Retail Analytics E-Commerce

Group 9
IIM Lucknow
Anju R Gothwal

PGP28250

Animesh

PGP29181

Malory Ravier

IEP15003

Mayank Khatri

PGP29220

Richa Narayan

PGP29207

Shashank Singh
Chandel

PGP29493

Tushar Gupta

PGP29197

AGENDA
1) RETAIL ANALYTICS
Industry Practice Types of Analytics
Information Providers
2) ANALYTICS IN ECOMMERCE INDUSTRY
Web analytics basic metrics, top tools
Data Handling Software in Trend- HADOOP
Major Analytics Applications in Ecommerce

3) ANALYTICS IN ECOMMERCE COMPANIES

Amazon
Flipkart
Ebay

4) RESEARCH PAPER STUDY

Customer Segmentation and Promotional Offers
RFM
Lifetime Value

5) RECOMMENDATIONS

1) RETAIL ANALYTICS
2) ANALYTICS IN ECOMMERCE INDUSTRY
3) ANALYTICS IN ECOMMERCE COMPANIES

4) RESEARCH PAPERS STUDY

5) RECOMMENDATIONS

Industry Practices - Types of Analytics RETAIL

ANALYTICS
CUSTOMER ANALYTICS

MARKETING ANALYTICS

Customer Acquisition

Marketing Mix

MERCHANDISING AND
PLANNING

Customer Loyalty

Brand Health

Shelf space optimization

Behavioral Segmentation

Multichannel Campaign
Optimization

Product Pricing

General Merchandiser TESCO

DEMAND AND SUPPLY
CHAIN
Inventory Planning
Demand Forecasting
Product Flow Optimization
Department Store
METRO GROUP

Apparel Chain SEARS CANADA

Store Location Decisions

Fashion Retail BELK

RISK ANALYTICS

PREDICTIVE ANALYTICS

Detecting Fraudulent
activity

Determining Customer LTV

Detecting Process Errors

Detecting Store Theft
Online Retailer - AMAZON

Revenue forecasting
Product Recommendations
Trend Analysis

Information Providers -RETAIL ANALYTICS

Market research companies providing retail intelligence

IRI: Information Resource Inc.

Leader in delivering powerful market and shopper information, predictive analysis and the
foresight

Keeps systems on big retailers, collect info, sell data and trends, simplifies and supports
manufacturers and all
Services Provided

Market, consumer and shopperintelligence

Retail tracking information
Online and offline marketing ROI strategy and effectiveness
Predictive analytics and modeling
Enterprise-class business intelligence software platforms and solutions
Pricing, trade promotion and brand portfolio maximization
Store level and merchandising insights
Strategic consulting and thought leadership
AC Neislen: Another Player in the arena

1) RETAIL ANALYTICS
2) ANALYTICS IN ECOMMERCE INDUSTRY
3) ANALYTICS IN ECOMMERCE COMPANIES

4) RESEARCH PAPERS STUDY

5) RECOMMENDATIONS

Web Analytics E Commerce

Web Analytics involves mainly studying consumer behavior and traffic online
Ecommerce applications study consumer purchase to boost sales, attract more customers,
build brand
BASIC METRICS TO TRACK

MEASURE

DESCRIPTION

Visitors

No of visitors tells how business is doing

Page Views

Maximum viewed Tells the popular content

Referring Sites

Tells the interests of customer

Bounce Rates

Tells why people leave the site

Keywords and Phrases

Tells about customers requirements

TOP ANALYTICS TOOLS FOR ECOMMERCE:

TOOL

CAPABILITIES

APPLICATIONS

Google Analytics

Monitors traffic from social media, emails

Measures effectiveness of marketing

program

Adobe Site Catalyst

Real time segmentation

Increase checkout conversion rates

IBM Corementrics

Enterprise level Solution, provides

actionable information

Know how website affects visitors,

advertisement ROI

Webtrends

Digital marketing intelligence

Increase Conversions, Search and social

DATA HANDLING - Software in trend - HADOOP

HADOOP: Open source software project

Accomplishes two tasks: massive data storage , faster processing

ADVANTAGES:

