Last Updated on November 14, 2024 by Owen McGab Enaohwo
The benefits of business intelligence systems for modern companies are numerous, especially for those in the retail industry.
Retail companies—whether they’re digital, brick-and-mortar, or a mixture of both—can leverage business intelligence systems to gauge valuable insights faster, unlock competitive opportunities, and optimize key processes.
But that’s putting it simply. The benefits of BI are multi-faceted and nuanced. So, what are the key advantages of a business intelligence system for retail companies, and are they worth it?
Understanding business intelligence systems
What are business intelligence systems and why have they earned such a foundational place in the retail business tech stack?
What are business intelligence systems?
Business intelligence (BI) is the process of extracting raw business data and transforming it into actionable insights that can be used to support stakeholder decision-making, predictions, and strategies. Business intelligence systems refer to the vast software and tools that companies use to retrieve, analyze, and present this data.
Here are the main methods that BI systems use to extract historical, current, and predictive insights:
- Descriptive analytics: Uses data aggregation and data mining to uncover trends, patterns, and relationships in historical data.
- Predictive analytics: Uses data mining, statistical modeling, and machine learning to make future predictions.
- Prescriptive analytics: Uses various advanced statistical methods to determine an optimal course of action or strategy for a specific scenario.
- Performance benchmarking: Measures and analyzes current performance against competitors and industry standards.
- Data visualization: Represents data in visual formats, such as graphs and charts, typically within dashboards and reports.
The importance of BI systems in retail
The retail industry is fiercely competitive, notoriously fast-paced, and highly unpredictable. And, it tends to produce vast volumes of data.
To keep up with competitors, retail businesses need to respond to ever-evolving customer needs. They must have a finger on the pulse of the latest market trends and possess the agility to pivot strategies in response. They also need to streamline operational processes to remove the bottlenecks that threaten customer satisfaction and profit.
Fundamentally, they need to trust that the business decisions they make are backed by accurate data.
Using BI systems, leaders can make informed business decisions about everything from marketing and sales to production and operations. For example, they can adjust prices in response to current trends, increase inventory in anticipation of customer demand, adopt the latest business automation to boost productivity, and much more.
Benefits of BI systems in streamlining retail processes
Here’s our pick for the most important benefits of business intelligence systems.
- Enhancing inventory management
Poor inventory management causes costly inefficiencies: stockouts, overstocks, cash flow complications, reordering mistakes, and more.
62% of businesses say that reducing their out-of-stock is their most pressing inventory objective. Nonetheless, having a lack of effective technology/processes is the biggest obstacle for a majority (30%) of companies.
Image sourced from AIMMS.com
BI tools are the solution, delivering clear, actionable insights that enhance everything from procurement to tracking, optimization, and forecasting.
Intelligent retail business software automatically collects, integrates, and reports data from all your disparate sources, such as your warehouse, transport, and sales. This gives you 360° visibility into your inventory. Instantly see and use up-to-date stock data to make accurate, cost-effective replenishment decisions and reduce stockouts and overstocks.
You can also use data such as seasonality, market trends, and sales spikes to accurately forecast product demand and optimize inventory for cost efficiency.
- Improving sales and marketing strategies
To generate leads and guide them towards conversion, you need to know, on a deep and intricate level, who your customers are and what they want.
What type of marketing campaigns generate high-quality leads? What are your customers’ motivations and pain points? What sales strategies generate the most conversions and what is the most effective way to turn a one-time buyer into a loyal customer?
The answers to all of these questions lie in your data. But when it all exists in raw formats and siloed locations, it’s difficult—if not impossible—to get the full picture of what your customers want and how best to convert them.
BI systems give marketing and sales leaders comprehensive insight into customer behaviors, preferences, and trends. Detailed data visualizations can illuminate patterns and trends in customer behavior, enabling you to fine-tune marketing efforts and sales strategies to meet evolving customer needs and boost revenue.
- Powering data-driven decision-making
Your company’s health depends on strategic, data-backed decision-making. But by the time you’ve collected and analyzed data manually, it’s often too late to act on opportunities. That is if you manage to spot them at all.
One of the main benefits of business intelligence systems is how quickly, comprehensively, and accurately they can analyze vast volumes of data. They’re able to reveal patterns and trends that are undetectable to humans. And, they use these insights to make accurate predictions that guide strategic decisions, ultimately helping you reduce financial risks and capitalize on opportunities.
