Tag Archives: competitive advantage

Targeting a Niche Market is a Way for Small Online Retailers to Sidestep Big Competition

The market dominance of the online retail giant Amazon.com and multi-channel retailer Walmart is a huge barrier for anyone who wants to start selling products online.  As a result, the big retailers can be found anywhere online. They offer a large variety of products at ridiculous low prices. Moreover, they promise to deliver products within a couple of days of ordering. And they take the return of products in their stride. So, how on earth can you, as an owner of a Shopify or Woo Commerce website, compete with Amazon and Walmart? The answer is to develop a niche market for your business.

What is a niche market?

A niche market is a small market segment with customers that have specific interests or needs 1. Contrast that with a mass market where retailers such as Amazon and Walmart target as many people as possible. As a result their product offerings are wide and deep and they target generic audiences all over the world. These large retailers that compete in mass markets seem to have unlimited financial resources to enjoy a sustainable competitive advantage with all aspects of the retail mix.

But, you don’t want to compete with Amazon or Walmart, do you?  Therefore it may be worthwhile to consider a niche market.

The characteristics of a niche market are as follow: 2

  1. The customers in the niche have a distinct set of needs;
  2. They will pay a premium price to the firm that best satisfies their needs;
  3. A niche is not likely to attract competitors;
  4. The niche marketer gains certain economies through specialization; and
  5. The niche has size, profit, and growth potential.

So, it’s looking good thus far! But how can you develop a niche market for your business?

How to develop a niche market for you retail business

Although niche marketing and market segmentation seems like the same thing, there is a fundamental difference. Market segmentation is a top-down approach, stating that it is “the process of breaking a large market into smaller and more manageable sub-markets.” By contrast is niche marketing a bottom-up approach, meaning that “the marketer starts from the needs of a few customers and gradually builds up a larger customer base.” 2

Five important elements of a niche market are: 2

  1. Positioning – offer a product that satisfy a unique need with the segment;
  2. Profitability – customers in the segment must be willing to pay a premium for your product or solution;
  3. Distinct competence – you should quickly be seen as an expert by the customers in the niche market;
  4. Small market segments – means that you can focus on the customers’ needs and pickup more quickly on developing trends;
  5. Adherence to the marketing concept – the philosophy that firms should analyze the needs of their customers and then make decisions to satisfy those needs, better than the competition.

Next you must communicate with customers in you market niche.

Niche marketing

Many small and new retailers choose to operate in niche markets. They deal mostly in specialized or unusual products which cannot be found easily elsewhere like departmental outlet or supermarkets. These retailers need to be found in places where it is easy for customers to seek them out.

One of the places where customers can search for special products is the internet. Astute marketers in a niche market can, by using the right digital marketing tools, get right in the faces of their target audience.

The ability of online retailers to help customers locate, evaluate, and purchase a far wider variety of products than they can via traditional brick and mortar channels is an important characteristic of the internet channel. Active search tools allow customers to easily locate products they know they are interested in. Even more, they can help them to identify products they weren’t previously aware of. 3

Customers that are seeking unusual products are more likely to join online communities on social media sites with relevant topics. As a result, retailers may not only find and learn from customers in on social media, but positive feedback about their brand may lead to more site visits.

A great idea for retailers is to create discussion groups on their own websites. Get a couple of known influencers to publish or interact with your audience. This may give your brand an ‘expert’ states in the niche market. Equally important is regular and informed communication (a newsletter via email) to keep the attention of your special group customers.

Benefits of Niche Marketing

Kirsten McCormick in TriveHive lists the following benefits of niche marketing:

  1. Enhanced Customer Relationships. A small customer base has its benefits. So, when you are engaging with fewer people, you can focus on the quality of those engagements and on nurturing your relationships.
  2. Reduced Competition. When you have a highly specific product or service, there will be less companies out there with the exact same offering.
  3. Increased Visibility. Increased visibility is a benefit of niche marketing that not only leads to more customers but can also improve your online presence.
  4. Word of Mouth Growth. Another benefit of niche marketing is that it is very word-of-mouth-friendly. Indeed, people in a niche tend to be in frequent contact with others in that niche, which means more opportunities to get the word out about your business.
  5. Honed Expertise. Niche marketing requires more concentrated practice in one area, so it can really fine tune your expertise in a shorter time period. Hence the benefit of niche marketing is that it enables you to become an expert or thought leader in your niche.
  6. Less Resources. One important part of effective digital marketing is identifying and understanding your audience, which requires an investment of time and money on data and analytics tools. The benefit of niche marketing is that because you are confined to a specific person and a specific need, less focus is required on digging into your data to understand and keep up with their needs.
  7. More Fun. Businesses don’t always pick their niche and pursue it. Oftentimes, they accidentally find their niche in the process of serving their target audience.