Handle huge amount of data - great volumes and varieties esp. from social media and
automated sensors

Low cost - the open-source framework is free and uses commodity hardware to store large
quantities of data
Computing power - distributed computing model can quickly process very large volumes
of data
Scalability - can easily grow your system simply by adding more nodes. Little
administration is required.
Storage flexibility - can store as much data as you want and decide how to use it later.
Inherent data protection and self-healing capabilities -Data and application
processing are protected against hardware failure. If a node goes down, jobs are
automatically redirected to other nodes to make sure the distributed computing does not
fail. And it automatically stores multiple copies of all data.
Other S/W involved Tableau, TeraData etc.

Major Analytics applications E Commerce

Personalization
Improving Customer
Experience

Personalization helps to increase conversion rates

HBR say personalization increases ROI by 8 to 10 times
Ex: Gilt Group ecommerce company uses targeted emails to give
offers matching customer search
Analyzing buying pattern to make online purchase seamless process
Optimizing services like customer call

Pricing

Develop models for real time pricing of millions of SKUs

Parameters considers are competition, inventory, required margins
etc.

Predictive Analysis

Used to predict consumer behavior ex. Used by Amazon to predict

customer purchase
Vendors like Atterix, SAS, Lattice provide such services

Managing Supply
Chain

Supply chain intelligence for real time communication between

different stakeholders like vendors, warehouses, customer etc.
Helps achieve faster delivery, higher fulfillment, low inventory

Platforms for Predictive Analytics

Platforms

Predictive Tools that integrate

with e-commerce platform
Tools and Plugins
No headache of integration
Springbot, Custora, Canopy
Labs
$199-$300/month

Open Source Product

Full Featured Site

Suitable for an
analytics team
Hiring the right skilled
resources a challenge
R, KNIME, PredicitionIO
Free

Most functionality
Point solutions for
various areas
Consulting options
provided
SAS, SAP, Predixion
Approx. $10,000 for
single user license

1) RETAIL ANALYTICS
2) ANALYTICS IN ECOMMERCE INDUSTRY
3) ANALYTICS IN ECOMMERCE COMPANIES

4) RESEARCH PAPERS STUDY

5) RECOMMENDATIONS

Analytics Practices Amazon

ATTRIBUTES
In-house/ outsourced
Major Tools

Major Metrics
Analytics major heads

Notable attributes

PRACTICES
All analytics done in- house
Open Source
Tweaked to Amazons needs
Amazon uses its native analytics platform Hadoop with Elastic Map
Reduce and S3 database
Amazon also uses Glacier for archiving data and Kinesis for stream
processing of high volume real time data streams
One of the most Metrics driven company almost everything measured
and evaluated
1.
2.
3.
4.

Customer Analytics
Seller Analytics
Trust Analytics
Supply Chain Analytics

They also monetize the platform by offering it to other companies

Customer Analytics - Amazon

PRODUCT RECOMMENDATIONS

Hybrid Recommender Systems a mix of both content and collaborative filtering

Main metrics analyzed are

1) Customers past purchases
2) Items customers have rated and liked
3) Purchases compared to similar purchase by other competitors
4) Items in virtual shopping carts

Generates approximately 29% sales from recommendations

CUSTOMER SERVICE

No attempts to up sell over customer service calls

Data network allows Amazon to call the customer in under a minute after he places a
service request

Reports and Views are extensively used to have selected customer information on screen

Customers are only last name and address to fetch all their data

Customer service reps are well informed due to big data analytics; leads to
individualized and human

Seller Analytics - Amazon

Amazon treats its over 2 million sellers as its customers, provide all the technology and
services sellers need to run their business

Personalization with sellers, proactive, data driven recommendations to each and every seller
on the platform

Tens of millions of recommendations to entire seller base in a day through emails and the
native platform Seller Central

