The Big Deal About Big Data Research Study

Transcription

1 The Big Deal About Big Data Executive Summary 1 retail consulting and industry thought leadership The Big Deal About Big Data Research Study Presented by: The Parker Avery Institute the education, training and research unit of The Parker Avery Group

2 Full Report: The Big Deal About Big Data 2 CONTENTS Introduction... 4! Key Findings... 6! Top Big Data Opportunities... 7! Current Definition and Usage of Data... 9! Maturity of Big Data Initiatives... 12! Timeframes for Investing in Big Data... 13! Business Challenges Stalling Big Data Initiatives... 15! Percent of IT Budget Invested in Data and Analytics... 17! Focus of Initial Big Data Investments... 19! Retailer Big Data Preparedness... 21! Areas Most Impacted by Big Data... 22! Organizational Impact of Big Data... 23! Addressing Increased Customer Expectations and the Digital Generation... 24! Customer Privacy Concerns... 25! Customer Impacts... 27! Other Big Data Concerns... 28! Final Word... 29! Figures... 30! Study Methodology... 31! be selective.

3 Full Report: The Big Deal About Big Data 3 Definition Big Data is high-volume, high-velocity and high-variety information assets that demand cost-effective, innovative forms of information processing for enhanced insight and decisionmaking. (Source: Gartner) Copyright The Parker Avery Group. All rights reserved.

4 Full Report: The Big Deal About Big Data 4 Introduction The definition on the previous page may sound like something out of a technical document and more likely than not, does not truly illustrate the importance of Big Data. To provide more relevant context, here are some concrete examples 1 of what Big Data actually is: 5 billion global mobile phone users 2.4 billion global internet users in billion active Facebook users 500+ million total photos uploaded to social media sites every day 244 million American internet users in million user generated reviews on Yelp alone 150 times per day mobile phone users check their devices 100 hours of video uploaded on YouTube every minute 9-fold increase in digital information created and shared over the past 5 years it took only 3 years for tablets to outsell laptops and desktops 70% growth in mobile data traffic in 2012 That s Big. 1 All statistics from: FEDTECH: be selective.

5 Full Report: The Big Deal About Big Data 5 Big Data is all encompassing. Every second, data is created by billions of devices and interactions around the globe. As a retailer, when a customer, employee or external business partner goes online or picks up their smartphone or other mobile device, data is created sometimes even if the device is not actually used. Furthermore, almost every interaction human and non-human creates what are sometimes called digital breadcrumbs. Often, these are created without our knowledge, but they are recorded and can be used. One cannot read through a retail publication these days without seeing differing commentary about Big Data. It has become one of many current buzzwords used across a number of different industries, and many companies are under the impression that Big Data holds secrets beyond their wildest imaginations. This leads us to ask: How can Big Data be used? Many are hoping Big Data will finally deliver the panacea of customer insights. Or help them gain better perspective into competitive intelligence. Perhaps even to improve their ability to predict and react to trends that shape and influence their key business decisions. Whatever the motivation, many retailers are considering Big Data initiatives because the amount and variety of data they now can have at their disposal is not only significant, but it is also increasing exponentially. Admittedly, the very definition of Big Data is varied, but in essence it relates to data represented by massive increases in volume, incredible velocity and great variety. This is data that is created every nanosecond of every day across a myriad of different devices, platforms and technologies. So What s the Big Deal? The opportunities that Big Data present to retailers are varied and tremendous, but not without significant obstacles and challenges. In this research study, we explore retailers understanding, use, plans and perceptions of Big Data, all which should give you insights on how to best approach your own Big Data initiatives. Copyright The Parker Avery Group. All rights reserved.

6 Full Report: The Big Deal About Big Data 6 Key Findings! 73% of retailers believe refining store assortments to be more relevant is their top Big Data opportunity! 68% of retailers believe providing more relevant products and services for their customers and developing more refined customer insights are also top Big Data opportunities! Only 10% of retailers have started Big Data initiatives, while 31% have no Big Data plans! Of those currently investing in Big Data, efforts are primarily focused on Marketing and Customer Relationship Management as well as Merchandising! While there was a great deal of variation, the areas retailers feel will be most impacted by Big Data are Traditional Promotions and Customer Experience! Retailers have not yet begun to strongly consider the organizational impacts that Big Data will have! 72.4% feel that their existing technology is prohibitive and 55.2% are concerned about the upfront IT investment! Overwhelmingly, retailers do not feel their organizations are prepared to handle Big Data be selective.