Disadvantage of niche marketing

Because the customer base of a niche market may be small, the potential for the retailer to grow her business can be limited. However, says Ash Ome in DigitalDevelop.net “Despite a few disadvantages, the niche marketing with drop ship has so many advantages that will surely take your small business towards success.”

Concluding

The retail industry is in the midst of disrupting events that are shaping its future. Most Brick and Mortar retailers are adding the online channel to their business. At the same time are Pure Play online retailers adding physical stores to the business.

And then there is Amazon.com. But the answer remains to get a niche market for your business. That’s especially true for the millions of Shopify and Woo Commerce drop shipping retailers trying to make money in the online channel…

Read more: Thinking About Competing With Amazon.com? Think Again…

Notes

1 Choudhary, S. 2014. Rooting by niche marketing, International Journal of Advanced Research in Management and Social Sciences, 3(10):84-91.Contrast

2 Parrish, E.D., Cassill, N.L. and Oxenham, W. 2006. Niche market strategy for a mature marketplace, Marketing Intelligence & Planning, 24(7):694-707.

3 Brynjolfsson, E., Hu, Y.J. and Smith, M.D. 2006. From Niches to Riches: Anatomy of the Long Tail, MIT Sloan Management Review, 47(4):67-71.

Images

Pixabay.com

Flickr.com

Making Money Online Requires Analysis, Planning, Effort and Lots of Patience

It seems that right now is the best time for making money online. According to Statista.com, retail e-commerce sales worldwide amounted to 1.86 trillion US dollars during 2016 and online retail revenues are projected to grow to 4.48 trillion US dollars in 2021.

Ashwin Ramasamy writing for PipeCandy estimates that there are between two and three million eCommerce websites, excluding websites from China, on the web. So, if you do the calculation, taking the numbers of 2016, the average annual revenue per eCommerce website could be around 740,000 US dollars.

And with an online retail revenue of 4.48 trillion US dollars projected for 2021, there seems to be a lot of spare capacity to take up. Is making money online that easy? Not really…

“eCommerce has about an 80% failure rate. Other researchers claim it’s as high as 97%. One of the reasons the failure rate is so high is because an eCommerce business can be easy to set up, for a small amount of money. Creating a store front is easy. Making it successful, on the other hand, not so much”, says Dianna Labriem in Tech.co.

So, the Trillions of US dollar revenue generated each year by online retailers is shared by a handful of eCommerce websites.

Making money online the hard way

From the moment that you’ve activated your ecommerce website, you need already to know what value you’re offering your customers. In other words, what is your competitive advantage in the online market you’re targeting?

A sustainable competitive advantage may be defined as ‘the ability to deliver superior value to the market for a protracted period of time’ 1. Here, superior value refers to the fact that the consumers of a product or service must be convinced that they are getting something of value for their money. The value proposal for Bricks and Clicks retailers was previously discussed in this blog.

The hard way of making money online starts with analyzing your online market.

Analyzing your online marketplace

To make money successfully online, you need to know everything about your market. Your market consist of your customers, suppliers and intermediaries and your competitors.

Analyzing your customers:

  • Who are your biggest customers?
  • Who are the most profitable?
  • Where can you find your customers online?
  • Do your customers have any unmet needs?
  • What are the benefits they seek from your products?
  • And what price are they willing to pay for your products?

Analyse your intermediaries:

Intermediaries have captured a significant proportion of the profits available in the online retail market 2.  Therefore, their impact on your business’s marketing mix should be analysed.

