Retail and predictive analytics

grid, data, money, dollarSince the beginning of time, humankind has attempted to predict the future and we haven’t given up yet. Who is going to win the US election? Hillary or Donald? Is the stock market going to rise or fall tomorrow? Will the weather be good next weekend? Sometimes we get it right and sometimes we get it wrong even with the most sophisticated tools.

And so it is in retail.

The not so new predictive analytics is a case in point and SAP claim to have a new method for us. Predictive analytics has always required retailers to aggregate granular pieces of information, which takes time. They say that thanks to “the cloud-based SAP HANA real-time business platform, which converges database and application platform capabilities in-memory, retailers can now analyse Big Data in granular format, in real time”.

Having cleared that up and with Nostradamus turning in his grave, we can now doubtless look forward to no more overstocks, no more understocks, no more markdowns and bumper profits all round.

SAP goes on to say that they can even pinpoint what SKU’s are selling in what locations at what time of day.   I thought we were already doing that using any reasonable POS system and in any case, so what?

The famous ARTHUR system using a cube with product, location and time on the three axes was around in the 80’s. In those days it was a mainframe system typically running on an ICL or IBM computer the size of a small house. Only later did the client server version appear to run on PC’s. When the chairman of our company visited overseas and heard that you could plan by SKU, by store, by day or even hour, he said “we’ll have one of those” and so it came into being.

TedCoxen-com-LikeUsOnFacebook20141108ZJWe cranked up the ICL and off it went. Three days later the merchandise planning director, who was not prone to profanity said “turn the @*$%$ ing thing off”. And so ARTHUR died an untimely death until it was resurrected some years later when common sense prevailed and it then worked like a dream. Of course not going down to the granular level that SAP is now boasting about.

But there is more.

SAP say that “retailers equipped with real-time granular predictive modelling capabilities can drill down to the issues customers need resolved and provide an experience that lets them resolve those issues as effectively and quickly as possible”.

Who on earth writes this drivel?

It’s a bit like Dr. Batty’s Asthma Cigarettes (since 1882) for the temporary relief of paroxysms of asthma, which effectively treats asthma, hay fever, foul breath, all diseases of the throat, head colds, canker sores and bronchial irritations. But there is a qualification. “Not recommended for children under 6.”

Stuart Bennie is a retail consultant at Impact Retailing and can be contacted or 0414 631 702.

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1 comment

  1. Rick Marshall posted on October 21, 2016

    When Einstein claimed god doesn't roll dice. He was wrong. And he should have known. Predictive analytics can only work in a closed system and retail is far from a closed system. Random events can and do happen. Retailers have no control over their competitors, the weather , and a host of things that make retail an open system and therefore unpredictable. At the macro level we can assert predictions with a certain confidence - eg daily turnover is more or less predictable because this is less open. But the finer the analysis the less predictable it becomes. To understand all this properly you need mathematicians, physicists, information scientists, and more. Or you can read the brochure, believe the snake oil and wonder what went wrong.

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