7 Full Report: The Big Deal About Big Data 7 Top Big Data Opportunities Parker Avery asked study participants to provide the top Big Data opportunities for retail. The primary answer, chosen by 73% of respondents, was refining store assortments to be more relevant. This was closely followed by two very related opportunities: providing more relevant products and services for customers and developing more refined customer insights to target promotions and offers (both selected by 68% of retailers in the study). TOP BIG DATA OPPORTUNITIES Refine store assortments to be more relevant 73% Provide more relevant products and services for our customers 68% Develop more refined customer insights to target promotions and offers 68% Better manage demand and replenishment and drive supply chain efficiencies 41% Understand and react quickly to competition and new trends 34% Optimize store layout and product placement 16% Figure 1: Top Big Data Opportunities These top opportunities align with initiatives many retailers are undertaking to match store assortments on more micro-levels to accommodate local customer needs and desires. This finding also indicates that retailers wish to use Big Data to simultaneously reassess and refine the products they offer to their customers, while developing strategies to better market these new or changed offerings in more targeted ways to their customers. However, even though retailers may be looking at Big Data to refine their offerings, they are not as interested (yet) in using it to optimize their store layout and product placement strategies, which ranked lowest as opportunities. As retailers gain a better understanding and incorporate technologies, processes and roles to use Big Data in their enterprises, certainly these lower-ranked opportunities should be Copyright The Parker Avery Group. All rights reserved.

8 Full Report: The Big Deal About Big Data 8 explored, since data from in-store equipment, customer mobile devices and other sources has great potential for optimizing in-store customer experiences and retailer operational efficiencies. Retailers are also not quite as ready to tackle supply chain opportunities using Big Data. The ability to better manage demand and replenishment was ranked 4th (out of 6), which indicates that retailers are at least initially focusing their efforts on the demand side of the retail equation. Likewise, study participants did not view the ability to understand and react to competition and new trends as a top opportunity. It appears that retailers are focusing internally for at least the near-term, as they begin to understand the possibilities the Big Data can bring. Perhaps as retailers become savvier about how to reign in, analyze and effectively use Big Data, their focus will include more external factors, such as supply chain dynamics, competition and trends. be selective.

9 Full Report: The Big Deal About Big Data 9 Current Definition and Usage of Data One of the first questions we asked study participants was how they currently define and use several different types of data. This was done to level-set the understanding of traditional data vs. Big Data, as well as to provide a perspective on how effectively retailers feel they are leveraging different data sets. Answers as to what types of data are considered Big Data were varied there was not a strong opinion about any of the data sets, indicating a probable lack of understanding of what Big Data truly entails. CURRENT DATA USAGE 100% 90% 80% 19% 16% 10% 10% 10% 23% 23% 28% 19% 13% 70% 35% 35% 26% 60% 50% 40% 63% 16% 43% 35% 34% 87% 30% 45% 55% 20% 10% 0% 16% 3% Transactional and customer data we own/ manage 32% Data we pay for (e.g., Neilson) 10% Nontransactional data we own/ manage 23% Online data that we don't own or manage 32% Data from our instore equipment & security cameras 38% Data from consumer mobile devices Supply chain data Data from advanced technologies Used Very Effectively Used Somewhat Effectively Not Effectively Used Not Used at All Figure 2: Current Data Usage While only 19% of respondents said they are able to very effectively use their own transactional and customer data, the greater majority (63%) are only able to use this internal data somewhat effectively and the remainder not effectively or not at all. This underpins the notion that internal data issues are likely a major cause for retailer hesitation to delve into Big Data projects. For study participants whose growth rates were above average (greater than 3%), we found that more of these retailers believe they are able to "very effectively" or "somewhat effectively" use their own transactional and customer data better than their Copyright The Parker Avery Group. All rights reserved.

10 Full Report: The Big Deal About Big Data 10 peers, but almost all retailers in our study struggle with leveraging data sources that they do not own or manage. Not surprisingly, retailers whose growth rates are average or below average (3% growth rate or less than 3%, respectively), have less confidence about their company s ability to leverage their own transactional data. Above average retailers also seem to be getting their money s worth with respect to paid data: Parker Avery noted that these retailers are able to use paid data more effectively than their peers. However, nearly a third of all respondents do not use paid data at all. With such varying degrees of effective use of this data source, coupled with the increasing availability of so many other sources of data, it will be interesting to see how the use of paid data sources pans out once retailers figure out how to best harness and leverage Big Data. As far as unstructured data sources, such as online, un-owned data, data from customer mobile phones and advanced technologies, only a handful of above average retailers feel they are able to use this somewhat effectively; the remaining study participants do not feel they use these data sources effectively, if used at all. THERE IS A DEFINITE CORRELATION BETWEEN RETAILERS USE OF THEIR TRANSACTIONAL, CUSTOMER AND PAID DATA AND THE IMPACT ON GROWTH RATES: ABOVE AVERAGE RETAILERS ARE ABLE TO USE THIS DATA MUCH MORE EFFECTIVELY THAN THEIR AVERAGE OR BELOW AVERAGE PEERS, RESULTING IN HIGHER GROWTH RATES. The majority (55%) of respondents admitted that they are not using their own nontransactional data such as website traffic, customer surveys and other feedback very effectively or at all. While 90% of respondents are actually collecting this data, something is hindering the ability for over half of retailers to really take advantage of the information that can be gleaned from these sources. When asked about online data that the retailer does not own or manage (for example external social media and review site data), only 10% of study participants feel they are able to use this very effectively. Since 23% are using these data sources somewhat effectively, this probably indicates that most retailers are still investigating the best strategies and technologies for capturing and using this vast amount of data. However, early adaptors are beginning to use these unstructured data sources by analyzing customer behaviors and opinions, trends, and even weather or travel patterns to predict in-store sales and make dynamic pricing or cross-selling decisions. be selective.

