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Retailers' No. 1 Tech Priority Is Business Intelligence

An Aberdeen Group survey finds that BI tools can improve retailers' "customer intelligence," cut wasteful spending and increase gross margins.

By Thomas Wailgum

February 26, 2008 — CIO — All of the frothy hype over business intelligence tools is justly warranted in the retail industry. That's according to a January 2008 report from Aberdeen Group titled "Business Intelligence in Retail: A Best-in-Class Roadmap for Performance Improvement."

The report's findings, that BI tools can "build customer knowledge, improve visibility across the enterprise and drive sales," are based on survey results from more than 200 retailers. Nearly 70 percent of the retailers had already implemented and currently use BI tools, and 26 percent reported plans to adopt a BI system.

It's important to note that Aberdeen defines BI not as a single reporting or analytics application applied to a specific data set. Rather, BI "involves the ability to access information affecting the business, often as the data is created," write analyst Jeanette Keene and research director David Hatch. "This can involve one or a multiple set of data sources, and can affect one or many sets of decisions, actions and people."

The top reason retailers are implementing BI systems is to allow them "to quickly react to changes in customer demand." In addition, Best-in-Class retailers using BI tools (defined by Aberdeen as having increased their average year-over-year same-store sales by 11.7 percent, their average profit-margin by 9.3 percent and their customer retention by 12.2 percent), said they needed to be more predictive with their forecasting capabilities (38 percent) and improve customer loyalty and retention (38 percent).

"There is clear focus among Best-in-Class companies on improving intelligence across the enterprise to react to and better predict customer demand," the report's authors write. "In today's highly competitive and global landscape, the average consumer has many options, so maintaining and exceeding customer expectations is critical for a company's continued success."

Retailers need all the help they can get with customer service. The most recent data from The University of Michigan's American Customer Satisfaction Index (ACSI) showed that customer satisfaction in the retail sector slipped 0.3 percent last quarter to 74.2 on ACSI's 100-point scale. The last holiday season, in particular, was less-than-merry for many retailers: "Satisfaction with the department and discount scores reached its lowest level since 2001," the index showed.

"Operational efficiencies don't always translate into customer service," said Claes Fornell, head of the ACSI, in the report. "Cutting jobs and eliminating services might improve earnings but won't do much good if customers take their business elsewhere."

 

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