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BIG DATA: REVOLUTIONIZING THE RETAIL INDUSTRY

Reference No. 15/010C Publication Year 2015
Author(s) Ailie Tang, Lawrence Mui
Company Big Data
Industry Retail & Wholesale, Commercial Services
Geographic setting Worldwide
Functional Area Marketing, General Management and Strategy

Synopsis

Did you ever receive a coupon offering you an extra 20% discount for the pair of shoes that you wanted to buy while shopping in a department store? Or did you ever wonder why the salesperson serving you could always do the right trick for cross-selling the complementary items that you were most interested in? Kroger, a grocery store chain in the US, excelled in drawing a response rate of over 70% within six weeks of mailing “snowflake” coupons to its customers. The magic lied in the use of Big Data for Kroger and other retailers to analyze its customers’ shopping history and personalize the offers for the members on its loyalty program.

According to a McKinsey report, Big Data was defined as “datasets whose size is beyond the ability of typical database software tools to capture, store, manage, and analyze”. With Big Data, management could leverage the use of information to derive insights and make better decisions on which direction the enterprise should sail through the waves of changes ahead. With the rising popularity of Big Data in different industries, especially the retail, finance and telecommunication industries, the International Data Corporation (IDC) predicted that the global Big Data and analytics market would reach US$125 billion in hardware, software, and services revenue in 2015.

This case study aimed to take you on a journey to explore how Big Data was going to revolutionize the retail industry in the coming years. Light would first be shed on the general ideas of the Big Data concept and its differentiations from data mining. The notable 4Vs of Big Data would then be introduced, followed by the benefits that companies would receive when tapping into the power of information. Impacts of Big Data on the AIDA model would be highlighted. Challenges confronted by enterprises when making use of Big Data would then be discussed, followed by recommendations for streamlining the implementation of Big Data.

Learning Objectives

This case study aims to introduce the basic characteristics of Big Data to students. It also showcases how the use of Big Data could revolutionize the operations of the retail industry.

After completing the case study, students should be able to:

1. understand the 4Vs (i.e. Volume, Variety, Velocity and Veracity) of Big Data;

2. illustrate the uses of Big Data analytics in different retailing contexts;

3. explain how the implementation of Big Data could alter the sequence of the AIDA model; and

4. critically evaluate the short and long term impacts of Big Data on the retail industry. 

Suggested questions for students

1. How could Big Data revolutionize the original sequence of the four phases of the AIDA model?

2. What are the short and long-term impacts of Big Data on the retail industry?

3. How retailers could leverage the use of Big Data to create its own competitive advantages?

This case was fully supported by a grant from the Research Grants Council of the Hong Kong Special Administrative Region, China (UGC/IDS12/14).