Business reports are also available for purchase for in depth insights

Examples of some recommendations

1) Almost out of stock Recommendation on how much to add to inventory based on

looking demand for the product adjusted for seasonality and festivals

forward

2) Search Results When customer encounters no search results or results of low relevancy,
the results are surfaced back to the seller and recommend to carry products customers
are
looking for
3) Fulfillment by Amazon Recommendations based on the characteristics of how difficult the
products are to fulfill
4) Performance Feedback Metrics on satisfying customers, serving their needs and getting
products to them fast and easily
5) Sharpness of Pricing Surface up the sellers of all different products a seller is carrying on
Amazon, determine whether it makes sense to lower prices for customers

Supply Chain Analytics - Amazon

Monitors, tracks and secures 1.5 Billion items laying around 200 fulfillment centers

50 million updates are made to the database per week

Entire data is crunched every 30 minutes and the results are transmitted to all the terminals

INVENTORY CONTROL

Amazon uses non-stationary stochastic model for optimizing inventory

Has developed algorithms for joint and coordinated replenishments

Algorithms also support fulfillment, sourcing and capacity decisions

Forecasting is done at an SKU level for each fulfillment center

DEMAND

Analytics on customer wish lists, gift registries and pre-orders to anticipate demand apart from usual
forecasting techniques

Wish lists are publicly visible, software crawls wish lists to aggregate data about customer demand

LOGISTICS

Patented Method and System for Anticipatory Package Shipping

Anticipates customer needs before they express them

Analyzes

a) Customer Ordering History

b) Wish-lists
c) Average Shopping Cart Content

d) Feedbacks
e) Searches
f) How long a cursor hovers over a product page

Results in very fast delivery, sends off packages to a shipping hub or a truck near the customers address

Control and Trust - Amazon

CREDIT CARD FRAUD DETECTION

Uses a scoring approach to identify the most likely fraud situations

Some of the situations analyzed are

1) Purchase of easily resold goods on gray market such as electronics
2) Use of different billing and shipping address
3) Use of fastest shipping option

WAREHOUSE THEFTS
Constantly Updates database of high ticket, most likely to be stolen
items

Software Used - Flipkart

QLIKVIEW Parent Company: Qlik, based at Pennsylvania
Improved Inventory Management tool to optimize Stock Levels
CHALLENGES

Integrate Complex Data from disparate sources

Deliver Analytical data to staff in various departments

Improve inventory utilization

Initial Usage: Open source Business Intelligence (BI) but the problem faced Scalability
ADVANTAGES

Provided transparent and up-to-date information for analysis

Embedded data-driven decision making at Flipkart

Improved Inventory Utilization

Information gathered over telephonic conversation with IIM L alumnus working in Flipkart

Software Used - Flipkart

BIGFOOT - Computerized Maintenance Management Software (CMMS)
1) Managing the maintenance operational needs of organizations
2) Bigfoot CMMS' full functionality paired with its intuitive design allows to implement the solution
and get results quickly.
KEY FUNCTIONS

preventive and predictive maintenance

inventory management, work order

asset, and equipment management

purchasing

built-in reporting and analysis

ADVANTAGES

The system can support any number of facilities and multiple languages

Increases staff productivity and reduce maintenance costs today

Support integration with other systems like ERP, bar code, custom interfaces, advanced reporting
solutions building Automation solutions, and Active Directory

Bigfoot CMMS can be configured for different user types, security settings, site and location
details, and user access settings

Analytics Practices eBay

ATTRIBUTES
In-house/ outsourced
Major Tools
Major Metrics
Analytics major heads

Notable attributes

PRACTICES
Most of the analytics done by the in- house analytics team
Few practices are outsourced
SAS
Excel
Exit Rate, Transactional and operational metrics
1. Buyer Analytics
2. Seller Analytics
3. Trust Analytics
Analytics used by Marketing team for segmentation of customers or
predicting churn rate for customers is handled differently
AB Testing for measuring efficiency of new feature

Information gathered over telephonic conversation with IIM L alumnus working in eBay

Major Metrics - eBay

EXIT RATE

Which is the page which marks the termination of users session

Find the dissatisfying elements of the page if the page is not meant for user to exit the
session

Improve the elements from pages in order to increase the length of session and reduce
chances for abrupt end of user sessions

TRANSACTIONAL METRICS

Number of bought items

Revenue from bought items

Frequency of transaction

OPERATIONAL METRICS

Conversion from home page or search results to cart due to some features

Easy payment options increasing number of sales

One click payment option or reach cart at least steps

Customer engagement and avoid exit rates

Buyers Analytics- eBay

BUYERS ANALYTICS deals with the analytics used to design or experiment with the process flow
related to purchase of a product
E.g. Homepage, Search, View Item window, Checkout, Cart, Wish list etc.