  • The place (delivery) – most online retailers are dependent on logistic service providers to do the ‘last mile of delivery’ to their customers. Retailers should analyse the different service providers and choose one that is the most reliable at the best price;
  • Your product – only source products of the highest quality at reasonable prices from reliable suppliers;
  • Your promotion – which marketing intermediary will deliver your marketing messages the best? Google’s AdWords or social networks such as Facebook or Twitter?
  • The price that intermediaries charge – analyse the offerings and choose those who deliver the best service at reasonable prices.

Analyse your intermediaries

Analyse your competitors:

You need to find out how to satisfy customers better than the competition. By doing a competitor analysis you may begin to understand the level of competition that exists in your target market and it will help you to make the right pricing decisions.

The strategies and actions of your competitors may well determine if you will be making money online:

  • Who are our present and potential competitors?
  • What are the positions that they have established in the market?
  • What are their strategic objectives and thrusts?
  • What are their present and future strategies?
  • What are their strengths and weaknesses?

The next step to do to get your online business on its way, is incorporating all the data you’ve generated with your analysis into a strategic plan.

A strategic plan to make money online

By now you should know who your customers are; who the intermediaries are that you’re going to use; and whom you’ll be competing against. Now you should develop a competitive strategy.

The competitive strategies available for online retailers to obtain and maintain a sustainable competitive advantage are 1:

  1. The differentiation strategy – value is added to the product or service through differentiation to make it different from competitors’ products and services.
  2. The low-cost strategy or overall cost leadership – this implies that an organisation will supply a product or service more cost-effectively than competitors.
  3. The focus strategy – here you can focus on a special product/market niche that you may later monopolise.
  4. The pre-emptive move or first-mover advantage – this strategy can be pursued by an online retailer who takes a calculated risk by being the first to enter a market with a new product or service.
  5. Synergy – this means that all the components of an organisation are working together and so creating a sustainable competitive advantage. For example a physical retailer that adds the online channel to its business.

It takes a lot of effort to make money online

Mostly, money doesn’t just start flowing in because you have an ecommerce website. You may need to spend many hours a day to monitor the happenings on your, (and your competitor’s) website. You need to follow the trends in your market, negotiate with intermediaries and confront your competitors. You definitely need to create quality content for your website and also get a presence on social media networks.

Furthermore, you should manage the finance of your business and identify the risks of the business. Your online customers demand a 24/7 service – and that is what you need to deliver. For your customers, the alternative is a click away…

Concluding

Although the internet offers us billions of potential customers, anywhere at any time, it will take some time for your online business to show substantial profits. That is especially true for small retailers with a limited marketing budget…

However, if you do the right thing and do that right, with lots of patience and belief, you’re online business may be part of the 3% that make money online.

Notes:

1 Du Plessis, P.J., Jooste, C.J. and Strydom, J.W. 2001. Applied strategic marketing, Heinemann.

2 Laseter, T.M. and Rabinovich, E.  2011. Internet retail operations: integrating theory and practice for managers, CRC Press.

Images

  1.  Featured image: Pixabay
  2. Image in body: Pixabay

The Value Proposition for Bricks and Clicks Retailers

I’m not aware of one retailer that does his/her business without customers. Indeed, retailers that have plenty of loyal customers enjoy a competitive advantage and are doing well. So, how do they do it?  Retailers with a clear and effective value proposition at least know who their customers are, what they want and need and why are they coming back. Above all, retail customers can also be found online…

With the advent of the internet and subsequent social media networks, the way that retail customers interact with retailers, products, and patrons has changed. In fact, in today’s tech savvy society, shoppers have access to brands 24/7, from websites to mobile apps to storefronts. Therefore Bricks and Clicks retailers (retailers that use both the physical and online retail channels) need to develop a value proposition for their store and online customers.

What is a value proposition?

A value proposition is an entire set of experiences, including value for money that an organization brings to customers 1. Importantly, customers may perceive this set or combination of experiences to be “superior, equal or inferior to alternatives”.

The customer value proposition can also be explained by this equation: value = benefits less (-) costs. The equation suggests that customer value comprises positive consequences (benefits) and negative consequences (costs). When customers perceive greater benefits than sacrifices, customer value is created 2. Perceived benefits and costs for retail customers are shown in the Table below.

