Bi in the Retail Sector...a Comprehensive Analysis

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1. Abstract (One page)

One of the challenges for companies that have invested heavily in customer data collection is how to extract important information from their vast customer databases and product feature databases, in order to gain competitive advantage. The retail industry collects huge amounts of data on sales, customer buying history, goods transportation, consumption, and service. With increased availability and ease of use of modern computing technology and e-commerce, the availability and popularity of such businesses has grown rapidly. Many retail stores have websites where customers can make online purchases. These factors have resulted in increase in the quantity of the data collected. For this reason, the retail industry is a major application area for data mining. This paper elaborates upon the use of the data mining technique of clustering to segment customer profiles for a retail store. Retail data mining can help identify customer buying patterns and behaviours, improve customer service for better customer satisfaction and hence retention. The retail industry collects huge amounts of data on sales, customer buying history, goods transportation, consumption, and service. With increased availability and ease of use of modern computing technology and e-commerce, the availability and popularity of such businesses has grown rapidly. Many retail stores have websites where customers can make online purchases. These factors have resulted in increase in the quantity of the data collected. For this reason, the retail industry is a major application area for data mining. This paper elaborates upon the use of the data mining technique of clustering to segment customer profiles for a retail store. Retail data mining can help identify customer buying patterns and behaviours, improve customer service for better customer satisfaction and hence retention.

Case
Background Note
a. Industry Overview
The Indian Retail industry has grown at a CAGR of 14.6% for the period FY07-12. The said growth can be attributed to the growing Indian economy, increase in Private Final Consumption Expenditure (PFCE) and the change in consumption pattern of the Indian populace. The changing consumption pattern, in turn, primarily remains driven by higher standard of living, growing middle-class population, greater proportion of working women, increase in penetration levels of organised retail etc.

Of all the retailing segments, the contribution of ‘food & grocery' is estimated to have remained the highest at 58% of the total retail sales during FY12 with the ‘clothing & footwear' segment remaining the second-largest contributor occupying 10.5% of the total retail pie during the same period. However in terms of growth figures, the ‘entertainment, books & sports goods equipment' segment is estimated to have outperformed the other retail segments, registering a CAGR of 21.3% during the period FY07-12 . 

Despite the said growth, the Indian retail industry remains highly fragmented, with the organized retailing still at a nascent stage accounting for a miniscule percentage of the total Indian retail market. During FY07- 12 , the organised retailing in India has grown at a CAGR of 26.4%; higher to the growth of total retailing in India during the same period under consideration. Of the organised retail sales during FY12, the contribution of ‘Clothing & Footwear' segment remained the highest at 37% with the ‘Food & Grocery' segment being the second-highest contributor accounting for 24.2% of the total organised retail sales. Notably, the penetration of ‘Food & Grocery' segment remained low at 2.8% owing to greater sale of fresh produce and groceries from the unorganised retail outlets.

With the global as well as Indian economy reviving post recession, the organised retail industry witnessed gradual increase in footfalls and correspondingly an increase in the Same...
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