Predictive Analytics for Retail

A Guide to Practical Applications of Predictive Tools for Developing Retail Products

Predictive Analytics are being rapidly adopted by the retail industry as a more efficient and cost effective way to to make better product decisions.

Retail Predictive Analytics Overview

Learn How Retailers, Brands and Manufactures are Leveraging Predictive Analytics to Reduce Costs, Markdowns and Time to Market for their Retail Development Cycles

Table of Contents

  1. What is Predictive Analytics?
  2. How do Predictive Analytics work?
  3. What are some outcomes of using Predictive Analytics?
  4. Case Studies

Predictive Analytics are being rapidly adopted by the retail industry as a more efficient and cost effective way to to make better product decisions.

What is Predictive Analytics?

At this point, we are all familiar with general analytic tools that report everything from sales history to website traffic. These tools organize the data of actions such as sales that have taken place in the past.

First Insight’s Predictive Analytics platform takes these data points, along with user-generated content - the Voice of your Customer(Link to VoC blog post) - to provide forward-looking metrics yielding accurate demand and sales predictions for products that are still early in the development cycle.

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How Can Predictive Analytics Apply to Retail?

Retail predictive analytics help you create and design better products, but they go far beyond general product recommendations. Here are just some of the additional insights that can be gained with the proper tools:

  • Which design elements and attributes are most valued by your consumers?
  • Which products should be in the assortment, and which should be eliminated?
  • How should products be priced to maximize margins, even without any sales history?
  • How much inventory should retailers/brands buy or manufacture?
  • What messaging will resonate with specific customer segments, retail channels and geographies?

How Do Retail Predictive Analytics Work?

Each tool or platform in the retail predictive analytics industry has its own subset of technologies and methods for retail forecasting. Most tools rely on a combination of predictive algorithms and historical product performance data or feedback from customers. Some platforms go far beyond just previous product performance with complex methodologies of predictive technologies to provide astoundingly insightful outcomes.

We at First Insight pioneered early retail predictive analytics technologies and have the most mature platform that can function as a strong case study for advanced predictive technologies and methodologies. Each predictive retail analytics platform employs different tools, but well-formed products such as our InsightSuite platform combine the following:

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Previous Product Performance Data

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Voice of the Customer

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Machine Learning & AI

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Bayesian Modeling

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Human Computational Modeling

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Retail Predictive Analytics Outcomes

Many different outcomes can be derived from predictive analytics tools. Flexible platforms such as our InsightSuite can also be customized to derive the precise outcomes desired by a retailer. Below, we will outline some common outcomes that can be expected when using Ppredictive Aanalytics tools as a component of your retail product development strategy.

Predict Pricing Strategies

This is the most obvious and expected outcome that most retailers hope to receive from their predictive tools. From entry price points to regional pricing strategies, you should expect to receive deep insight into how to price your products.

Select Winning Products

Learn which products will sell, and which products will be left on the shelf. Identify products that resonate with specific niches and products with mass appeal. Avoid controversial and offensive products and identify offerings that will create a buzz and maximize sales for your brand.

Reduce Markdown

Improving sales and setting effective price points will lead to reducing markdowns. If you have to markdown your products, predictive tools canshould help you set the proper markdown cadence.

Set Entry Price Points

Know what the perfect entry price point is for your retail offerings. Understand how to maximize full-price sales to reduce markdowns and improve sell-through. Predictive analytics tools with multi-national support can also strategically recommend different entry points for different regions.

Reduce Store Testing

In-store testing, focus groups and other forms of costly “real-world” product testing can be greatly reduced. This shortens the product development cycle, reduces production costs and waste, and provides design teams with more creative flexibility.

Improve Product Success Rates

Mature retail predictive tools can greatly improve overall product success rates. You can eliminate poor concepts earlier, find the right price points, and spend more time investing in products predicted to succeed.

Inform Design Decisions

Design teams can flourish when empowered by predictive analytics. They have more latitude to take creative risks and VoC data can provide useful insights on how to improve a product after the initial concept has been developed.

Improve Speed to Market

Many retail Predictive Analytics tools provide rapid results unparalleled by traditional in-store testing. For example, our InsightSuite provides results in as little as 24-48 hours. In some cases, this may increase speed to market by up to 5 months.

Case Studies

Review some practical applications for retail Predictive Analytics.

How Data Helped rue21 Avoid Becoming a Retail Cautionary Tale

By leveraging First Insight's retail analytics, rue21 has greatly improved their product success rates.

Read Case Study

How Dick's Sporting Goods Uses Data to Make its Products Stand Out

Learn how're brand leveraged predictive analytics to increase sell-through and margins

Read Case Study

Pick Me a Winner: Crocs Uses Data to Improve Production Innovation

Learn how're brand leveraged predictive analytics to increase sel-through and margins.

Read Case Study

Learn More About Our Retail Analytics Solutions

First Insight’s InsightSuite Software Platform utilizes two vital components, The Voice of the Customer and Predictive Analytics, to enable brands, manufacturers, retailers, and licensees to make better product decisions on new products by answering questions that include:

Learn How Our Retail Analytics Platform Works Learn More
Explore Our Retail Price Optimization System Learn More
Our Retail AI Helps You Predict Winning Products Learn More