By Robert Hetu, Research Director, Gartner
Eighty-eight percent of retail CIOs believe advanced analytics will have the greatest impact on their organizations over the next five years.
Advanced analytics technologies that enable Big Data discovery and execution through algorithms can reinvent retail. Their importance increases exponentially with the development of the Internet of Things (IoT). The impact of advanced analytics was clear in the 2017 Gartner CIO Survey, which included responses from 133 retail participants from 33 countries, accounting for $513 billion in revenue and $11 billion in IT spending. Retailers surveyed agreed that advanced analytics, IoT, business algorithms, digital security, and virtual customer assistants are the top technologies having the most potential to change their organizations in the next five years.
The impact of digital business will require advanced analytics to support real-time decision making to take advantage of momentary business opportunities. These opportunities will demand a different approach to marketing, merchandising, pricing, distribution, store operations, and every other internal process. Ultimately, retailers will need the ability to decide in a split second if an opportunity is potentially desirable or undesirable in favor of the next momentary opportunity. Retailers will leverage Big Data, advanced analytics, and algorithms to enable these decisions with greater accuracy and timely execution of customer-facing processes. Success will require retailers to use a new KISS acronym: the combination of knowledge, innovation, strategy, and speed, to maintain and grow market share in the digital economy.
IoT will revolutionize retail. Gartner recently predicted that by 2020, 50 percent of everyday essential household consumable products will be auto-replenished from the connected home through IoT. In fact, by 2020, the global smart home market is set to grow to just under $60 billion, and a family home in a mature, affluent market could contain several hundred smart objects. The convenient connected home auto-replenishment solutions for everyday essentials will drive growth in e-commerce. Retailers must have an IoT strategy that can ensure they do not miss this new value stream.
While rating highly across all segments, algorithms spiked for department stores, apparel, and home retailers. Algorithms are a set of rules for solving a problem in a finite number of steps, as for finding the greatest common divisor. New technologies create opportunities to advance algorithms, incorporating many more data inputs from advanced analytics and steps and even decision-making capability. In this way, algorithms are the connection that allows for retail execution. Gartner describes this as algorithmic retailing: the application of Big Data through advanced analytics across an increasingly complex and detailed retail structure to deliver an efficient and flexible, yet unified, customer experience. Anything done by business users via Excel today can be done faster, leveraging more data, to achieve better results.
Digital Security And Virtual Customer Assistants
Digital security and virtual customer assistants are also expected to have a significant impact on retail. Digital security will be driven by ever-increasing customer demands for personalized experiences and convenience that will require use of personal data, combined with the growth of hacking that is causing significant data loss and threat to consumers. Retailers will employ virtual customer assistants as a way to improve the quality and efficiency of customer-facing, repetitive processes, directly delivering cost reduction through labor savings. Both require advanced analytic capabilities to achieve the promise of digital business transformation.