11 Full Report: The Big Deal About Big Data 11 As these technologies mature and retailers gain better control over their owned data, we anticipate that retailers abilities to effectively tap into and make meaningful use of these external, unstructured data sources will strengthen. Not surprisingly, data from newer technologies (for example, mobile devices, RFID, and even in-store equipment and security cameras) is not being used effectively or at all. Furthermore, an overwhelming number of study participants (87%) are not using data from advanced technologies at all (examples include biometrics and interactive digital displays). Since company-owned and managed transactional and customer data should be the foundation for any data-centric initiative, it is wise for retailers to understand they must get the basics in order before adding more. To quote a line from the 1995 remake of the classic movie Sabrina: "Sometimes more is not better...it's just more." Copyright The Parker Avery Group. All rights reserved.

12 Full Report: The Big Deal About Big Data 12 Maturity of Big Data Initiatives The majority of retailers in our study are either in the very initial stages of investigating Big Data possibilities (45%) or do not even have Big Data on their radar, primarily due to issues with their existing data (24%). This finding aligns with the previous discussion of many retailers not using their existing owned or paid data very effectively. Just over 10% are actually budgeting for Big Data and have integrated Big Data initiatives into their strategic plan. In the middle of the maturity spectrum, about 21% of retailers have developed a Big Data plan and are in the process of aligning it with their strategic plan. WHAT STAGE / MATURITY ARE YOU IN WITH YOUR BIG DATA INITIATIVES? We don't have a grip on our existing data, so Big Data is not yet on our radar (24.1%) We have Big Data initiatives built into our strategic plan (6.9%) We have a budget for Big Data investments (3.4%) We know we need to do something, but are still investigating the best route (44.8%) We have developed a Big Data plan and are aligning this with our strategic plan (20.7%) Figure 3: Maturity of Big Data Initiatives be selective.

13 Full Report: The Big Deal About Big Data 13 Timeframes for Investing in Big Data The fact that only a handful of retailers have already started investing in Big Data aligns with our findings about retailers maturity relative to Big Data in essence, many retailers are still struggling with data they own or pay for, so to invest in Big Data anytime soon may not make much sense. This maturity level is caused by a number of different factors, including aged IT infrastructure and applications, the skills needed from both business and IT staff, as well as the prohibitive cost of new technologies required to handle Big Data. Additionally, many companies want a better confidence of the ROI they can expect to achieve with investments in data and analytics, and they are concerned about how rapidly the environment is changing. WHAT IS YOUR COMPANY'S TIMELINE TO BEGIN YOUR BIG DATA INITIATIVES? 3+ years (3.4%) No Big Data plans (31.0%) 2-3 years (31.0%) Already started (10.3%) Within 1 year (17.2%) Within 6 months (6.9%) Figure 4: Timelines for Big Data Initiatives Many retailers are also taking more time to investigate the best route in understanding how to use and leverage Big Data. This is being influenced by both external and internal factors, such as the wide variety of technology providers who are offering solutions aimed at harnessing and analyzing structured and unstructured data sources, Copyright The Parker Avery Group. All rights reserved.

14 Full Report: The Big Deal About Big Data 14 as well as shareholders who are concerned about brand viability in a dynamically changing retail market. Furthermore, with the myriad of other high priority technology initiatives in which to invest for example, omnichannel and customer experience retailers must make tough decisions about where their investments in both capital and human resources will have the most positive impact on their business. According to an April 2013 RIS report 2, Big Data is not even on the radar as an action item for most retailers over the next 18 months. MAJOR&ACTION&ITEMS&OVER&THE&NEXT&18&MONTHS& Cost containment Adopting a unified enterprise platform Leveraging social media Campaign management and promotions Developing a mobile commerce strategy Expanding multichannel (synchronization) initiatives Developing a mobile enterprise and/or store Figure 5: RIS Study - Major Action Items Over Next 18 Months 2 23 rd Annual Retail Technology Study (RIS, April 2013) be selective.

