BA Report V1

7/27/2019 BA Report V1

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Retail Analytics: Understanding Customers

Overview of Retail/FMCG industry in India:

The Indian retail sector has been at the helm of Indias growth story. This sector has evolved

dramatically from village fairs, street hawkers to malls and plush outlets and is still growing strong.

India is the seventh-largest retail market in the world, and is expected to grow at a CAGR of over 13%

till FY12. In FY07 retail sales reached Rs 13,300 bn and amounting to around 33% of India s GDP at

current market prices. According to the Central Statistical Organisation estimates, the total domestic

trade (both retail and wholesale) constituted 13.0% of countrys GDP in 1999-2000, which has gone

up to 15.1% in FY07. [SOURCE: ICRIER, CSO]

During the past years, the retail Indian market has seen considerable growth in an organised

manner. Major domestic players have entered the arena, and have plans to expand in the future

years, across verticals format and cities. For example, various companies like Tata, Hindustan

Unilever, Bharti, Biyani group, Adani Enterprise, have been investing considerably in the always

booming Indian retail sector. Also, a number of multinational corporations have also set up retail

chains in collaboration with various Indian companies.

The Indian retail sector is highly fragmented; also the unorganised sector has around 13 million retail

outlets that account for around 94-95% of the total retail industry. However, moving forward, the

organised sectors growth potential is constantly increasing due to globalisation, economic growth,

and trending lifestyle. Moreover, high consumer spending by the young population about 31% of the

country is below 14 years and sharp rise in consumable income, are driving the Indian organised

retail sectors growth. Small towns and cities are also witnessing a major shift in consumer lifestyle

and preferences, and hence emerged as attractive markets for retailers to expand their presence.

Although the growth potential in the sector is immense, it comes with many challenges that could

slow down the pace of growth for new entrants. Tough regulations, ever increasing real estate costs,

lack of basic infrastructure, high personnel costs, shrinkage and highly competitive domestic retailer

groups are some challenges. Moreover, resource constraints at shopping malls are also delaying

completion and thus disrupting many retailers entry strategies.


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Current Scenario

Introduction to Business Analytics in Retail:

Retail Analytics for understanding customer is the systematic study of customer data with the main

objective of optimizing customers utility, while improving the return on the marketing program

investments. The term analytics refers to the applied use of statistical techniques to gain

understanding and value from unstructured and structured information in an enterprise,

departmental and third-party databases and repositories, line ofbusiness etc. From a practical

approach the objective of anymarketing analytics is to study customers shopping and consumption

behaviour, to uncover their tastes and preferences, and to identify any particular patterns. Firms can

utilize this knowledge to better serve their customers, by offering more relevantpromotions;

customized products and services; and reducing promotional differences. Retail analytics also allows

themanagement to measure the effectiveness of marketing campaigns and initiatives, and hence

increasing accountability.Analytics can also provide a critical and timely input to managerial decision

making, to make it more data driven.


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Prerequisites of Analytical Retail

Regardless of any analytical process or application, there are some key prerequisites of analytical

progress in retail that are common to virtually every organization. First is data, you cant do analytics

without somewhat clean, integrated, high quality, and accessible data. Fortunately, retailers

increasingly have vast amounts of data available, from point of sale (POS) transactions, from

websites, from current loyalty programs, from credit programs, and from enterprise resource

planning (ERP) and other such business applications.

Data must be accessible to be analyzed; so many leading retailers provide access to data in the form

of a constructive data warehouse. Many companies have proliferated warehouses and multi-purpose

data marts, but since, integration is critical for advanced analytics, most sophisticatedretailers prefer

building an enterprise data warehouse (EDW) which helps in key analytical applications to draw data

from. The EDW includes customer, supply chain, product, pricing, and financial data and hence

making it much easier to interrelate data across other functions. Many of the retail analyticsprofessionals noted that, their lives became much easier when their companies adopt an EDW.

Importance:

Data Analytics is needed in the field of retail because it gives us so much information about the

customers, their pattern which we cannot ignore. This is important to know why something

happened, why it happened and what should be done to prevent the bad things or repeat the good

things. We also know other details about the customers like who they like are. Profiling &

segmentation, when are they coming back, why are they coming back, what are they purchasing, are

they upgrading or downgrading in their subsequent purchases etc. Similar analysis can be done at

merchandise level or store level, or at any other level.Just collecting data and generating reports will

is not enough, it will not increase your sales or customer loyalty, but they provide the dealers the

appropriate tools to understand the customer behaviour. It is data analytics and to utilize this

knowledge ofcustomers behaviour that increases the sales and customer loyalty.

