Consumers may be duking it out for Nintendo Wiis in shopping aisles this year, but overall the battle for holiday spending dollars will be between the retailers. With consumers’ awareness of a softening economy, retailers will be forced to into stiff competition for consumer dollars, according to the National Retail Federation.

Sahir Anand, an analyst at the research consultancy Aberdeen Group, says this competitive landscape makes business intelligence critical. It represents the work of turning the massive customer and transaction data warehouses into useful guidance on everything from how to attract and deliver a great customer experience to what merchandise to stock and in what balance.

Anand talked to Associate Online Editor Diann Daniel about what retailers should be doing with their business intelligence tools for this essential business season.

CIO: First off, do you think business intelligence is a must for today's retail companies?

Sahir Anand: I think if you want to improve customer retention and sales, in all channels—store, Web, catalogue—at some stage you'll have to adopt business intelligence tools because the transactions and data are so complex nowadays. Without business intelligence tools, it's going to be a lot of gut-feel decisions in terms of how you plan your merchandising strategy to fulfill customer demand. And that just doesn't work well.

Take the example of the holiday season. Business intelligence is important for any seasonal sales, but it's crucial for the high traffic, high-volume Christmas holiday season. Business intelligence combines data and shows patterns and trends to give customer insight, which can then be used to guide sales, marketing and other key areas. Most importantly, BI delivery tools provide the reports and dashboards that are required for retail performance management.

The important thing for any retail segment, especially for the specialty retail segments as they drive a bulk of the holiday sales, is to systematically identify the products your consumers want, and especially to identify new products they may want and make sure that you deliver those new products. In order to make sure you have no gaps between what you offer and what consumers want, you need to identify and forecast trends, and look at the demand pattern over time. Business intelligence integrates the complicated customer, location and product information and enables you to see what patterns are