Frontier India Current Affairs

Written on May 14, 2008 – 1:10 pm | by FICA |

Organized retailers in India will need far more than prime locations and competitive prices in order to succeed in what is shaping up to be a fast growing but extremely competitive retail market. These retailers have the opportunity to develop a competitive advantage by gaining a deep understanding of their customers using robust data analytics.

A new report from Diamond Management & Technology Consultants, Inc. contends that organized retailers need to build their data collection, storage, and analysis capabilities if they hope to win in the burgeoning Indian market. Diamond’s report, entitled “Understanding the Indian Retail Customer - in Bits and Bytes!” explains that India’s innovative organized retailers should leverage data-driven analytics to acquire new customers, build loyal long-term customers, and maximize customer value.

Consider Tesco, a top-five international retailer with more than 2,000 stores, whose Clubcard Loyalty Program has been a key contributor to the company’s success. The Clubcard program helps Tesco identify customers individually, providing sales and transaction data that give the company unique customer insights. Indian organized retailers may miss out on those benefits if they don’t start planning now, particularly if they intend to compete on the basis of value, rather than being the low-cost provider.

Diamond’s report outlines a multi-step approach toward developing enterprise capabilities that will help organized retailers better serve their customers while improving corporate performance.

Diamond believes that, although the traditional building blocks of organized retail remain crucial to the success of organized retailers, they are unlikely to provide long-term competitive advantage. A strong analytics approach driven by customer data will become a key driver of success in the Indian retail market, allowing retailers to use the resulting insights to maximize customer lifetime value (CLTV), according to the report.

In a highly competitive environment, it is vital for retailers to distinguish themselves, and a deep understanding of the customer will serve as a springboard toward differentiation. “As the organized retail market in India matures, long-term success will require deep insight into the customer’s psyche,” said Balaraman. “As a result, retailers in India that want to remain ahead of the curve will need to consider three distinct capabilities when designing and implementing a customer analytics engine: data collection, data storage, and data analysis.”

Building robust customer data analytics skills is a long-term process, and Diamond’s report recommends that retailers in India should apply a phased approach when developing these capabilities. However, retailers can begin reaping the benefits of data analytics from an early stage by capturing and analyzing basic customer information, according to Diamond’s report. “Adopting a phased approach to developing analytics capabilities will help retailers maximize value and move ahead of the pack,” said Nair.

Retailers can capture several types of data–such as point-of-sale, footfall, basket size, margin, and time-of-purchase–which will help retailers refine product assortment, inventory management, pricing, and promotions to boost sales and maximize customer value. As time progresses, the report notes, retailers will have more historical data to identify trends, which can then be used for demand forecasting and resource allocation.

In addition, retailers should implement customer initiatives, such as customer loyalty programs, to capture information about their customers at an individual level. This data will allow retailers to segment their customers and target marketing efforts and promotions based on a segment’s specific needs.