Opportunity:

Achievingcompetitive advantage from retail analytics is enormous. With the various analytical tools,

retailers can:

Develop close relationships with customers, based on the understanding of their behaviourand patterns

Deliver the targeted advertising,promotions and other offers to customers that will motivatethem to buy the targeted products

Charging the exact price that customers are willing to pay Using the marketing investments wisely Distribution centres, locate stores, warehouse and other facilities in optimal locations


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Challenges:

Data Perspective:

The biggest challenge most retailers face now is in extracting insights from the huge customer data

base, beyond this replenishment chain. Analytics which is backed by robust data management, has

the capability of burrowing retail industry into these mountains of huge data, too tedious now for

any human effort, and of discovering patterns, invisible to the statistically unaided eye. But this data

offers these retailers the capability to transform their businesses.

Right across the retail industry, there is abelief that more work must be done to extract value from

internal customer data assets .In other cases, they believe that the internal data they already have is

of a better quality and there is a tangible reluctance to utilise a broader set of external sources such

as social media or attitudinal or behavioural data.

Three main challenges that seem to be dampening their interest in the emerging external

data sources:

the ability to link external data to individual customer potential data privacy concerns like theft, duplication etc and reputational impacts of

tapping and scanning into customers external data

the lack of clarity through which pieces of external data are going to add greatest value tothe business

Managerial Perspective:

Retail managers could have perhaps the most to gain from successfully collecting the massive data;

customers are sharing about themselves, via transactions, shopping as well as by sharing their views

and opinions about products via social media and other online forums. But ironically though, the

retail industry is under tremendous pressure to stay competitive, the industry as a whole lags behind

other industries in its use of data analytics. Many retailers are finding themselves paralyzed or

perplexed by the amount of data streaming into their networks. But several factors are dramatically

altering the retail landscape that will require companies to overcome the various data challenges

and make broader and deeper investments in big data analytics-

Manufacturers have begun by-passing retailers, and forming direct relationships withconsumers via online sales and social communities like facebook etc butbefore this growing

trend, the retailer alone, owned the relationship with the customer, But now the

relationship is shared between the retailer and its suppliers as the customer can buy from

the supplier at much cheaper price.

Offline and online consumer behaviour is merging with online retailers like Flipkart, Ebay,Amazon etc, thus threatening the business models of traditional brick and mortar

companies. Also, Consumers are not increasingly visiting physical stores but using

smartphones and tablets to search the web, to find the best prices for the products, they go

into the store to investigate or even order online.

Retailers have shifted away from focusing on customer acquisition and focusing more oncustomer retention.


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Thus Analytics can help pinpoint changes in consumerbehaviour that matter, and indicate what

organizations can do to retain desired customers or expand their share of wallet.

Tools Used:

In our study of retail analysis we majorly used excel to calculate and refine the data. We also createda dashboard for plotting the graph.

The two techniques used for comparative analysis are:

a. Regressionb. Predictive Analysis

Overview of the data:

In our study of Indian Retail Market we considered the personal care product SOAP. In which we

used 4 major companies namely HUL, Godrej, Wipro, R&B, and others.

Products under HUL

o Lux.o Lifebuoyo Lirilo Hamamo Breezeo Motio Doveo Pearso Rexona

Products under Godrej

o Cintholo Godrej-turkisho Godrej no 1o Godrej Vigilo Godrej Shikakaio Crowning Gloryo Godrej fairglow

Products under Wipro

o Santooro Chandrikao Wipro baby softo Yardley


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Product under Reckitt Benckisner

o DettolOther Products

o Camayo Gangao Himanio Johnson n Johnsono Margoo Medimixo Vigil

Methodology:

In our study we have considered 4 major beauty soaps brand and other similar brands.The brands

under study includeHUL, Godrej, Wipro, R&B and others. We analysed the data that was avaulbale

for the soap industry and on the basis of the data available, we planned the useful information that

can be obtained using SAS. We used SAS for backend support where data was processed and useful

information was obtained from the data.This data which was processed was then exported and fed

into the frontend tool named Spotfire.Here the dashboard was formed using the data that was

exported.This was then made into visulazations for the management. The link of this was published

so that the data can be viewed with the link from anywhere.