15 Full Report: The Big Deal About Big Data 15 Business Challenges Stalling Big Data Initiatives Not surprisingly, existing technology was overwhelmingly a challenge for retailers to invest in Big Data. However, this challenge extends to other initiatives, such as mobile, multi-channel, promotions, global expansion and more. According to RIS, over 45% of retailers state that retiring their antiquated legacy systems is their top challenge over the next three years. While many of these custom-developed systems were cutting-edge years ago and have served many retailers unique needs very well, they can no longer support or integrate with newer technologies and much more robust data volumes, varieties and velocities. TOP 3 BUSINESS CHALLENGES RETAILERS ARE FACING WITH THEIR BIG DATA STRATEGIES 80% 70% 72.4% 60% 55.2% 50% 40% 30% 34.5% 31.0% 27.6% 20% 10% 10.3% 0% Existing technology infrastructure is prohibitive Upfront IT investment costs Existing data issues prohibit us taking on more data Lack of business skills Lack of IT skills Other Figure 6: Top 3 Business Challenges Relative to Big Data Strategies Upfront technology investment costs was the second business challenge to taking on Big Data, as 55% of study participants cited. The jury is still out on a solid Big Data ROI, even though there have been some early success stories: Macy s and Kroger are two good examples, as they have each been able to leverage Big Data to increase sales by double-digit percentages. However, only a handful of data points albeit with leading retailers may not be enough to persuade other retailers to bite the Big Data Copyright The Parker Avery Group. All rights reserved.

16 Full Report: The Big Deal About Big Data 16 bullet just yet. And Macy s admits that marrying traditional transactional data with unstructured, external data sources is still a challenge. 3 Some of these early success stories can primarily be attributed to just getting a better handle on existing data. It seems some retailers are making headway on upgrading their infrastructures and improving their overall capabilities to make better use of the data they currently own. This is an important first step in any Big Data strategy. About one-third of study participants identified the lack of business and/or IT skills as being prohibitive to Big Data initiatives (31% and 28%, respectively). This speaks to an acknowledgement that Big Data is no small undertaking and that it will impact the business as much if not more than the IT department. While the IT department will need to deal with new technologies and much larger data volumes, types and speeds, the business will need to change dramatically to best take advantage of the new information Big Data will provide them. Gone are the days of IT analysts being responsible for generating reports, facts and figures and handing these off to the business. These tools are now directly in the hands of the business, and retailers must recognize that they need to develop new skill sets and business processes in order to effectively handle this information. Additionally, as we found with understanding retailers Big Data timeframes, since many companies still struggle with understanding the ROI and quantifiable benefits that Big Data initiatives can bring, retailers are focusing their investments on projects that are more likely to have a solid business case. Such investments include mobile, multi- or omnichannel, social media, online customer service, e-gift cards, in-store customer experience initiatives, and alternative payment methods. 3 Retail Goes Shopping Through Big Data (CNBC, April 14, 2013) be selective.

17 Full Report: The Big Deal About Big Data 17 Percent of IT Budget Invested in Data and Analytics Most retailers total IT budgets, as a percentage of total revenues, are less than 3%. Parker Avery found that out of existing retail IT budgets, most retailers allocate less than half of this to data and analytics. PERCENT OF TOTAL IT BUDGET INVESTED IN DATA AND ANALYTICS (APPLICATIONS, INFRASTRUCTURE AND STAFF) Greater than 50% (21.4%) Less than 25% (46.4%) 25-50% (32.1%) Figure 7: Percent of IT Budget Invested in Data & Analytics Parker Avery expected allocation of retail IT spending on data and analytics to be higher more towards 50% of the IT budget. This discrepancy may be because some study participants do not completely understand what they are spending their IT budget on (only 17% of respondents were from the IT department). However, we have witnessed some retailers who do in fact spend more than 50% of their IT budgets on data and analytics not including operational data storage costs. According to Aberdeen Group 4 marketing analytics is a key success factor in understanding the dynamics of consumer buying behavior. As such, Aberdeen noted that 90% of Best-in-Class retailers have a marketing analytics initiative in place vs. 69% of all other retailers. This delta indicates that Best-in-Class retailers are investing more 4 Building the New Database of Intentions with Real-time Marketing Analytics (Aberdeen Group, May 2013) Copyright The Parker Avery Group. All rights reserved.

18 Full Report: The Big Deal About Big Data 18 in analytics and reaping the benefits through better capabilities to more precisely segment their audience and focus marketing and merchandising efforts accordingly. Additionally, Aberdeen found that Best-in-Class retailers are also able to use analytics to better customize offers for individual customers and specific market segments than their peers. The true question relative to investments in data and analytics, however, is value: What is the business value on this annual investment? It would be interesting to understand how much of the IT budget is spent on data storage and movement as opposed to analytical capabilities. Parker Avery hypothesizes that a good portion of some retailers IT budgets is spent on storage and data movement, which is of limited value the real value is in the information resulting from analytics. It is similar to building an expensive distribution center or warehouse that receives and stores retail merchandise that is then never sold. be selective.

