For retail businesses, time is not just a resource; it’s a currency. The introduction of predictive analytics, particularly when driven by Artificial Intelligence (AI), has revolutionized how retailers approach this valuable asset. This technology isn’t just a futuristic concept—it’s a tangible tool that transforms time from a potential foe into a formidable ally. AI-driven predictive analytics is a beacon for businesses eager to see tangible results, guiding decision-making with insights derived from data patterns and consumer behavior. In this blog post, we’ll explore how predictive analytics reshapes the retail landscape, empowering businesses to make more informed, time-efficient decisions that drive success and outpace competition.
Data analytics in retail: Why it matters
In 2021, the global retail market generated a staggering $26 trillion, with projections surging over $30 trillion by 2024. This colossal figure highlights not just the vastness of the retail landscape but also underscores its intense competition. In a crowded market, staying ahead is about offering the best products or services and making strategically informed, data-based decisions. This is where leveraging big data in retail becomes essential. Data analytics, with its ability to analyze and interpret complex datasets, emerges as a crucial tool for retailers. By harnessing the power of customer data, retailers can gain invaluable insights into consumer behavior, preferences, and trends, enabling them to tailor their offerings and strategies effectively.
For physical stores, in particular, the optimization of operations and customer experiences becomes increasingly achievable through data-driven insights. Data analytics can transform vast amounts of customer data into actionable intelligence, allowing retailers to make decisions that are not just based on intuition but are backed by empirical evidence. This approach can enhance customer satisfaction, increase efficiency, and improve profitability. Whether it’s optimizing the store layout, personalizing marketing strategies, or streamlining the supply chain, data analytics provides a pathway for physical stores to thrive in the competitive retail market.
Thus, in the race to capture a slice of the ever-expanding retail pie, leveraging data is not just a strategy; it’s a necessity. Retailers who embrace data analytics and integrate customer data into their decision-making processes are better positioned to understand and meet the evolving needs of their consumers. This understanding is critical to retaining a loyal customer base and attracting new patrons in a market where consumer preferences constantly shift.
Limitations of traditional data analytics
For decades, retailers have relied on traditional methods to gain insights into shopper behavior, including customer surveys, focus groups, in-store observations, and sales data analysis. While these methods have been instrumental in shaping retail strategies, their limitations are becoming increasingly apparent in the modern retail landscape. Traditional data analytics, often requiring substantial manpower and resources, are time-consuming and resource-intensive. This process, which is not equipped to provide real-time insights, risks being outpaced in today’s rapidly evolving retail environment. Waiting for survey responses or conducting intermittent focus groups can lead to missed opportunities and reliance on outdated information.
Additionally, these traditional methods may be prone to biases and inaccuracies. Shoppers in focus groups may not always provide honest feedback, and the limited sample size may not represent the broader consumer base. Furthermore, these methods often struggle to adapt to the digital transformation of retail, failing to capture online shopper behavior effectively, a critical gap as eCommerce continues to surge.
The increasing complexity of the buyer’s lifecycle in retail is further accentuated by the fact that many traditional data sources predominantly offer historical data. According to a recent Prosper Insights & Analytics survey, 86% of customers research products online before purchasing in person or at a store. This shift indicates a fundamental change in consumer behavior: the influence of online presence and digital marketing campaigns on purchasing decisions. This trend makes historical data less reliable, as consumer preferences and behaviors can change more rapidly than before. Consequently, retailers must navigate a more complex buyer journey, integrating the supply chain and inventory levels prior to the final purchase. This complexity demands more agile and adaptive data analytics methods that capture real-time, multi-channel consumer data to provide accurate and actionable insights. Enter, AI.
The role of AI in modern retail
AI is rapidly becoming ubiquitous, profoundly altering how consumers interact with the retail world. In fact, AI is set to have a 9 trillion dollar impact on the retail sector.