It’s why better decision-making remains the most important BI goal. According to Dresner Advisory, 52% of companies described better decision-making as a “critical” business intelligence objective—more important than cost-savings and revenue growth.
Image sourced from Dresner Advisory
Let’s say you want to launch a new product. Using BI market and customer data, you can more accurately discern the outcome of your initiative. BI within your accounting software is indispensable for accurate budgeting, cash flow predictions, and revenue forecasting. This empowers financially conscious decisions and allows you to leverage real-time data to gauge financial performance at every turn.
Plus, with the speed at which BI systems deliver insights, you can make these strategic decisions quickly to gain a competitive advantage.
- Optimizing supply chain management
From globalization and increasing customer demands, many factors contribute to the escalating complexity of modern supply chains. One of the most significant influences is the abundant volume and diversity of data.
Simply put, we’re generating so much data that it becomes an obstacle.
Thanks to BI technologies, achieving data visibility across the entire supply chain lifecycle is possible. Not only can you track inventory from the moment you purchase from a supplier right through to customer order fulfillment, but you can also access supplier performance metrics, route optimization KPIs, predictive analytics, and more.
With all of these business analytics at your fingertips, you can quickly spot harmful bottlenecks and optimize supply chain management. Ultimately, this leads to operational efficiency, cost-savings, and enhanced customer satisfaction.
Free to use image sourced from Unsplash
Here are some practical applications of BI in supply chain management:
- Vendor communication and collaboration: BI tools integrate data between your different supply chain partners, fostering up-to-date, transparent, and instantly available data sharing. With aligned insight into inventory levels and production schedules, you reduce the risk of product quantity mismatches and make sure you’re updated on shortages or delays.
- Supplier performance: Data such as supplier pricing, product quality, delivery times, and reliability should be tracked to evaluate supplier performance. This enables you to make informed decisions to improve cost-effectiveness and minimize supplier disruptions. This could mean moving on from unreliable suppliers, opting for more affordable vendors, or re-negotiating contracts.
- Demand forecasting: Leverage predictive analytics via BI tools to make future demand projections and adjust your production schedules and distribution strategies appropriately. For example, you might proactively employ more employees to meet anticipated spikes in demand, or purchase more or less stock in alignment with seasonal or future trends.
- Inventory management: Inventory management systems leverage historical data and market demand patterns to optimize inventory levels and identify optimal replenishment times and volumes. Plus, with full visibility into your moving inventory, you can offer transparent, reliable order fulfillment services to meet customer needs.
- Route optimization: BI can collect and analyze transportation metrics such as distance, time, traffic, vehicle operating costs, and fuel costs. Thanks to visualizations, you can quickly spot ways to optimize routes. This has numerous benefits, such as faster delivery times, reduced transportation costs, optimized resource utilization, and carbon footprint minimization.
- Enhancing customer experience
Only by knowing your customers on a deeper level can you provide tailored experiences.
BI tools track customers across channels and interactions, analyzing intricate customer data including demographics, pain points, purchasing behaviors, and more.
Using this data, you can segment your customers into groups based on shared characteristics. From there, target them with personalized marketing campaigns and sales strategies that relate directly to their needs and preferences.
Free to use image sourced from Pixabay
Use patterns and trends gleaned by BI to reach customers with the right content at the right time. And because BI systems generate data in real-time, you improve your responsiveness to customer concerns and changing needs.
As customers continue to demand tailored experiences, it’s become increasingly essential to proactively target them with relevant marketing materials. Integrating business intelligence software with a customer relationship management system is the best way to gain comprehensive insight into your customer data.
Customer experiences also benefit from your optimized supply chain.
Customers don’t care how complex your supply chain is—they just want reliable inventory levels, transparent shipping, and timely deliveries. BI facilitates this by eliminating the bottlenecks that cause stockouts, incorrect orders, and delivery delays. Customers get the correct item on time, improving their satisfaction and loyalty.
Summing up
Business intelligence can be leveraged in multiple critical areas thanks to its ability to extract such huge volumes of raw data. From supply chain management to customer service, sales, and marketing, business intelligence is a transformative tool that enriches key retail processes with the in-depth insights needed to fuel informed decisions.
Stay ahead of competitors, unlock opportunities, and optimize business operations and costs with business intelligence solutions.
About the Author:
Nikolay is a professional writer who delivers content on topics such as leadership, productivity and project management. Nick is passionate about entrepreneurship, consulting and growth hacking.