19 Full Report: The Big Deal About Big Data 19 Focus of Initial Big Data Investments As might be expected, the areas most selected as their current focus for Big Data investments are in Marketing and Customer Relationship Management (CRM). However, less than a third of study respondents identified any of the areas as current Big Data investments most tagged specific areas to be a year or more out, where their Big Data investment focus expands to include Promotions, Planning, Fulfillment and other areas. This aligns with the findings that retailers believe the top Big Data opportunities are around becoming more relevant to their customers. If retailers are able to better understand their customers using Big Data gleaned from customer-centric areas like Marketing and CRM, then they will be able to more closely align product assortments and targeted offers to these customers. So it seems there is a common strategy of using Big Data to (1) understand customers, and then (2) align merchandising activities around this knowledge. TIMEFRAME FOR BIG DATA INVESTMENTS 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 29% 28% 25% 24% 22% 20% 17% 17% 16% 13% 25% 25% 8% 21% 20% Marketing 44% Customer Relationship Management 29% 8% 38% 48% 4% 17% 24% 26% 35% 40% 24% 16% Buying Planning Sourcing Promotions Management 42% 39% 17% 25% Fulfillment 9% 32% 16% 35% 36% Vendor Management Channel Operations 21% 17% 50% Product Development Today In 1-2 Years 3+ Years No Plans Figure 8: Timeframe for Big Data Investments Channel Operations and Product Development did not seem to be high on the list as near-term Big Data priorities for most retailers. This mirrors the fact that most retailers are still only in the initial stages of their Big Data investigation and planning. So except for their current Big Data investments, the remaining statistics shown here may be educated guesses as to where these investments will ultimately be. Copyright The Parker Avery Group. All rights reserved.

20 Full Report: The Big Deal About Big Data 20 Effectiveness of Existing Data and Analytics Investments For the most part, retailers feel they are getting the value they expect from their existing investments in data and analytics. However, this sentiment is not very strong, and there is definite concern about how quickly the data technology environment is changing. About 80% of study participants agree their data and analytics investments provide expected value, but of this group, only 4% strongly believe that they are getting the value they expect. On the other side of the equation, 20% do not feel they are achieving any value from these investments. Most retailers (72%) also believe these investments give them a strategic advantage, and 20% feel strongly about this. However, close to a third (28%) felt they are not able to leverage these investments to achieve a strategic advantage. EFFECTIVENESS OF EXISTING DATA & ANALYTICS INVESTMENTS 100% 90% 4% 20% 16% 80% 70% 40% 16% 32% 60% 50% 40% 30% 20% 10% 0% 36% 12% 8% Our organization is getting the value we expect from our investments in data and analytics. 36% 24% 12% 12% 16% 16% Our use of data and analytics gives us a strategic competitive advantage. We are concerned about our data and analytics investments because the environment is changing so quickly. Strongly Agree Agree Somewhat Agree Disagree Strongly Disagree Figure 9: Effectiveness of Existing Data & Analytics Investments Regardless of how they feel about their current data and analytics investments, retailers are clearly concerned about the quickly changing environment the majority (72%) voiced this concern. be selective.

21 Full Report: The Big Deal About Big Data 21 Retailer Big Data Preparedness Retailers admit to being only minimally prepared to handle Big Data initiatives, which is another reason for their hesitation to invest and move forward in this area. When asked about business and IT skills, roles and responsibilities, business processes and technology, only a handful of retailers feel they are very prepared to handle Big Data across the board. Most study respondents felt they were at most minimally prepared. It is clear that retailers feel their overall enterprise is less prepared than their IT organization. But not by much when asked about each different area, between 60 and 80% felt that the levels of preparedness were minimal to not at all prepared. HOW PREPARED IS YOUR ORGANIZATION TO HANDLE BIG DATA INITIATIVES? 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 4% 4% 16% 68% 28% 56% 28% 52% 12% 12% 12% Roles and Responsibilities Business Processes 8% 8% 8% 8% 32% 32% 32% 56% 4% Business Skills Technology Skills Technology Applications 48% 48% 12% 12% Technology Infrastructure Very Prepared Sufficiently Minimally Not At All Figure 10: Organizational Preparedness Fortunately, retailers understand that Big Data is clearly not just a function of the IT department they understand that this type of major initiative transcends across the entire business, and will result in significant changes organizationally as well as systemically. This means that as retailers continue to explore Big Data possibilities, they will need to re-evaluate the way they operate across the enterprise, make appropriate modifications and proactively manage this major change. Copyright The Parker Avery Group. All rights reserved.