This transformative power has led the retail sector to embrace AI and machine learning as essential analytics tools for gleaning valuable insights from data. AI’s ability to analyze and interpret complex data sources allows retailers to enhance user experiences, engage customers more effectively, manage inventory efficiently, and develop dynamic pricing models. This AI-driven analytical prowess extends to optimizing supply chains, arranging shelves to maximize sales, and tailoring product recommendations to individual consumer preferences. By integrating AI into their strategies, retailers can automate processes, predict inventory levels, and fine-tune their merchandising tactics, thereby revolutionizing the shopping experience and operational efficiency.
However, while generative AI, exemplified by technologies like ChatGPT, has made strides in retail by providing predictive models to offer insights through the analysis of historical data, its limitations in forecasting customer behavior are becoming apparent. These AI models, despite their advanced algorithms and extensive data processing capabilities, often fall short in delivering the precision and context-specific insights needed to fully understand customer behaviors and buying patterns in nuanced retail environments. Their challenge lies in adapting fast enough to maximize profitability. As a result, the retail industry is exploring beyond generative AI to include analytical AI models that offer deeper insights and more accurate predictions. This pivot reflects a broader industry trend towards leveraging a mix of AI technologies to overcome the limitations of generative AI, ensuring retailers can stay ahead in a highly competitive and ever-evolving market landscape.
Retail predictive analytics at InContext
According to Baer in an article released by Forbes, customers these days value time as it relates to shopping, “With only 1,440 minutes available each day, customers want to devote as few minutes as possible to waiting, as Baer’s research proves. This is so important that people will pay more for it.” Although this might sound daunting, the good news is that time is relative. Although customers want things “right now,” their satisfaction with a brand is based on many different interactions throughout the customer journey, which means you’ve got lots of opportunities to keep them happy – increasing the likelihood of customer loyalty.
So, how do you accomplish this? Be quicker than the competition. And at InContext, we’ve got the tool to help you do it. The distinction of AI at InContext lies in the unparalleled quality and relevance of the data fueling its models. Our AI solution is uniquely enriched by a vast dataset encompassing over 2 million virtual shopping trips, offering a deep dive into consumer behavior across diverse retail settings. This wealth of shopper insights, backed by a 91% correlation rate, allows for a nuanced, detailed exploration of consumer interactions, enabling businesses to swiftly validate merchandising strategies with precision. Testing new retail ideas against this rich AI model enables businesses to quickly dispel merchandising myths, avoiding the long wait times tied to traditional research methods or virtual studies.
Unlike generic AI platforms that operate on wide-ranging assumptions, InContext’s AI is rooted in scenario-specific, real-world data, enabling it to forecast outcomes with remarkable accuracy and speed. This approach streamlines the decision-making process and significantly cuts down on expenses tied to iterative, guesswork-driven methods.
At InContext, our AI engine is designed to offer businesses an expedited, economically viable route to discerning consumer preferences at the shelf. This strategic advantage ensures that our partners keep pace with market dynamics and lead the charge in making informed, data-backed decisions that resonate with their target audience, keeping them several steps ahead in the competitive retail landscape.
Arrangement AI, an innovative AI tool crafted by InContext, revolutionizes the way retail companies approach new product launches. By leveraging a decision-making platform that delivers clear, concise, and data-backed insights within days, retailers can make informed decisions on the optimal planogram for maximizing sales lift. Utilizing advanced algorithms and drawing from a vast data lake of 2 million shopping trips, Arrangement AI enables retailers to not just hypothesize, but accurately predict the planogram arrangement that will deliver the highest sales lift for a new product. This process allows retailers to move from idea conception to testing with unparalleled speed and precision, ensuring that when a new product hits the shelves, it’s positioned in a manner that’s most conducive to success. The result is a streamlined path to market for new products, backed by the confidence that comes from data-driven decision-making, ultimately leading to improved sales performance and competitive advantage in the marketplace.