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Objectives:-

1. To analyse the current market demand considering volume units sold as a tooland also understanding competitors sales pattern

Brand Sales(Units)

HUL 17658

Godrej 2845

Wipro 1635

R&B 876

Others 25134

Analysis: Using the above chart and the table, we anaylse that HUL is the leader in the

market and the second position is far away from the market leader.The others have a major portion

which gives a new brand a chance to foray into the market and make its position by consolidating the

market position by taking over small players which can be a good market strategy for the company

to expand and grow across the segment.

2. Understanding the geographical demand of our product so as to understand thetarget customers


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Analysis: The above graph and table shows the data for sales region wise.The chart clearly

shows that the maximum sales is in the Eastern region and least in the western region. Also the sales

combined of north and south hardly reached the eastern region sales. This gives us an opportunity to

foray into the market in South and Western region where weather is comparitively more hot thannorthern region and hence demand is more season specific than the eastern region where the

temperature is similar throughout the year.

3.Understand the tastes and preferences of the customer on the basis of segregation ofquality of the soap


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Category Sales Volume

PREMIUM SOAPS 13435.62

POPULAR SOAP 23744.77

ECONOMY/CARBOLIC 6702.68

SUB-POPULAR 4266.935

Analysis: The above graph shows the marget segregation on the basis of quality of soap.The

demand is maximum for the popular soap followed by the premium soap. Also, we visulaize that the

sum of premium soap, economy soap and sub-popular soap is combined sum of the popular

soap.This gives the new player to think that if it enters into the popular soap category then it will

have to face a lot of competition and it may be dificult to enter in this area.The other option is to

enter into premium category or the economy category If it enters into the premium quality and if

establishes itself as a premium category soap , then entering into a popular category will be easier

for it as it will have a brand name in itself.

4.Analysing the impact of promotional ideas used by major players in the market on their

sales, so as to enhance our advertising skills


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Analysis: In the above visulaization, we can view the varios promotional ideas used by the

company and the way it has impacted the business.We observe that the major player HUL has used

Value added pack more than Banded offer to increase its sales.Other players in the analysis have

used very little amount of the budget to increase sales through promotion. The other players have

used the market to get into the share of major players by using Value added packa and banded offer.

This clearly shows that the sales of major players are not effected much by the promotional offer butit helps the others to increase sales.The new brand can use these methods as it is a new player and it

requires to enter and get loyalty from customers by first entering into the market and then by

compete with big players.

5. To understand the market demand on the basis of selling propositions.


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Analysis: Using the above visulizations, we observe the Selling propositions used by the companies in

the market.We observe that the major variation in choice for products is for the households having

more than 4 children.This shows that there is a great demand and variation within households

having many children.This includes the major non urban population where joint-family still exists and

there are no nuclear families which is still an urban trend. Using this we observe that the demand is

much more in smaller cities and eastern region which is less developed and more service class

people stay who demand for popular category soap.The pie chart shows that beauty selling

proposition has entered into the male gender category and this has a huge potential for a new player

as more and more of this trend will come to the country which is a trend of the developing countries

especially in south east asia.

6. To understand our loyal customers in order to provide them special offers and indulge

them in loyalty program.


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Analysis:We observe from the graph that the customers are most loyal to a particular brand which is

more than the sum of other three brands.This is in sync with the sales figure which showed that the

sales are maximum for HUL.This observation leads to the face that the others players have very small

number of people loyal to that brand and hence there is a huge potential for a new player whoch can

foray into the market by creating a product that is unique and which can lead to loyal customers for

higher top line and bottom line.

7. To understand the market demand and availability on the basis of price so as to target theexpectation of market with new product. This will also help us to target our customers.


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Analysis: The above chart shows that Market demand by brand and market demand by the type of

price.The pie chart above shows that the market demand is maximum for the Pears followed bt

Lifebuoy.Now a major observation here is that Pears falls under premium category whereas Lifebuoy

falls under economy and popular category.Other brands include cinthol and dettol which falls under

popular and economy category.This observations leads us to believe that the demand is huge in

popular and economy category which can also be observed by the market demand pie chart which

constitutes more than 80%. This will lead to consolidation of the players in the average category.As

there will be increase in income and habits, there will be shift In the premium category where a

single players dominates currently.This leads us to believe that a new player if can come in thepremium category to establish itself, it will have a large share of economy category people who will

foray into premiuim category as purchasing power of people increases.

8. To measure the Affluence index on the basis of Social Economic Condition, Education and

Household size of the sample data.


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Analysis: The affluence index was created to find the socio economic conditions of the household so

that we can categorize each household into a certain category for the benefit of analysis and finding

target customers.There were various measures that were considered to arrive at the affluence index

through which we categorized demand, market segmentation etc for the observation.

BA Report V1

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