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BW Businessworld

Business Insight

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With real estate in most cities having more than doubled in value in the last 5 years, major retailers looking at expanding their footprint in the Indian market, face an uphill challenge. The decision around the number of new stores to be opened, best location for each store in a city and the size of each store is not a straightforward choice. A store too large can be too costly and delay the breakeven of a business; a store too small runs the risk of not keeping a large enough product assortment and give away valuable business to competition. Given a limited budget, what would be a better location to open the next store – a high street address or a mall address?

All these questions have vexed decision makers for many years and most of the times their decisions have been based on the gut feeling for a few people. Given the number of retail businesses that close down in a city like Bangalore, it is anyone’s guess how successful these gut based decisions are! The use of data analytics in this space has proved to solve this dilemma. It helps companies decide the optimal size of each new store that they open, while ensuring that the decision takes into account key parameters like catchment area, real estate rental costs, presence of competition, average incomes in the geographical area etc. Data analytics even helps retailers make differential decisions based on the location of their new store being in a high street address or a mall address.

With the use of a variety of advanced statistical algorithms to develop a pattern between successful and unsuccessful stores in different locations, data analytics analyses several independent parameters contributing to a store's success and then measures the ROI of the investment made in real estate. Companies are given a simulator that can be used to judge different options for any of their future stores. These results are constantly improved as more data from newer locations are got.

While data analytics has been around for many years now and all IT companies derive substantial revenue from such services, a few companies are already showing the future path in this fast growing industry. Today with data analytics, insights to businesses are brought as fast as the speed of business itself!

While most analytics companies in the industry create standardised reports from data, the future of analytics is into bringing the science of analysis with the art of decision making. ‘Simulation’ and ‘Optimisation’ are advanced capabilities that not only require a strong mathematical base but also a deep understanding of the business context of the client being serviced. The next 10 years in this industry are going to reward these players that bring such capabilities to large and small businesses!

It is said that 80 per cent of most IT projects fail – and the 20 per cent that works results from IT specialists who make the right use of analytics, thus ensuring that they deliver better results every time. This is because Analytics is not just an application, it is the presentation of a strong data base that empowers its users. The components of analytics must be rapid to deploy and must operate together to cater to all kinds of business needs.

A single analytics tool chain across differently structured data can be used to complete environments for companies given they have appropriate analytic capabilities. The empowerment that analytics brings, gives staff across the organisation the information they need to improve the organisation’s bottom line and helps organisations be better decision-makers.

The author, Arvind Nagpal, is the CEO of TEG Analytics