Future-proofing your retail business

Balancing the art and science of advanced

analytics in customer experience
Future-proofing your retail business | Balancing the art and science of advanced analytics in customer experience

An ever-changing landscape 03

Building capabilities: The IDO maturity curve 04

Retail of the future:

Understanding how advanced analytics can help 05

Analytics for retail: Demystifying the shiny objects 06

Locating analytics on the journey toward becoming an IDO 07

Omnichannel opportunities await 08

Core components of a future-proofing playbook 11

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Future-proofing your retail business | Balancing the art and science of advanced analytics in customer experience

Introduction
For Canadian retailers, the future is here. Artificial intelligence (AI), big data,
and exponential technologies have moved from the fringes firmly to the centre,
fundamentally altering the retail landscape and expanding the toolset available
for retailers to respond.

With these developments, retail now has access to a new category of inquiry
in the form of advanced analytics, which uses sophisticated techniques and tools
to gather, organize, and analyze data and content to uncover deeper insights, craft
predictions, and generate recommendations. Advanced analytics allows retailers
unprecedented potential to understand customer preferences and behaviours, and
to create integrated and responsive ecosystems—including through partnerships
and mergers and acquisitions (M&A)—to best position themselves for success
in a rapidly evolving world.

In contemplating the prospects for new approaches and technologies, however,

retailers need to be clear about both the potential of these new tools and the risks that
can arise when implementing an analytics approach. Stated simply: analytics without
insight risks producing a black hole of data, from which no opportunities emerge.

To reap the promise of advanced analytics, retail businesses need to build the functional
capabilities that will allow them to operate as Insight Driven Organizations, or IDOs.
An IDO iteratively embeds analysis, data, and reasoning into the daily decision-making
process. A partnership between technology and the business will be a critical ingredient
to winning in the market.

The strategic question facing the retail sector is not “What shiny AI object can I add
to my tool belt today?” but “What are the foundational capabilities I need to develop
for my business to function as an IDO?” Do you have the answer?

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 Future-proofing your retail business | Balancing the art and science of advanced analytics in customer experience

An ever-changing
landscape
The world of retail is now overwhelmingly
characterized by change.

As new technologies enable channel- the number of casualties will increase.

agnostic consumers, the need for retailers The retailer that endures will need to
and brands to evolve in order to stay compete with e-commerce and the
competitive is greater than ever. ascendancy of marketplaces, while
automation serves up yet another
The path to purchase has been dramatically battleground to conquer—supply chain and Are you prepared to shift to the
reconfigured, with consumers now engaging logistics analytics—that new competitors next generation of retail?
across all channels—online, mobile, and are already deploying effectively.
in-store—to make their purchase and • Are you nimble? Do you have
transition decisions. Brands increasingly In order to survive, retail must respond an analytics platform that can
interact directly with customers, and effectively to these challenges. monitor competitive shifts
e-commerce growth continues to outpace in the market?
conventional retail sales growth. Meanwhile, Responding effectively doesn’t mean
a singular focus on building analytics • Do you have the right ecosystem
new and pervasive technologies take hold
capabilities. Instead, it means identifying model? Have you defined
across the retail space.
compelling business problems to which your target operating model,
Against this backdrop, the local mall needs advanced analytics can be applied, and do you know who your
to reorient. Consumer shopping behaviours integrating analytics capabilities within competitors are?
and preferences have evolved, resulting the organization to gain novel insights • What is your IDO strategy?
in declines in mall foot traffic and retail into those problems, and then using those Do you know where you sit
construction, and increases in bankruptcies insights to produce business results. on the IDO maturity curve?
and store closures. The mall of the future
will need to encompass AI, virtual reality, and
personalized concierge services across all
stages of the customer experience lifecycle.

Today's retailers are struggling to win

in delivering extraordinary customer
experience. But as the Canadian market
continues to bifurcate and polarize,

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BUILDING CAPABILITIES:

The IDO
maturity curve
The journey to becoming an IDO passes through
multiple stages. Our framework defines five levels
of maturity:

01 02 03 04 05
AD-HOC LOCALIZED ANALYTICS ANALYTICAL INSIGHT DRIVEN
ANALYTICS ANALYTICS ASPIRATIONS COMPANIES ORGANIZATIONS
Aware of analytics, but Adopting analytics, Expanding ad-hoc Industrializing Transforming
little to no infrastructure building capability, and analytical capabilities analytics to combine analytics to streamline
and a poorly defined articulating an analytics beyond silos and into data from broad decision-making
analytics strategy strategy in silos mainstream business sources into across all business
functions meaningful content functions
and new ideas

This maturity curve can help you benchmark your own company’s analytic progress
against others in your industry across North America, and identify where your
strengths and gaps lie.
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 Future-proofing your retail business | Balancing the art and science of advanced analytics in customer experience

RETAIL OF THE FUTURE:

Understanding
how advanced
analytics can help
Tools such as AI, computational analysis of large data sets,
and accelerating technologies are transforming retail.