Real-world examples
For the retail sector, AI is not just a tool; it’s a strategic ally with time on its side, enabling businesses to innovate, test, and validate with unprecedented speed and minimal risk. However, despite the clear advantages of advanced analytics, parts of the retail industry have been slow to fully embrace the potential of AI, as recently highlighted by the Harvard Business Review. This hesitancy leaves an untapped wealth of opportunities for leveraging real-time insights over outdated historical data, which quickly loses its relevance in the fast-paced retail environment. Let’s take a closer look at how retail businesses can leverage AI to get ahead of the competition.
Take, for example, a retailer planning to launch a new product. According to a study released by MIT, 95% of new products miss the mark, which means that the room for error in new product introduction is low. The good news is that AI can significantly reduce the margin of error. Before it even hits the shelf, retailers can leverage InContext’s Arrangement AI to strategically navigate the complexities of product placement by leveraging previous results analysis to reduce the time to market.
By simulating various planogram scenarios, Arrangement AI provides knowledge about how shoppers shop your category based on previous studies including pricing, promotions, arrangement, and assortment, to help identify future POG scenarios efficiently. This level of analysis offers retailers a granular view of product success, enabling them to make data-driven decisions that optimize shelf space and maximize the product’s market entry impact. By utilizing Arrangement AI, retailers gain a strategic advantage, reducing the guesswork involved in new product launches and enhancing the probability of achieving higher sales and customer engagement from the outset.
How about a retailer who has noticed stagnation in sales? According to Forbes, the pandemic caused a lasting shift in retail that brought forth a consistent change in consumer behavior. So what does this mean, exactly? It means that historical sales data ages quickly, and it’s no longer efficient enough to find out what customers used to do. Retailers must find innovative ways to predict what they’ll do next more accurately than ever. Utilizing Arrangement AI to assess category drivers enables retailers to swiftly identify the most effective and optimal shelf arrangement outcomes. This powerful tool delves into comprehensive insights on shopper behaviors within specific categories, drawing from extensive previous studies on critical factors such as pricing strategies, promotional impacts, arrangement preferences, and assortment diversity. By analyzing this wealth of data, retailers can pinpoint key drivers influencing consumer purchasing decisions. Arrangement AI facilitates the efficient exploration of future planogram (POG) scenarios, allowing retailers to forecast with a high degree of accuracy which arrangements will resonate most effectively with their target audience. This rapid assessment capability streamlines the decision-making process and secures a competitive edge in the marketplace. Retailers can quickly adapt their shelf arrangements to meet evolving consumer product demands, ensuring that their product presentation aligns with shopper expectations and preferences, ultimately driving increased sales and customer satisfaction.
The true value of modeling data
We know that modeling data in the retail sector is invaluable, acting as a vault of expert knowledge that guides strategic decisions across the entire spectrum of retail operations. By leveraging relevant and comprehensive data models, retailers can transform assumptions into actionable insights, predicting consumer behavior, optimizing inventory levels, and personalizing customer experiences. Because the quality of your business decisions hinges directly on the robustness of the data pool utilized and the precision of the models applied, our data sets are pulled from over 2 million virtual shopping trips. The largest set of shopper insights of its kind, InContext’s data models excel in accurately forecasting consumer preferences and helping retailers avoid common pitfalls, such as overstocking items that fail to sell or misinterpreting market trends.
Get ahead of the competition with InContext
High-quality, relevant data is the key to effective AI strategies in the rapidly evolving retail landscape. It enables retailers to anticipate consumer needs and trends and unprecedentedly personalize shopping experiences. Partnering with InContext offers retailers a distinct advantage in this data-driven race.
InContext’s cutting-edge AI solution is designed to harness the power of high-quality data, ensuring that retailers can navigate the complexities of the modern retail environment with agility and precision, allowing them to not only keep pace but also outstrip the competition. Contact us today if you’re ready to learn how InContext’s suite of tools can transform your business.