ANALYTICS FOR HOMEPAGE

Arrange the homepage according to the purchase history, likes and comments of customers

Analyze the increase in number of clicks on home screen and difference in navigation flow

Analyze the increase in number of visits on home page during one session

Analyze number of items listed on homepage to be selected for wishlist or cart

ANALYTICS FOR SEARCH

Add a pop up/layer when clicked on an item from search result

Give multiple options on pop up: Checkout, check details, compare

Analyze increased or decreased number of clicks and conversions to cart in order to see
efficiency of the new feature and hence decide on whether to continue with the feature or not.

Seller Analytics - eBay

SELLER ANALYTICS include
1) Assortment Analytics

2)Ratings of Sellers

ASSORTMENT ANALYTICS

What are the suggested assortments for a seller

Which sellers to be listed so as to maintain the assortments

Major trends like most number of clicks for an item and most selling items

Analyze if the most clicked items is most selling or not? If No, why not?

RATING OF SELLERS

Categorize sellers into groups and hence decide on what types of deals to be done with the
sellers

Analytics used for recommendation of established and flourishing practices of high rated
sellers to the less performing sellers

Categorize sellers as High and low trusted or performing enabling recommendation and
listing of items from good sellers to enhance customer experience

Trust Analytics - eBay

TRUST ANALYTICS include
1) Fraud Analytics 2) Credit Cards Analytics 3) Product Health Management
FRAUD ANALYTICS
Which are the sellers or Buyers who are included in fraud
For Example A Buyer may buy a product but deny paying multiple times suggesting fraud
A seller may claim shipment but actually delay the shipment and increase customer waiying time
reducing their customer experience
Such accounts for Buyers/ Sellers needs to be blocked for significant duration
Model allow to create a new account
Analyze the fraud accounts either new or old to unlist /block them

CREDIT CARDS ANALYTICS

Analyze the credit rating history of customers
Identify the exposure of the card and decide on highest allowed purchase amount. The allowed exposed
amount is at risk
Analyze the probability of loosing this money if the customer defaults

PRODUCT HEALTH MANAGEMENT

Analytics on products categories to increase customers experience and hence loyalty by fostering trust
for the product, seller or e-bay as whole

Notable Practices- AB TESTING -eBay

AB testing
is to check the efficiency of the introduced eBay product or feature
is widely used by Ebay and probably the only major player using it

DIVISION OF CUSTOMERS INTO TWO SEGMENTS

Control Group (30% customers)

Test Group (30% customers)

STEPS IN AB TESTING

Introduce a feature - Eg. Increase the size of a button

Enable the feature for Test Group and keep it disabled for the control Group

Notice the change in behavior - Had the number of clicks increased significantly to
measure the positive response of the introduced feature. If yes continue with the feature to
enhance customer experience

Decision Making - If the result in not significantly better then retract the introduced
feature

Notable Practice - RFM Analysis -eBay

Recency | Frequency | Monetary

for Customer segmentation and Promotional Offers

Analytics used to segment customers and then direct suitable promotional in order to increase the
overall revenue generated by each customer
Recency last visit to site
Frequency how frequent is purchase and in what quantity
Monetary amount of money spend
Recorded data in form:
Customer ID | Category of purchase | Date of purchase | Quantity of purchase | Amount of purchase
Recency
Frequency
Monetary
Get Recency,
Frequency &
Monetary score
out of 5
Influence of
category is not
considered

Calculate the
combined score
Frequency
outweighs other
two factors

Decide number of clusters &

segment customers
according to score.
Apply promotional schemes.

