Data Analytics in Retail Industry.

The competition in the retail market is really high. With the need to satisfy customers and increase profit, the retail companies are using data analytics in all stages of the retail process.

The online retail companies like Amazon, e-bay were one of the first to use data analytics in the retail industry. Data Analytics made online retail companies grow exponentially. Seeing the success and the value in the analytics, offline retail industries like Walmart, Target have started to use data analytics to fend off the competition.

There are a number of ways in which both the online and offline retail industries are using data analytics. Let’s see how a few works.

Demand Prediction

Data analytics is used to predict future demand for a product. Using historical customer buying data, predictive analytics can be used to predict the demand.

It is a very good inventory management technique. Previously, the retailers had to guess based on season and other unreliable techniques. But now, with data analytics, the retail companies can better predict how a product could perform in the future.

The demand prediction also gives the retail industry an idea about how to manage their inventory. When a product sale is projected to grow, then the retail could pile up the product and vice versa.

Price Optimization

When you predict the demand and have the inventory numbers, you can optimize the price. This process is popularly known as Markdown optimization. Previously, the companies had to guess to set the price for a product based on the season, demand, and inventory stock. But now, data analytics helps to set the price of a product at the right time to maximize sales.

Personalized Recommendation

To increase revenue, retail companies are using analytics to give personalized customer experience. Based on the customer’s buying pattern, analytics is used to recommend products to the customers.

Along with providing special discounts for individual customers, personalized recommendations increase sales and revenue in the retail industry. It also increases customer retention and customer conversion rate. Moreover, today’s customers like to have a personalized experience when buying. Data Analytics makes it happen.

Amazon has had tremendous success by using personal recommendations with the help of data analytics.

Optimize supply chain and operations

Another area where data analytics gives its contribution to the retail industry is optimizing supply chain and operations. The retail companies have a trove of data from log files, sensors, and machines. Using this data, a company can optimize its supply chain management with the help of analytics. The transportation of goods, stock management, and manufacturing can be optimized using analytics provided with right data.

In the same way, companies can use data analytics to improve their operations. With data analytics, hidden patterns or insights can be recovered that will be useful to the retail companies to make better decisions to improve their operations.

Increase Return Of Investment

Retail companies use predictive analytics to asses their current state, optimize operations, and predict future performance. By accurately predicting future events, the companies can use it to increase their Return Of Investment.

Increasing the return is the main value provided by the analytics to the retail companies. It is the main reason why all the companies are using analytics and it will be the reason that drives the growth of data analytics in this decade.


As you can see, data analytics is now deeply integrated into all the processes in retail industry from stock management to sales. And it is providing great value to the industries. The retail industry mainly outsources the analytic process to other companies. For eg: Microsoft is the main provider of big data solutions to the retail giant Walmart.

To get an advantage over their competition, retail companies are increasingly using data analytics. In this decade, it is necessary for even small to medium-sized retail companies to integrate data analytics. It is unsurprising to see the change that has happened in the retail industry in the past decade. With data growing exponentially, it’s safe to say that data analytics is going to play a big role in the retail industry in the coming decade.

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