22 Full Report: The Big Deal About Big Data 22 Areas Most Impacted by Big Data Perhaps not surprisingly, promotions and customer experience related areas were identified as being most impacted by Big Data initiatives. What was surprising is that over half of respondents also identified supply chain efficiencies and distribution strategies as being moderately to significantly impacted. With most Big Data efforts clearly focused on the demand side, evidently some retailers are already considering the downstream impacts. Retailers have mixed feelings about other areas, such as pricing strategies, omnichannel fulfillment and even social media strategies and mobile marketing. Some felt these would be greatly impacted, while others did not. This discrepancy is likely due to varying retail models, as well as the fact that Big Data strategies are mostly still in their infancies. Mobile Marketing Pricing Strategies Social Media Strategies Customer Experience Traditional Promotions Store Operations Product Development Store Layout Sourcing Strategies Store Merchandising Product Assortment Omnichannel Fulfillment Distribution Strategies Supply Chain Efficiencies ANTICIPATED BIG DATA IMPACTS ON CUSTOMER-FACING AREAS Customer Service It is interesting to note that None - Minimal Impact Medium Impact Significant Impact mobile marketing did not get more attention, since Figure 11: Big Data Impacts on Customer and Internal Areas shoppers mobile devices are significant drivers of Big Data, and inversely mobile promotions will likely be driven by information gleaned from Big Data. Areas that retailers do not see much impact are store operations and layout, product development and sourcing. Again, since many retailers are still sorting through how to handle Big Data, the integration with these areas may not yet be on their radar. 40% 36% 52% 52% 48% 44% 60% 56% 56% 56% 52% 68% 64% 76% 72% 28% 40% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 12% 24% 16% 24% 28% 28% ANTICIPATED BIG DATA IMPACTS ON INTERNAL AREAS 16% 28% 20% 32% 12% 28% 24% 20% 20% 20% 24% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% None - Minimal Impact Medium Impact Significant Impact 12% 28% 36% 28% 32% 24% 24% 12% 16% 8% 4% be selective.

23 Full Report: The Big Deal About Big Data 23 Organizational Impact of Big Data Our findings indicate that retailers have not yet begun to earnestly consider the organizational impacts that Big Data will have. When asked specifically about Big Data s impact on retailers Merchandising organizations, there were mixed feelings. The top three roles identified as being moderately to significantly impacted are Pricing Analyst, VP of Merchandising and Director of Merchandising. It seems retailers acknowledge that Big Data will impact roles within the Merchandising organization, but there is not a strong sense of exactly which roles and to what extent. IMPACT OF BIG DATA INITIATIVES ON MERCHANDISING ROLES 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 12% 12% 16% 16% 13% 16% 12% 12% 12% 24% 20% 16% 32% 24% 8% 8% 28% 28% 32% VP Director of Merchandising Merchandising 16% 12% 4% 24% 20% 25% Category Director 24% 28% Pricing Director 38% 32% 21% 24% Private Brands Director 16% 24% 32% 12% 16% Category Merchant 16% 28% 24% 32% 20% 8% 24% 24% 16% Pricing Analyst Buyer Assistant Buyer No Impact Some Impact Medium Impact Significant Impact NA (role doesn't exist) Figure 12: Big Data Impacts on Merchandising Roles Roles outside the Merchandising department that retailers felt will be impacted included: Information Technology Planning Marketing (VP Level+) Customer Service (VP Level+) Store Operations and Store Management Business Analysts Allocations Analysts Sourcing Supply Chain Managers This speaks again to the fact that many retailers are still figuring out how and when to work Big Data into their operating model. So even though they understand Big Data will bring organizational change, they have not really begun to plan the specific modifications that will be needed. Copyright The Parker Avery Group. All rights reserved.

24 Full Report: The Big Deal About Big Data 24 Addressing Increased Customer Expectations and the Digital Generation As customer expectations continue to increase, and the next generation of customers continues to become increasingly digital and connected, Big Data will undoubtedly play a role in future retail strategies. Parker Avery asked how retailers are using Big Data to address this rapidly changing, customer-centric world. We found that the majority (over 60%) admitted they know specific focus is needed, but have not yet started down this path. Again, this speaks to the fact that most Big Data initiatives are in their very beginning stages of planning. None of the retailers who participated in our study said that they are already using Big Data to address this dynamic. However, some retailers feel they are already moving down the path of using Big Data to develop and implement strategies that accommodate this increasing and new breed of customers. HOW RETAILERS ARE USING BIG DATA TO ADDRESS INCREASED CUSTOMER EXPECTATIONS AND THE "DIGITAL GENERATION" We are in the process of implementing our next-generation customer strategy using Big Data (21.7%) We are already using Big Data to be one step ahead of our customers' expectations (0.0%) We are developing our next-generation customer strategy using Big Data as a foundation (17.4%) We know we need to address this, but haven't yet started (60.9%) Figure 13: Use of Big Data to Address Increased Customer Expectations be selective.

