Retailers battle it out on big data

DAMON KITNEY
July 22, 2013
The Australian

WESFARMERS is set to ramp up its use of data analytics across its retail and industrial supply chains to provide mutual benefits for the company and its suppliers, and remains on the lookout for potential acquisitions of data mining and other e-commerce businesses.

Chief financial officer Terry Bowen said the group sought to work more closely with its suppliers on using data analytics to better target customers and make more efficient use of inventory.

Coles’ FlyBuys membership has given the retailer deep insights into customer habits and allowed it to choose where best to build new supermarkets and tailor marketing campaigns.

Now the company is keen to expand the use of data analytics throughout the supply chains of its customer-focused divisions. “When we are dealing with suppliers, using data, and them understanding where their sales are occurring in their business and them understanding that better to their benefit, is a growth area,” Mr Bowen told The Australian.

The use of big data is shaping as the new front in the battle for market share between the major retailers after Woolworths paid about $20 million in May for a 50 per cent stake in data analytics company Quantium.
Last year, global conglomerate GE launched the concept of the industrial internet, claiming it was forcing every industrial company to redefine itself as technology and the rise of big data allowed firms to measure every aspect of performance.

A survey of business leaders by The Australian earlier this year found more than half agreed that a world of big data was emerging in which data streams gave unique insights into things such as consumer behaviour and that it would be a boon to business.

Wesfarmers Industrial and Safety business is poised to hire a data mining analyst to deliver better insights on profitability, customer behaviours and trends.

New Lion chief executive Stuart Irvine said last week that the beverages giant had agreed to work more closely with Coles on using data analytics in supply chains to bolster inventory management, “meaning product is available when people want it”.

He said they were also better targeting promotions, even using competitors’ brands to make “one plus one equal three”.

Mr Irvine, who has worked extensively abroad, said that while Australian retailers were still about a decade behind Britain retailing giants suchas Tesco on using data analytics, “it won’t take them 10 years to catch up”.

Last month, Coles launched a fee-free credit card that works in conjunction with the retailer’s Flybuys customer loyalty program to help the retailer gain more insights into customer spending.

Coles has been investing more heavily in data analytics since taking full control of Flybuys and relaunching the scheme in 2011.

“There is no doubt that the data and analytical capability we have in the group through Flybuys has been significantly enhanced from what it was several years ago,” Mr Bowen said.

“Our data and analytics team is very good and the systems we put in place several years ago have allowed us to do some pretty innovative marketing in that area. Inevitably it is an iterative process, whether you are dealing with customers or suppliers. Data is the new frontier in that space.”

Mr Bowen said the enhancement of the group’s data analytics capability had come about largely through organic recruitment. “That is not to say you couldn’t get better if we saw an acquisition opportunity,” he said. “But it is not a big gap that would see us chasing an acquisition.”

Last year, Wesfarmers established an internal unit called Wesfarmers Emerging Ventures that has been charged with looking for small high-growth investments outside the group’s traditional business streams.

Emerging Ventures operates independently of the long-established Wesfarmers Business Development Unit, which assesses future growth opportunities within the group’s business portfolio.

Mr Bowen said while no deals had been struck by the unit as yet, “we have looked at a lot of things and learnt a lot of things as we have considered other opportunities and risks across the group”.

“You do learn a lot through each of these exercises, even if you don’t do a deal,” he said.

“We have had a look at the e-commerce space — where there is quite a lot of innovation and change going on.”
Mr Bowen revealed in April that Wesfarmers had for the first time asked each of its nine operating divisions to address their individual digital strategies as part of the annual corporate planning process.

Wesfarmers managing director Richard Goyder has previously described the digital revolution as one of the biggest challenges and opportunities for Wesfarmers.