Ideal number of
segmentsManagerial Decision

Which parameters should be focused for the target customer segments

Current Scenario

Recommendations

1) RETAIL ANALYTICS
2) ANALYTICS IN ECOMMERCE INDUSTRY
3) ANALYTICS IN ECOMMERCE COMPANIES

4) RESEARCH PAPERS STUDY

5) RECOMMENDATIONS

Customer Segmentation and Promotional offers

RFM Analysis : Suggested Improvements

Instead of rating similarly for all the product for Recency, Frequency and Monetary.
Ratings can be done differently for different category. For E.g.
Home & Kitchen

Apparel

Tech

n_Bought_Item
n_GMV
n_months* score
0<=n<0.35
n<2.5
n<3
1
0.35<=n<0.5
2.5<=n<3
3<=n<5
2
0.5<=n<0.75
3<=n<3.75
5<=n<7
3
0.75<=n<1
3.75<=n<4.5 7<=n<10
4
1<=n
4.5<=n
10<=n
5

n_Bought_Item
n_GMV
n_months* score
0<=n<0.35
n<2.5
n<3
1
0.35<=n<0.5 2.5<=n<3.25 3<=n<5
2
3.25<=n<3.7
0.5<=n<0.75
5<=n<7
3
5
0.75<=n<1 3.75<=n<4.5 7<=n<10
4
1<=n
4.5<=n
10<=n
5

n_Bought_Item
n_GMV
n_months* score
0<=n<0.35
n<2
n<2
1
0.35<=n<0.5 2<=n<2.5
2<=n<4
2
0.5<=n<0.75 2.5<=n<3.5 4<=n<6
3
3.5<=n<4.2
0.75<=n<1
6<=n<9
4
5
1<=n
4.5<=n
9<=n
5

This is so because a customer buying apparel 3 month back may not be term as recent but
buying cell phone 5 month back may be termed as recent because of difference in life
cycle of the product or category of product

Assign weights to Recency Frequency and Monetary instead of equal weights

Home & Kitchen

Apparel

Tech

Factor

Weight

Factor

Weight

Factor

Weight

Recency

Recency

Recency

Frequency

Frequency

Frequency

Monetary

Monetary

Monetary

Depending on the category

one may want customer to
be more recent, or more
frequent or more revenue
generator per purchase

Customer Segmentation and Promotional offers

RFM Analysis : Suggested Improvements
Rate the Recency, Frequency and Monetary as High or Low for each customers and then
define the segments based on the combination of these values
Ideal Clusters based on RFM
Recency

Frequency

Monetary

Clusters

BEST

VALUABLE

SHOPPERS

FIRST TIMES

CHURN

FREQUENT

SPENDERS

UNCERTAIN

Divide your customers into these 8 segments

Now if one wants to convert his valuable customers into best customers he
knows that he can target the Monetary value of the customers and direct
promotional which would increase the per purchase spending of the

Customer Segmentation and Promotional

offers
- based on Customer Lifetime Value

THREE APPROACHES

1) Segmentation by using Lifetime Value

2) Segmentation by using Lifetime Value components
3) Segmentation by using Lifetime Value & other information
Eg: socio-demographic factors or transaction analysis

APPROACH I (LIFETIME VALUE)

Customers are sorted in descending order of LTV

Percentile score is generated

Target customers (constraints usually financial budgeting determines how many customers to be
targeted)

Customer Segmentation and Promotional offers

- based on Customer Lifetime Value
APPROACH II (LIFETIME VALUE COMPONENTS)
Three components
1) Current Value
2) Potential Value
3) Customer Loyalty

Three axis is derived

Scoring of each customer for each component on a scale of 0 to 1

Segments based on scoring

Eg: A customer with High Current value, Potential Value & Customer loyalty must be retained

Internal Data: Customer

Profile; Behavior Data; Survey
Data

External Data: Acquisition

data; Co-operation data

Current Value; Potential Value;

Customer Loyalty

Customer Segmentation and Promotional offers

- based on Customer Lifetime Value
APPROACH II (LIFETIME VALUE COMPONENTS)

