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Advanced data analytics – a source of success in retail

Kamil Folkert, CSO at 3Soft S.A. and a co-founder of Occubee, talks to Computerworld about the benefits of implementing a data-driven approach in business and the best way to start the adventure with artificial intelligence in the retail industry.

How can retail benefit from data potential?

Advanced data analytics based on artificial intelligence and machine learning is becoming a shield for retailers in the face of new challenges – economic and geopolitical turmoil, the effects of the COVID-19 pandemic, broken supply chains, and shortages of raw materials and people. At the same time, it allows them to build a competitive advantage and cope more effectively with new market conditions, dictated, among other things, by booming e-commerce and growing consumer demands.

Our work with clients representing various sectors – FMCG, home & garden, fashion – shows us that many of them are already implementing the digital transformation process, e.g. using business intelligence systems, but there are also those who are still struggling with data silos in Excel and identify a strong need to implement a strategy to change their approach to the data they have. They want to improve processes and evolve into a data-driven business, preferably in an evolutionary, not revolutionary, way.

Retailers recognize the real value inherent in data, and see big data and artificial intelligence as “game changers”, as a ticket to effectively scaling the business while reducing costs and increasing profits.

However, the path to achieving these goals can vary, as each company faces slightly different challenges; they also formulate strategic and operational goals differently. Our work with retailers, therefore, begins with identifying business opportunities and determining how, using mathematical modeling and advanced AI algorithms, we can improve process performance.

Is artificial intelligence reserved only for top players?

It’s not just corporations and international retailers that can benefit from the power of artificial intelligence. Our Occubee platform is the best proof of this. We created it primarily for medium-sized and growing retailers that have historical data to forecast future business events. In this way, we lower the barrier to entry and make it easier to implement AI in smaller-scale enterprises.

Analyzing data with Occubee does not require purchasing additional point-of-sale equipment or expanding the in-house data center. The SaaS model makes it a financially attractive and business-efficient approach. Operational risks related to the continuity of existing IT infrastructure and business processes that have been optimized over the past years are minimized. Retailers can therefore achieve measurable business benefits at a relatively low cost, shortly after implementation – not by revolutionizing the way they operate, but by enriching existing processes with the knowledge of future business events that resides in the data.

Artificial intelligence is no longer an extravagance or futuristic curiosity, but the next stage of development, or even a necessity. This applies not only to international retail chains, but also to retailers representing the mid-market.

How does being data-driven affect business?

By analyzing billions of receipt data, information on thousands of products in different locations, and dozens of retailer-specific factors, we are able to predict customers’ future purchasing decisions. This is done, of course, with a certain probability, just enough to make sound business decisions based on facts rather than intuition.

The use of machine learning models makes it possible to generate hundreds of sales forecasts per day, taking into account many internal (e.g., price lists, store locations, marketing actions) and external (e.g., weather forecast, holidays, special events) variables, which, when combined with individual model training at the product/store combination level, is far beyond human capabilities. In addition, the use of the latest technologies in the area of cloud data management ensures effective monitoring of data flow in real time. This makes it possible, among other things, to generate alerts when business anomalies are observed in the data flowing in real time.

Thanks to advanced AI algorithms, retailers can reduce overstocks, allowing them to free up frozen capital. At the same time, they can increase product availability by reducing out-of-stocks, minimizing the risk of lost sales.

It’s also worth noting that by improving business performance, we also support retailers’ sustainability efforts in the process. For example: better planned logistics on the warehouse-store line or optimized loading area of delivery vehicles result in a reduced carbon footprint. High-quality demand forecasts in FMCG contribute to reducing waste, which is particularly important, for example, in the case of food with a short shelf life. In turn, more accurate forecasts in the fashion industry mean less water and energy is used to produce clothes.

Artificial Intelligence supports the ongoing sustainability revolution. Every retailer should ask themselves today: do I want to be a participant and beneficiary of it, or just a silent witness?

What does AI implementation mean from the perspective of retail chain employees?

Artificial intelligence will not replace humans, if only because not all regularities regarding the future operation of a given business are reflected in historical data. In situations like that, the role of the expert and the ability to perceive it is a key element in maintaining the operational efficiency of the business. As an example, I will use the analogy of the autopilot in an airplane. The fact that such a system exists has not caused airlines to do away with pilots on board. The autopilot can be responsible for the dominant, though technically arguably the easiest part of the flight, allowing pilots to concentrate on the activities that require their intervention.

The same is true in retail, especially in the early days of working with advanced AI algorithms. It is worth using them to automate repetitive yet large-scale tasks, which often account for tens of percent of the activities required to ensure business continuity. This will free employees from routine tasks and reclaim time for matters that require their unique attention, creativity and expertise.

Where should retailers who want to implement data-driven strategies start?

I recommend a free workshop with 3Soft experts. During the meeting we learn about the specifics of the enterprise, analyze available data, identify needs and address concerns. Together we look for business opportunities and consider possible solutions. In this way, we discover areas that need optimization, which are of strategic importance in the context of increasing the value of the company.

Link (interview in Polish).

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