Customer perceived benefits Customer perceived costs
Transactional – lower prices, lower interest rates; Monetary – maintenance costs, running costs, disposal costs;
Relational – product quality, service support, delivery, personal interaction Learning costs – time and money needed to learn how to use a product;
Functional – finding the right products, convenient shopping hours. Logistics costs – delivery costs, time to deliver.

How do customers perceive value?

Customers perceive value on the benefits of the product or service they receive. Consequently, as the environment changes, and the customer experience and their needs change, the value they seek also changes. Before the advent of the internet, retailers that had the most knowledgeable sales persons were valued by customers, especially when they shopped for specialty products. However, nowadays, in the digital era, customers can not only get comprehensive product information online, but they also can read product reviews and compare prices.

Retailers need therefore to communicate their value proposition also in the online channel, through their websites and in social media networks.

The value proposition for online customers

Retail customers are rapidly engaging in the online channel. Indeed, there are, according to Dr Dave Chaffey, Smart Insights, 27 Apr, 2017, 2.8 billion active social media users. With these billions of social media users, retailers are no longer in control of customer relationships. Instead, customers and their highly influential virtual networks are now driving the conversation, which can trump a retailer’s marketing, sales and service efforts with their unprecedented immediacy and reach 3.

Kumar and Reinartz 4, 2016 said the following about how customers perceive value online:

For many online services (e.g., Google Maps, Facebook), customers are not expected to pay in monetary terms. The core benefit is free of monetary charge from the end user’s perspective. The monetization comes mainly from advertising revenues, with ads targeted at narrow segments or personal individual profiles. However, in the context of digitization, a new cost related aspect has been emerging.

“Customers now have to understand the value of the personal information that they will give up in this exchange. Thus, customers pay in terms of less privacy instead of monetary outlays. In fact, some customers value privacy of personal information privacy so much that they would be willing to pay to preserve privacy – this then creates a market for privacy” concluded Kumar and Reinartz 4.

What if you don’t have a value proposition yet?

The purpose of retailers is to create value for their customers. Therefore a value proposition equates to a positioning statement because it defines “who is the target customer?” as well as “why should the customer buy it?” and “what are we selling?” 2. According to Rintamäki, Kuusela and Mitronen, 2007, a value proposition should:

  • Increase the benefits and/or decrease the sacrifices that the customer perceives as relevant;
  • Build on competencies and resources that the company is able to utilize more effectively than its competitors;
  • Be recognizably different (unique) from competition; and
  • Result in competitive advantage.

GetToGrow mentioned the following advantages of a value proposition

  1. Gives direction. A value proposition gives you direction by defining your ideal target audience right up-front, and then identifying and understanding a core need that you look to satisfy with your planned solution.
  2. Creates focus. A robust value proposition gives you and your team focus by identifying the fundamental initiatives, activities and aspects of your business that will have the greatest impact on meeting your defined target audience’s needs.
  3. Breeds confidence. Confidence comes from knowing that you’re making a difference to the people that you’re serving, that you’re doing so in a way that’s meaningful to them, and that your actions are aligned to delivering an overall remarkable experience.
  4. Improves customer understanding and engagement. By grounding your solution in an understanding of your audience and their specific need, you can engage with them in a much more compelling and effective manner.
  5. Provides clarity of messaging. The value proposition frames not only how you’re creating value for your audience by addressing a core need, but critically why your solution is better than what they are currently doing or using, or versus whatever else is potentially out there that could do so.
  6. Increases effectiveness of marketing. By truly understanding your desired customers and their core need that you’re solving for, you’re able to focus on the channels and vehicles that are most relevant, and will effectively communicate the benefits and advantages of your solution.

Concluding

Retailers that know and understand their customer’s needs, want and wishes the best can communicate a superior value proposition to them. By using ‘big data’ or your internal sources of customer data, your firm’s value proposition can be customized and personalized. However, care should be taken not to infringe on the individual’s privacy.

Further reading:

Implementing Social Customer Relationship Management in Retail

Video: Value Propositions and Positioning

 

Notes:

1 Hassan, A. 2012. The value proposition concept in marketing: How customers perceive the value delivered by firms–A study of customer perspectives on supermarkets in Southampton in the United Kingdom, International journal of marketing studies, 4(3):68.

