Reconnecting the Retail Brain: Learning From the Octopus

By John Malpass, Retail Consultancy Practice Lead at Teradata

An octopus has nine brains: one for each tentacle and plus one at the centre. Each tentacle can react super-fast to local stimuli to grab opportunity, hide or defend itself and the wider body. Many of these reactions are instinctive. But the central brain is essential, monitoring and analysing information from across the organism, and taking crucial decisions that ensure survival.  It controls the whole body, makes strategic decisions, and ensures coordinated action by all the tentacles. The octopus’ seemingly miraculous speed, shape-shifting and camouflage capabilities, controlled by its central brain, are themselves a useful analogy for the future of retail.

Retailers need to adopt a similar approach leveraging enterprise-wide data and analytics not only to react fast at the edge, sensing and responding to changing customer behaviours and local market dynamics in each individual store, whilst also constantly informing strategic and future-focused decision-making.

As we’ve seen, for too many retailers brain and body have become separate, with data informing discrete projects and engagements but not used to transform entire business processes. Disconnects, friction and manual interventions in processes have all been highlighted in the current crisis, but they have been slowing things down and constraining value delivery for decades. To survive, the retailer of the future will have to become agile and able to respond to rapid and constant change. Just like the octopus, some responses will be automated; analytically enabled, managed and executed, while the central brain co-ordinates activities, thinks ahead, constantly learning and adapting to its environment.

The octopus has evolved over millions of years to develop and adapt its highly sensitive response capability. Retailers have had a few weeks to discover the benefits of a similar approach. Siloed solutions and manual processes cannot cope with the speed and scale needed to survive. As many will have experienced over the last few weeks, simply reporting what has happened can involve huge effort for little reward. Data is an asset, but it must be leveraged to deliver business advantage if it is to be valued. In later blogs I’ll demonstrate how data adds value to specific functions within retail, but for now I’ll share one example of how data can transform a process to create value on the shop floor.

In store bakeries are popular with customers, driving traffic, sales and margin and larger customer baskets. But margin can quickly disappear if too many or too few croissants are baked. One major supermarket, with over 400 in-store bakeries, found it had over 400 different ways of deciding how many items to bake during the day! To reduce waste and increase availability the retailer’s ‘central brain’ built a predictive model using data collected from across the organisation. Running the algorithm for each bakery with local, real-time data on current trading conditions automatically calculates exactly how many croissants bakers should make in each store and when to bake them.  This one algorithm has delivered over 10% in additional sales.

This is the sort of transformation that retailers must embrace – not only knowing what customers in each store want but acting on that knowledge by innovating a way to better meet their needs. Growth-orientated retailers tell us they have three strategic priorities: a hyper-personalised, frictionless  customer experience across all channels; more relevant localised and personalised Customer value propositions; and agile, cost efficient operations that respond to the demands of the modern digital economy. All demand reliable, trusted and real-time data at every point. The retailer of the future will run more than 50 million queries per day. That scale of data: every product in every store, every customer through every channel, 24/7, 365 days a year, means that automation is the only way to act at the speed needed to compete.

Automating the routine, while managing exceptions and alerts, creates time and space for more strategic analysis so retailers can switch from firefighting to scenario planning and simulation. This literal mind-shift opens the door to more strategic and forward-looking analytics and the use of big data to create new added value activities. Using data to define tomorrow’s opportunities and strategise the best next steps will build an agile business capable of responding to the demands of the modern digital market.

The global pandemic has been a harsh wake-up call for many in retail. Creaking systems, siloed and hard to reach data, and intensive manual processes have all been strained to breaking point. Those that were already set up and using enterprise-wide analytics will have fared better, but even those who have not taken the first steps should now see the urgent need to use data to transform their businesses. Luckily, evolution in retail does not need millions of years, and in the next few weeks I’ll outline how individual roles and functions can rapidly use data to change the way they do business. And you don’t need nine brains to do it.