Enabling execution precision

Until recently—even within the past The Deloitte Customer Engagement Index
The way in which retailers use and execute
half-decade—the tools of AI, computational helps make sense of the current and
analytics is critical in their success.
analysis of extremely large data sets, and developing retail universe, scoping the
Strategies can include building complex,
rapidly accelerating technologies in retail work retailers must undertake to fulfill
cross-channel capabilities, and responding
were relatively primitive compared to the shopping experience consumers want
to micro-moment and micro-market
how they’re transforming retail today. and have come to expect. The index also
niches and opportunities.
The approaches made possible by the most suggests where retailers should invest
recent advances in analytics can produce to extend niches and drive differentiation The new execution model is defined not
many benefits for retailers, such as: to capture market share. Do you know by five-year plans but by eight-week sprints,
how you measure up? delivering proof-of-concepts within an
Creating an ownable customer ecosystem model of strategic partnerships.
experience and delivering it profitably Driving competitive advantage using It is not a model to be used in isolation:
The evolution in consumer behaviours and analytics as a fundamental capacity retailers must identify, locate, and employ
expectations has reshaped the ways in The retail executive who plans to survive the mission-critical additional expertise
which retailers and brands operate. They’re will approach analytics as an enabler that will propel and sustain their growth.
now investing in e-commerce, mobile, social along the road to becoming an IDO.
media, and in-store digital analytics, all to The power of this enabler is not to be
define and deliver to customers a unified, underestimated. Practical applications
persuasive omnichannel experience. of AI today allow businesses to identify,
analyze, and monitor emerging risks to
Brands and retailers have also moved to a company’s business model, long-term
reformulate their internal structures and viability, and ability to create value, as well
practices to reflect the changing demands as build the symbiotic relationship between
of this omnichannel world. customers and organizations through
lifestyle and behavioural segmentation.
The imperative to create an ownable
However, the opportunity to take full
customer experience and deliver
advantage of AI is ever-evolving and
it profitably sounds simple enough but
positioned for boundless applications.
is challenging to execute. How do you
know where to start, how you stack up
relative to competitors in the field, and
how you compare to the overall landscape?

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 01 By uncovering deeper relationships
that would otherwise go undetected
Complex basket analysis can reveal insights
about customer purchasing patterns
that could have once gone undetected,
especially when data sets are large and
many variables are at play. These insights
often reveal that what customers say about
their preferences differs from what their
interactions and behaviours are observed
to be, allowing retailers to more precisely
shape and tailor their customer-experience
offerings in response—all the way to
one-to-one personalization.

02 By implementing updated
and accelerated approaches
to segmentation
Traditional customer segmentation is
based on demographics and inferences.
While this approach is still valuable,
analytics-enabled segmentation allows
retailers to work with immense volumes
of data to identify more refined customer
sentiments, lifestyle preferences, social
values, and relationships. The leap forward
ANALYTICS FOR RETAIL: that enabled this outcome is in machine-

Demystifying
learning capability, which uses algorithms
to autonomously sift through millions
of stock-keeping units (SKUs) and billions
of lines of data (including external and

the shiny objects

unstructured data) at a scale that was
unimaginable even a decade ago. The
result? Retailers and brands have new
ways to connect with customers across
the purchasing lifecycle.

How does advanced analytics produce

03 By enabling brands with
results in retail? Here are three examples: risk-sensing capacities
The intersection of analytical technologies
and data sources offers the capability
to analyze and monitor strategic risks.
Risk-sensing capabilities may include
real-time reporting, monitoring big data,
and integrating operational insights into
a company’s daily business processes—
which all have the ability to enhance
an organization’s understanding of the
risk/reward trade-offs inherent in value
creation. Risk-sensing practices can help
brands move more quickly and decisively,
make more targeted investment decisions,
and better allocate their resources.

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 Future-proofing your retail business | Balancing the art and science of advanced analytics in customer experience

Locating analytics
on the journey toward
becoming an IDO
An IDO is built on a foundation of five pillars, which include
data along with strategy, people, process, and technology.

STRATEGY PEOPLE PROCESS DATA TECHNOLOGY

Vision C-suite leadership Enterprise science Information model Reference

architecture
Value drivers Organization Demand Data sources
design management Value proposition
Stakeholder Data quality
management Talent Enterprise process Vendor landscape
Privacy
re-engineering
Operating model Change journey and security Delivery model
Governance
Innovation Knowledge Ethics and sharing Reliability
management Agility/scalability and continuity
Regulation
Decision process and compliance Sandbox
and innovation

Eighty-five percent of analytically mature organizations exceeded their corporate goals,

compared to 67 percent of less mature organizations. The retail winners of the future
will be those who use analytics to its full capabilities, executed and embodied within the
context of an IDO—not as a shiny talisman—to define the way forward.