2 Rintamäki, T., Kuusela, H. and Mitronen, L. 2007. Identifying competitive customer value propositions in retailing, Managing Service Quality: An International Journal, 17(6):621-634.

3 Heller Baird, C. and Parasnis, G. 2011. From social media to social customer relationship management, Strategy & Leadership, 39(5):30-37.

4 Kumar, V. and Reinartz, W. 2016. Creating enduring customer value, Journal of Marketing, 80(6):36-68.

Image:

Flickr.com

3D Printing Technology for Retailers – An Opportunity or a Waste of Money?

3D printing technology for retailers is now emerging as an outcome for small localized retailers that are facing closure. However, as it is with most disruptive technologies, the advantages that 3D printing offer for retailers should be weighed against its potential pitfalls.

Although the 3D printing technology has been used for a number of years, it has been mostly on an industrial scale. Meanwhile, the price of desktop 3D printers has started to come down resulting in an average annually growth rate of 170% since 2008 1. The door is now starting to open for innovative retailers to include 3D printing technology into their business models. As a result, brave small retail store owners have already started using in store 3D printing.

3D printing is a game changer in retailing, according to Richard Kestenbaum, contributing for Forbes. Richard writes: “Last week Ministry of Supply installed a machine in its Boston store that can make a garment on demand in 90 minutes (with finishing done offline after the garment is created). The machine can be set to make garments all day and night or it can be instructed to make a garment to a specific customer’s design, allowing customers to customize the colors they want in the garment.”

Let’s have a look how 3D printing works…

How does 3D printing works?

3D printing, also known as additive manufacturing (AM), refers to processes used to create a three-dimensional object in which layers of material are formed under computer control  (Wikipedia). According to Berman (2012), 3D printers work in a manner similar to traditional laser or inkjet printers. Rather than using multi-colored inks, the 3D printer uses powder that is slowly built into an image on a layer-by-layer basis. All 3D printers also use 3D CAD software that measures thousands of cross-sections of each product to determine exactly how each layer is to be constructed 2.

3D printing uses such raw materials as plastics; resins; super alloys, such as nickel-based chromium and cobalt chromium; stainless steel; titanium; polymers; and ceramics. Examples of products that are manufactured by 3D printing includes artwork, automotive parts, ductwork for a mobile hospital, sand cores for automotive engine block castings, architectural models, dental bridges, jewellery, ball bearing assemblies, and gear assemblies 4. But how can retailers use 3D printers to their advantage?

3D Printing technology for retailers – a 3D-printed product out of a desktop printer

What are the opportunities of 3D printing technology for retailers?

Cremona, et al. (2016) identified the following points on how 3D printing may influence a firm’s strategy:

  • Process innovation:
    • Delivery time of the product: the time to market is extremely reduced, to the extreme that it might become real time.
    • Product development process: is optimized because adjustments are made in a faster and less costly way.
    • Quality and flexibility: is under the control of the retailer with 3D printing.
    • Satisfaction of the single customer demand: personalized products are added to the platform.
  • Customer’s value:
    • Brand awareness: a close collaborative relationship is established between the retailer and the customers thanks to usability testing.
    • Customer’s loyalty: offering customized, personalized products may help clients to feel special.
  • Product platform enhancement:
    • Pushing the limits of traditional manufacturing machines: now new products can be developed also in a different approach and materials are added instead of subtracted.
    • Personalized modules: products can be designed and delivered exactly how the customers want them.
  • Sustainable competitive advantage:
    • Differentiation strategy: carrying out projects on demand makes the retailer to perform a differentiation strategy. It aims at delivering the most technologically advanced product, which is a unique solution with a unique design for each customer.
    • High specialized production know-how: allow companies to actually integrate 3D printing in the product life cycle. In doing so, an additional service is provided.

The most important strategic advantages that 3D printing offer small local retailers are customization, personalization and control over the supply chain. But what are the pitfalls of 3D printing?

What are the pitfalls of 3D printing technology for retailers?

3D printing is in the introduction phase of its life-cycle in the retail industry. Subsequently there will be a lot of surprises (good and bad) as the technology gets adopted more widely.