25 Full Report: The Big Deal About Big Data 25 Customer Privacy Concerns Customer privacy issues and security breaches continue to make retail headlines. In fact, retailers and restaurants accounted for 24% of all data breaches in 2012, second only to financial organizations (at 37%). 5 These security breaches involve compromised user passwords, malware, physical attacks like credit/debit card skimming devices and social tactics such as phishing. Customers are becoming more aware that their personal, transactional and even payment information is now digital and has the possibility of being hacked and misused. Retailers need to take this concern into consideration as they develop their Big Data strategies by implementing and enforcing strict privacy policies and security best practices. Given this heightened awareness, it is surprising that retailers do not seem as concerned about security as we would expect. Just over 17% said they were very concerned about customer privacy, and of this, just a handful of retailers are actively taking steps to combat the issue. Somewhat concerned, and are taking measures to minimize issues (30.4%) Very concerned, but not sure how to handle it (4.3%) CUSTOMER PRIVACY CONCERNS RELATIVE TO BIG DATA INITIATIVES Very concerned, and are taking measures to minimize issues (13.0%) Not concerned (17.4%) Somewhat concerned, but not sure how to handle it (34.8%) This is not to say Figure 14: Customer Privacy Concerns retailers are not concerned about customer privacy or security overall. It may be more of a testament that since they have not really begun Big Data initiatives, the customer privacy issues associated with Big Data are not yet being raised or discussed at length. Clearly, legislation and industry movements such as PCI compliance and the industry group Coalition for Retail Data Security (CARDS) are helping to raise awareness and address 5 Supermarket News: Retailers Account for Second-Most Data Breaches (April 24, 2013) Copyright The Parker Avery Group. All rights reserved.

26 Full Report: The Big Deal About Big Data 26 many retail data security issues, but each retailer needs to have a strong security program incorporated into any project that involves customer data. Furthermore, retailers such as Nordstrom, Family Dollar and Cabela s are testing solutions that enable them to track mobile phone movements in their brick and mortar stores to glean information from customer activities. 6 These retailers hope to use this information to make decisions about store layouts, product placement and offering customized coupons. However, some customers have been vocal about their privacy these same customers who willingly enter their personal and payment information in online transactions. This information has been tracked and used for years by online retailers. 6 New York Times Attention, Shoppers: Store is Tracking Your Cell (July 14, 2013) be selective.

27 Full Report: The Big Deal About Big Data 27 Customer Impacts When asked about how retailers feel Big Data will impact their customers (outside of the privacy and security discussion), participants cited Big Data will enable them to provide more personalized and relevant assortments to their customers, as well as improving the ability to have the appropriate amount of inventory across their selling channels. This aligns with our findings about what retailers perceive are their top Big Data ANTICIPATED CUSTOMER IMPACTS opportunities: refining store assortments and services to be IMPROVEMENTS IN STORE more relevant and developing ASSORTMENTS more refined customer insights to target promotions and offers. IMPROVED PRODUCT AVAILABILITY This discovery circles back to getting closer to the customer by using data customers ultimately generate. Privacy issues notwithstanding, if customers expect retailers to understand them and provide better, more personalized products and services, then there has to be some give-andtake on how much personal data they are willing to give up. ACROSS SELLING CHANNELS IMPROVED, MORE PERSONALIZED CUSTOMER EXPERIENCES SEAMLESS CUSTOMER EXPERIENCES MORE FULFILLMENT OPTIONS SPEED TO FULFILL BACK ORDERED ITEMS Figure 15: Specific Customer Impacts Copyright The Parker Avery Group. All rights reserved.

28 Full Report: The Big Deal About Big Data 28 Other Big Data Concerns Parker Avery asked study participants about other concerns around Big Data. Primarily echoing the finding that many retail organizations are not ready to take on Big Data initiatives, some retailers feel their organization is not aligned with the new world of omnichannel and digitally-influenced retail and thus remain in the dark ages. This is a tough cultural mindset to break, but one that needs to be changed if retailers are to remain viable. Customers and increasingly business partners are already digital and omnichannel, so retailers need to ensure they are not only keeping up, but also strive to be one step ahead. Another concern voiced was that traditional retail data and new data sets are being handled separately. This may be due to aged and incompatible technologies, initiatives sponsored and run by separate lines of business within a retail enterprise or other factors. Either way, if retailers are aiming to achieve a 360-degree view of their customer, these data sets must be integrated, which often requires additional technology integration points, modified business processes and organizational structures and increased collaboration across the enterprise. be selective.

