Moneyball for Retail
By David Dorf on Oct 18, 2011
Back in 2003, Michael Lewis wrote Moneyball:The Art of Winning an Unfair Game which was also released last month as a feature film staring Brad Pitt. The story focuses on the Oakland A's baseball team modernizing its scouting methods to be less subjective and more analytical, allowing it to compete with better funded teams.
Just like it’s not fair that the Oakland A’s $41M budget had to compete with the Yankee’s $125M budget, many retailers find it difficult to compete against Walmart, Target, and Amazon, companies that spend an enormous amount on IT. But it’s possible to follow Oakland’s lead and compete on analytics. Retailers that better understand their customers will have an advantage, sometimes regardless of the prices they charge or the products they carry (although you really need all three to be successful over the long-haul).
Aileen Lee of Kleiner Perkins Caufield & Byers presented on this topic at the Web 2.0 Summit, which was covered by Richard MacManus in this article. (Read the article for some real-world retail examples.) Even small retailers can gain a competitive advantage if they (1) collect the right data, (2) analyze it correctly, and (3) act upon it quickly.
Traditionally retailers didn't do this type of analysis because the data just wasn't available, but since the advent of e-commerce much more data has been collected. Other sources include loyalty programs, and more recently, social networks. Retailers have optimized supply chains, new store locations, and even pricing, but the next generation of analytics will focus on individual consumers, understanding what they want and what offers will influence their purchase.
There are lots of ways to attack the problem, and one that's extremely scalable leverages Oracle's engineered systems as described by Jean-Pierre Dijcks:
Not every retailer needs this much analytical horsepower, but imagine if answers were available at the speed of thought. Privacy aside, the possibilities to personalize the shopping experience are tremendous.