Shaleen recently blogged in inkjetwholesale.com.au the following of disadvantages of 3D printing:

  1. Scale and size limitations – you can’t print multiple objects of the same type at the same time.
  2. The absence of economies of scale – because every object or product is printed individually.
  3. Cost of buying and setting up a 3D printer – the initial cost still remains something of a roadblock for most businesses and individuals.
  4. 3D printed objects may require heavy duty post processing – it isn’t only the lack of polish that is the problem but also the possible dimensional inaccuracy.
  5. Large scale adoption of 3D printing will result in significant job losses – every new invention ends up taking away jobs amongst the masses.

According to Beck and Jacobson (2017), legal implications may include what is exactly a product, who is the manufacturer, what is the marketplace, and who should be potentially liable for a defective 3D-printed product (once “product” is defined).

At the end of the day, the most important aspect of 3D Printing technology for retailers is whether the customers will accept or reject it.

What do customers think of 3D printing technology in retail stores?

Retail Customer Experience recently reported results of a survey by self-service solutions company Interactions on what shoppers want from retail technology. The study, “What Shoppers Want from Retail Technology,” surveyed more than 1,000 adult shoppers. Of those polled, 84 percent expect retailers to successfully use tech features and functionality to boost the shopping experience and 62 percent are motivated to shop after an initial human greeting when entering a store. Importantly is what the respondents said about 3D printing in shops…

“According to the survey, 95% of shoppers said they were eager to buy products that were 3D printed, and 79% said that they would even spend more money at a store that offered product customization through 3D printing.”

Wow, really? I think we should end (or start) here…

Concluding

Lastly, 3D printing technology for retailers is a genuine disruptive digital technology that may (or will) turn the retail industry upside down. There are many recent examples of disruptive technologies that changed the rules of the retail game. As the costs of buying and setting up 3D printing technology are getting less, more retailers will adopt the technology. Indeed, if you invest now in the technology, you’ll be an early adopter and enjoy (localized) market leadership. Consequently, you’ll have to battle through the growing pains of the technology. On the other hand, by waiting a bit longer, laggard retailers my get 3D printers for a bargain, but at that time, probably, the customers will already be with the pioneers.

Video: The 3D printing process

Notes

1 Li, Y., Linke, B.S., Voet, H., Falk, B., Schmitt, R. and Lam, M. 2017. Cost, sustainability and surface roughness quality – A comprehensive analysis of products made with personal 3D printers, CIRP Journal of Manufacturing Science and Technology, 16:1-11.

2 Berman, B. 2012. 3-D printing: The new industrial revolution, Business horizons, 55(2):155-162.

3 Cremona, L., Mezzenzana, M., Ravarini, A. and Buonanno, G. 2016. How additive manufacturing adoption would influence a company strategy and business model, MIBES Transactions, 10(2):23-34.

4 Conner, B.P., Manogharan, G.P., Martof, A.N., Rodomsky, L.M., Rodomsky, C.M., Jordan, D.C. and Limperos, J.W. 2014. Making sense of 3-D printing: Creating a map of additive manufacturing products and services, Additive Manufacturing, 1:64-76.

5 Beck, J.M. and Jacobson, M.D. 2017. 3D Printing: What Could Happen to Products Liability When Users (and Everyone Else in Between) Become Manufacturers, Minn. JL Sci. & Tech., 18:143.

Images and video

  1. Commons.wikimedia.com; https://commons.wikimedia.org/wiki/File:3D_print_in_process_(9437659715).jpg
  2. Proto3000

Big Data for Small Retailers – Is it Doable?

Do Big Data (BD) for small retailers offer an opportunity to compete with the big retailers or is it too much trouble? One of the fall outs of the digitization of business is the massive amount of data that are everywhere. Every time a customer makes a purchase online or registers online, data is generated. The data can potentially tell you almost everything about consumers. Retailers that sort, analyse and interpret BD can add value for customers and so increase their shopping experience.

Surely retailers should take advantage of BD since it contains captured detailed information that probably was overlooked in the past. However, to get the most out of BD, retailers need to be innovative. The promise of new revenues, customers, and new businesses with BD will require development and investment in teams and technology 1. But first let’s have a look at what BD is all about…

What is big data?