Calculation of Present value

Present Value= Amount paid by customer cost

Calculation of Potential value

Probij : Probability that the customer i uses service/product j out of n services/products

Profitij : Profit that the company has when customer i uses product/service j

Calculation of Customer Loyalty

Customer Loyalty = 1- Churn rate

Probij and Customer loyalty can be calculated through models like decision tree, neural networks
and logistic regression (Training data set : Validation data set :: 30 : 70)

Customer Segmentation and Promotional offers

- based on Customer Lifetime Value
APPROACH III (LIFETIME VALUE & OTHER COMPONENTS)

Behavioral segmentation in terms of usage volume

Heavy users
Medium users
Light users

Brand buying behavior

Brand loyal
Brand switchers

Customer profitability

Marketing Strategy based on the segments

Customer Segmentation and Promotional offers

- based on Customer Lifetime Value
CROSS SELLING AND UPSELLING

Segmentation based on current value and Customer Loyalty

Current Value

Churn probability

Low

High

High

II

IV

Low

III

SEGMENT I (Loyal but less profitable)

Companies may have large opportunity for upselling

SEGMENT II (Unattractive)

SEGMENT III (Loyal and profitable)

Best for Cross selling of products

SEGMENT IV (profitable but likely to Churn)

Unfit for cross selling but company would like to retain them

1) RETAIL ANALYTICS
2) ANALYTICS IN ECOMMERCE INDUSTRY
3) ANALYTICS IN ECOMMERCE COMPANIES

4) RESEARCH PAPERS STUDY

5) RECOMMENDATIONS

Tactics for Building and Sustaining a Data Analytics

TeamAs per our study we have found that the companies doing major analytics
work have in house teams hence we suggest in- house centralized
analytics team
One core analytics team located at one spot
in the organizational chart
Ability to allocate resources as needed
Team gets exposure and experience on
multiple parts of the company
Jack of all Trades, Master of None
Expertise can be built once the analytics
practices have been set
In the long run, the company should move to
decentralized analytics team to leverage
expertise in each of the domains

Building an Analytics Culture

Make intellectual curiosity a priority
Technical skills alone are insufficient

Find techies who also can communicate visually

Express ideas about how a business use can best consume the output of data analysis

Business Savvy Analytics

Focus on important and the right level of granularity
Ensure Cross-Training
Expert doing a lunch and learn with the team or writing documents with tips and tricks

Look for domain expertise in your industry

They add the perspective of reality

Keep top talent in steady rotation

Domain experts gain a stronger understanding of the impact of actionable insights on a
companys day-to-day decision-making

Cultivate a touch of conflict

Biggest breakthroughs come from disagreement

References
Customer segmentation and strategy development based on customer
lifetime value: A case study
Su-Yeon Kim a, Tae-Soo Jung b, Eui-Ho Suh c, Hyun-Seok Hwang d,*
Realizing the Potential of Retail Analytics Plenty of Food for Those with the Appetite Thomas H
Davenport
Explore RFM Analysis using SAS Data Mining Procedures
Ruiwen Zhang, Cary, NC; Feng Liu, University of North Carolina at Chapel Hill, NC
How Predictive Analytics Is Transforming eCommerce & Conversion Rate Optimization (
http://conversionxl.com/predictive-analytics-changing-world-retail/? hvid=352IDw)
http://techcrunch.com/2013/08/31/how-amazon-is-tackling-personalization-and-curation-for-sellers
-on-its-marketplace
/
http://www.ecommercebytes.com/pr/? id=794560
http://www.infoworld.com/article/2619375/big-data/amazon-cto-big-data-not-just-about-the-analytics.html
http://blog.sqreamtech.com/2013/12/how-retailers-are-using-big-data-to-improve-sales-and-custom
er-service
/
http://aws.amazon.com/elasticmapreduce /
https://gigaom.com/2011/10/18/amazon-aws-elastic-map-reduce-hadoop /
https://datafloq.com/read/amazon-leveraging-big-data/517
http://www.predictiveanalyticsworld.com/patimes/amazon-knows-what-you-want-before-you-buy-it
/

Thank you