Wake Up, Retailers! Make Money From Your Big Data
By Greg Munves, [email protected]
If you’re like many mid-level or tier one retailers, online or brick-and-mortar, you’ve probably made a significant investment in Big Data, capturing and analyzing customer buying patterns across your business. You may not realize, however, that this huge IT investment can actually be a profit center, if you sell your data back upstream to your suppliers.
Hundreds of consumer packaged goods (CPG) manufacturers like Pepsi, Johnson & Johnson, and Procter & Gamble regularly buy access to detailed, transaction-level point-of-sale data from their retailers. Why? Your data gives them insight into their products’ performance – down to a store-by-store level on a local, regional or national basis. Sharing point-of-sale (POS) data with your suppliers tightens the working relationship between your merchants and suppliers helping retailers move more product.
That powerful knowledge helps marketers increase sales, set unit pricing, and even understand where to focus marketing efforts for new product launches. Essentially, you enable your suppliers to apply their analytical expertise to help you run your business better, while generating high quality revenue in the process.
Technological enhancements now make it easier for retailers to share data with their suppliers. New cloud-based platforms or “portals” have come on the market, allowing retailers to monetize their data through spreadsheet-style user interfaces that are instantly comfortable for most analysts.
If you’re considering turning your Big Data IT investment into a profit center, there are a few considerations to keep in mind.
High-margin revenue
A publicly traded variety store chain with thousands of stores routinely does large-scale, high-speed analysis on billions of rows of data to provide real business insight to its marketing and merchandising executives tasked with increasing same-store sales. The company’s financial gains from implementing Big Data analytics have been impressive.
The variety store’s management team realized that by creating a more organized and robust means of sharing data with its vendor community, it could monetize that data and convert the expense of developing the system into a revenue stream.
While the revenues a company might realize from selling data to a supplier may vary, it's typically extremely high-margin – by some estimates, representing as much as a half-penny to a penny-and-a-half on the retailer’s earnings per share.
In recent years, it has become possible to realize these benefits thanks to innovations in Big Data analysis technology – particularly the scalability and interactivity offered by cloud-based vendor portal platforms. The cloud allows convenient provisioning and sharing of large amounts of detailed data and analytics using simple protocols for securely sharing select data and customized analytics across multiple parties.
Cloud-based vendor portals make it easier for retailers to monetize data by offering tiers of pricing to suppliers – the more money is paid, the more access suppliers have to different levels of complex data and analytics. Robust access control capabilities allow vendors to see the margins on their own products but not on their competitors’ products (unless the retailer wants to grant additional access).
Once retailer data is available in the cloud, anyone with permission can access the data anytime, anywhere. Multiple users can access and interpret the information at once.
From there, retailers can leverage the analytical capabilities of their CPG vendors to analyze what's going on in their stores – supplementing their own internal analyses. Inventory data lets suppliers participate in ensuring that individual stores are properly stocked. POS, market basket, and loyalty data provide insight allowing for more effective merchandising, pricing and promotions.
Getting started
There are several important considerations for finding the right providers to help successfully turn your Big Data information into a revenue stream.
- Select a partner offering a platform that is easy to use and that your end-users are comfortable using. For example, many CPG data analysts are very comfortable using Excel spreadsheets. The system you settle on must, therefore, have user interfaces that resemble spreadsheets, to ensure quick user ramp-up time.
- Consider the ability to integrate other, third-party information such as weather, demographic or economic data. This could provide significant insight into buying trends – for example, how do changes in employment or weather conditions affect price sensitivity in the dairy department, region-by-region?
- Make sure pre-packaged analytics are available for things like market basket analysis and affinity analysis. Your portal should be able to offer sophisticated models to help CPG companies predict, for example, what items may soon be out of stock.
- Make sure your vendor portal provider can handle all your data in a non-summarized fashion. There is a big distinction when analyzing data at the market basket level versus store level versus a regional level. Your vendors’ analysts should be enabled to examine information at all levels for the most valuable decision-making and accurate conclusions.
You probably leverage your company’s POS, inventory and related data to improve performance, down to the store level. But if you’re not looking at ways to offer that data back to your vendors and give them the merchandising tools they need to help drive your sales, you’re only getting part of the bigger picture – and you’re missing out on a lucrative revenue stream.
Greg Munves is chief revenue officer at 1010data, a market leader in the analyzing, managing and sharing of big data. He can be reached at [email protected].