Big data is a term that primarily describes data sets that are so large, unstructured, and complex that it requires advanced and unique technologies to store, manage, analyse, and visualize 2. Therefore, big data represents the data sets that cannot be perceived, acquired, managed, and processed by traditional IT and software/hardware tools within a tolerable time 3. Compared with traditional data sets (small data), big data typically includes masses of unstructured data that need more real-time analysis, according to Chen, Mao, and Liu, (2014).

Where can retailers find Big Data? Rajdeep Nair responds as follows on Quora: “Data is everywhere… it can be purchase data or images uploaded by you on the social media site or data sent by mission sent to Mars by NASA. Everything that is there on the internet and company or an organisation’s confidential data stored on the server. Mostly  data is stored on the server, the technology of which is improving and evolving rapidly.”

However, a good place for small retailers to find “Big Data” is on their own systems. Have you ever analysed your own data sets before?

What retailers can do with Big Data

According to Russell Walker 1, firms that are first movers in leveraging BD have great advantages because they develop innovative insights about customers and markets. These insights can transform services, and even business models. Bernard Marr, contributing to Forbes declared Big Data as “A game changer in the retail sector”.

Bernard notes that Big Data analytics is now being applied at every stage of the retail process. Says Bernard: “BD is used to understand what the popular products will be by predicting trends, forecasting where the demand will be for those products, and optimizing pricing for a competitive edge.”  Moreover helps BD retailers to identify the customers that are likely to be interested in their products and works out the best way to approach them. It also to help them making the sale and working out what next to sell them.

Alex Woodie writing a piece in Datanami.com suggests there are 9 ways retailers are using big data technology to create an advantage in the retail sector.

The advantages of Big Data to retailers

  1. Recommendation Engines – by training machine learning models on historical data, the savvy retailer can generate accurate recommendations before the customer leaves the Web page.
  2. Customer 360 – customers expect companies to anticipate their needs, to have the products they want on-hand. Also to communicate with them in real time (via social media), and to adapt to their needs as they change. In the cutthroat world of retail, developing a customer 360 system using Big Data may be a matter of survival.
  3. Market Basket Analysis – is a standard technique used by merchandisers to figure out which groups, or baskets, or products customers are more likely to purchase together. It’s a well-understood business processes, but now it’s being automated with the help of BD.
  4. Path to Purchase – analyzing how a customer came to make a purchase, or the path to purchase, is another way big data technology is making a mark in retail.
  5. Social Listening for Trend Forecasting – platforms like Hadoop were designed to facilitate the handling and analysis of large amounts of unstructured data, such as Facebook posts.
  6. Price Optimization – setting the right price requires knowing what your competitors are charging. Data can be collected electronically using daemons that crawl competitors’ website to get detailed info about product pricing.
  7. Workforce and Energy Optimization – big data technology can deliver benefits on the marketing and merchandising side. As a result it can help big retailers optimize their spending on human capital.
  8. Inventory Optimization – by analysing BD, retailers can plan their seasonality in the shipping algorithms better.
  9. Fraud Detection – retail fraud is a huge problem, accounting for hundreds of billions of lost dollars every year. Retailers have tried every trick in the book to stop fraud, and now they’re turning to big data technology to give them an edge.

Concluding

The narrative about Big Data is more with ‘Big Retailers’ at this moment. However, with smaller retailers adding the online channel to their business, there are ample opportunities for them to use their own data to great effect. Everything else will cost retailers a lot of money. Maybe to start with small data is better for smaller retailers.

Have a look at this video by Tera data corporation more more on Big Data for retailers:

Notes

1 Walker, R., 2015. From big data to big profits: Success with data and analytics, Oxford University Press.

2 Xu, Z., Frankwick, G.L. and Ramirez, E. 2016. Effects of big data analytics and traditional marketing analytics on new product success: A knowledge fusion perspective. Journal of Business Research69(5):1562-1566.

3 Chen, M., Mao, S. and Liu, Y. 2014. Big data: A survey, Mobile Networks and Applications, 19(2):171-209.

Image and video

Pixabay

Tera Data Corporation