing their pricing and product mix down to the tiniest detail. As a retailer you can’t know if it makes sense to send a discount coupon for a specific product to a loyal customer when you only see your profitability at a category high level.

It’s time that retailers take their expertise in customer analytics and point the microscope internally. Where can you afford to raise the price just a little or decide that store reorganization has had negative impact on sales of one specific product? It’s time that the mid tier take the battle to the budget players and show just what happens when you apply decades of big data experience to the most granular aspects of cost optimisation, margin analysis and financial control.

 

 

* Growth figures:
Aldi – 32% sales increase, 12 weeks to Jul 2014
Lidl – 20% sales increase, 12 months to Jun 2014
Poundland – 12.4% sales increase, 13 weeks to 31 Dec 2013
Primark – 22% sales increase, year to Sep 2013

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