Dear Blog Reader,
With total revenues of about €2.7 trillion, the retail industry in the European Union (EU) is one of the most important sectors of all and plays a crucial role in the success of our economy.
Retail is also important for another reason. The retail industry in Germany is a forerunner in using Predictive Analytics and therefore the spearhead of digital transformation.
Data has become one of the most important resources for company decisions. Many new technologies, such as demand data analytics and consumer purchasing behavior, are responsible for the explosive growth of data.
Data provides the basis for faster and better company decisions. The challenge here is that companies will increasingly make operational decisions on the basis of growing data volumes, as Amazon shows us. This overtaxes human capabilities. Those who want to profit from the competitive advantage that data offers will only do so with automated decision making.
While other sectors are still deliberating how they can benefit from data analysis for forecasting and automated decisions, retail is in the middle of a digital transformation. This is no wonder because hardly another industry branch is facing such stiff competition between small retailers and large chain stores, which in turn must also struggle with growing online business. In addition, most retailers follow omni channel strategies, whether dealing with food or drugstore products. And in hardly another industry are the margins so negligible as here. In retail, it has therefore already become a true fight for survival, to buy as inexpensively as possible and to reduce stock as much as possible to maintain positive earnings.
It is worth it for other industries to think outside the box and see what retail has done with Predictive and Prescriptive Analytics in order to stay in the game.
Manufacturing and logistics industries are directly experiencing the use of better forecasting models in retail. Stock-keeping and purchasing policies in retail are closely linked to customers’ needs and purchasing behavior, which in turn directly affects manufacturing and logistics in the value chain. Manufacturers and shipping companies that know the needs of their customers, and thus those of retail, can optimize and streamline their own processes.
Retail is not always the same
As far ahead as retail is, there are still significant differences in the industry. Not every retail company is using predictive and prescriptive analytics. The companies who do not use analytics are giving away revenue and money for unnecessary inventory. Such companies are also likely to fall strategically behind the competition that already uses predictive analytics.