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Future-proofing your retail business | Balancing the art and science of advanced analytics in customer experience

Omnichannel
opportunities await
Establishing the right foundation is the critical first step
on the path forward. There are several key components
to creating a strong base.

Taking full advantage of analytics predictive insights about customer

It’s essential that you build—or ensure activities and inclinations. It builds
you have access to—top notch predictive, forward from data points to create
advanced analytics capabilities to help a future-oriented omnichannel world.
you form key customer insights, identify
growth opportunities, determine the Reviewing the potential
smartest omnichannel investments for of acquiring capabilities
your company, and even expand into If there are capabilities you can’t develop
new markets globally. Analytics is vital organically to stay competitive, you
to successfully making the huge shift to could consider strategic partnerships
becoming an insight-driven, customer- or M&A to obtain them. Partnerships,
centric organization. including with those in other sectors
of the economy, are increasingly seen
Reviewing what competitors as critical for success. How developed
offer along the path to purchase is your cooperation muscle?
Examine your competitors’ omnichannel
services from product discovery Creating an ecosystem model
to purchase to post-purchase fulfillment of strategic partners
and follow-up. What do they do well? External advisors and analytics firms
Where do they stumble? What’s lacking? can bring you best-in-class tools,
Use this knowledge to shape your knowledge, and insights to help you
own path forward. better understand your customers’
needs, preferences, and behaviours
Challenging the ‘old ways’ of so you can make the right decisions
understanding the customer about omnichannel. They can also bring
The old model looks at demographic you their knowledge of relevant best
segmentation and working backward practices, both in and outside your
from data points to try to discern industry, to help you ensure that you
customer preferences. The analytics- focus your limited resources on the
enabled method, in contrast, takes omnichannel investments with the best
democratized approaches to data sets possible return.
and data analytics capabilities, only
recently made available, to produce

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Future-proofing your retail business | Balancing the art and science of advanced analytics in customer experience

Core components
of a future-proofing
playbook
Look outside your category and industry for inspiration
and use these questions to get you started.

• What do you know about your customer The next step: Develop
experience? Where do you stand on the
Deloitte Customer Engagement Index? a playbook that works for
• Are you willing to make game- your business— defining
changing bets? Will you develop
through M&A or do you plan to rely processes, operating
on organic growth? Do you have
the right partnerships or acquisition procedures, and cultural
plan in place to fill any gaps in your
capabilities or ecosystem model? values that will shape
• Canadian retailers are dividing their your plays.
focus between long-term analytics
infrastructure and short-term wins.
Where do you stand?

• Global retail commerce is now

a given since consumers operate
in a borderless world even if the
companies they engage with don’t.
Have you adopted a global mentality?

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Future-proofing your retail business | Balancing the art and science of advanced analytics in customer experience

As AI, big data, and exponential technologies

continue to move toward the mainstream,
the impact and transformation facing just about
every business and industry, including retail,
is no longer in the future. It is today. If they
haven’t started already, retailers must take
immediate action to adapt to the rapid and
changing landscape or risk getting left behind.

Along the way, they’ll need the courage to make

bold bets and big moves, using all the resources
at their disposal—advanced analytics, AI, strategic
partnerships, and M&A—to create a competitive
experience and remain profitable through changing
times. The challenge for the winning omnichannel
retailer is to overcome the lure of shiny objects
in favour of the multidimensional strengths and
opportunities made available by moving toward
becoming an IDO.

The reward? Retailers who adapt will be able

to manage the volatility of the omnichannel retail
environment with the advantage of continuously
generated insights. It’s the only way to future-
proof a rewarding path forward in the new
retail environment.

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Future-proofing your retail business | Balancing the art and science of advanced analytics in customer experience

Contact us
Jennifer Lee Tom Quinn
Partner, National Retail and
Retail Consumer Analytics Wholesale Distribution Leader
jenniferlee@[Link] toquinn@[Link]

Alexandra Genest Ian Scott

Quebec Consumer and Chief Data Scientist
Industrial Products Leader iscott@[Link]
agenest@[Link]
Yohan Gaumont
Rick Kohn Digital Transformation Leader,
British Columbia Deloitte Digital
Retail Leader ygaumont@[Link]
rkohn@[Link]

Andrea Ng
David Lam Senior Manager,
National Consumer and Customer Advisory
Industrial Products Leader, andreang@[Link]
Financial Advisory
davilam@[Link]

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