29 Full Report: The Big Deal About Big Data 29 Final Word Without a doubt, Big Data is a significant factor in today s environment, and it is growing exponentially representing the potential for huge opportunities in retail. There have been a handful of early adapters and success stories, but for the most part, retailers are not truly ready to take on the challenge particularly since technologies, processes and roles to support Big Data are mostly still in their infancy. Existing data issues and antiquated systems are common challenges for retailers who are beginning their Big Data journey. Key transactional, product and customer information should be the solid foundation for any retail data project. Additionally, upfront costs of implementing the technologies to support Big Data often do not have strong business case justification because the understanding, usage of and technologies for Big Data are still emerging. Couple this with the massive organizational and process changes required, it is no wonder retailers are treading carefully. However, retailers should at the very least start planning on Big Data initiatives for the near future, because as the volume, velocity and variety of data continues to rapidly expand, those companies who are able to effectively harness, manage and use this tremendous asset will be able to influence and create an entirely new retail world. Copyright The Parker Avery Group. All rights reserved.

30 Full Report: The Big Deal About Big Data 30 Figures Figure 1: Top Big Data Opportunities... 7! Figure 2: Current Data Usage... 9! Figure 3: Maturity of Big Data Initiatives... 12! Figure 4: Timelines for Big Data Initiatives... 13! Figure 5: Figure 5: RIS Study - Major Action Items Over Next 18 Months Figure 6: Top 3 Business Challenges Relative to Big Data Strategies... 15! Figure 7: Percent of IT Budget Invested in Data & Analytics... 17! Figure 8: Timeframe for Big Data Investments... 19! Figure 9: Effectiveness of Existing Data & Analytics Investments... 20! Figure 10: Organizational Preparedness... 21! Figure 11: Big Data Impacts on Customer and Internal Areas Figure 12: Big Data Impacts on Merchandising Roles... 23! Figure 13: Use of Big Data to Address Increased Customer Expectations... 24! Figure 14: Customer Privacy Concerns... 24! Figure 13: Specific Customer Impacts... 27! be selective.

31 Full Report: The Big Deal About Big Data 31 Study Methodology The Parker Avery Group s Big Deal About Big Data study was conducted from June through July 2013 through a series of invitations via and social media. Data was and collected via an online survey. Only retailers were asked to participate to ensure responses reflected retail perspectives (i.e., no outside consultants or solution providers participated in this study). The following charts outline the demographics of study respondents. (Note: Graphics colors have no meaning, they are only used to show differentiation in the numbers.) STUDY RESPONDENTS ROLE FUNCTIONAL AREAS OF RESPONSIBILITY Manager (13%) Staff (13%) Other / Internal Consultant (9%) C-Level (9%) Logistics/ Supply Chain/ Distribution (13%) IT (17%) Marketing (13%) General Management (9%) Director (17%) Store Operations Management (4%) Other (13%) SVP / EVP / VP (39%) Planning & Allocation (22%) Merchandising (9%) MAIN RETAIL INDUSTRY SEGMENTS RETAIL SALES CHANNELS Specialty (17%) Other (9%) Catalog 9% 23% 68% Social Commerce 32% 68% Mass Merchant (13%) Apparel & Footwear (30%) Mobile Site 41% 59% Ecommerce Site 87% 13% Grocery (13%) Physica Store 91% 4% 4% Department Store (9%) Convenience (9%) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Primary Source of Sales Secondary Source of Sales Do Not Operate in this Channel Copyright The Parker Avery Group. All rights reserved.

32 Full Report: The Big Deal About Big Data COMPANY REVENUE ($US EQUIVALENT) COMPARABLE SALES GROWTH RATES $100-$499M (9%) $51-$99M (4%) $50M or less (4%) Over $5B (22%) AVERAGE: 3% GROWTH RATE (35%) BELOW AVERAGE: <3% GROWTH RATE (17%) $500-$999M (26%) $1-4.99B (35%) ABOVE AVERAGE: >3% GROWTH RATE (48%) COMPANY LOCATION HEADQUARTERED VS. RETAIL PRESENCE Europe (4%) United States (87%) Asia/Pacific (9%) be selective.

33 Full Report: The Big Deal About Big Data 33 The Parker Avery Group The Parker Avery Group is a boutique strategy and management consulting firm that is a trusted advisor to leading retail brands. We combine practical industry experience with proven consulting methodology to deliver measurable results. We specialize in merchandising, supply chain and the omnichannel business model, integrating customer insights and the digital retail experience with strategy and operational improvements. Parker Avery helps clients develop enhanced business strategies, design improved processes and execute global business models. Learn more about us at: contact us: 3200 Windy Hill Road Suite 950 West Atlanta, Georgia t: f: e: contact@parkeravery.com!! Presented by: The Parker Avery Institute the education, training and research unit of The Parker Avery Group