Five reasons successful grocery retailers outsource their data analytics

Big grocery retailers have recognized that retail analytics provide considerable insight into the best strategic direction for their business, while sustainably boosting sales and profits. Today’s savvy customers want more relevance in the offers they receive. Because of this, grocers that learn to use retail analytics find that they are able to gain a real competitive advantage in the marketplace. The problem is that few grocers have the resources and experience on hand to design, implement and continuously improve upon the complex analytics needed. And the truth of the matter is they’re leaving money on the table.

Outsourcing certain retail data analytics to the right strategic partner has provided great success for grocers throughout the world. Our research indicates that when a retailer uses data analytics to strengthen price, assortment and promotion optimization, as well as 1-to-1 marketing segmentation, they could see a net incremental sales increase of 1-4% and an average of 4-7% in gross profits. For a $2-billion retailer, this could potentially equate to an additional $80-million in sales per year and an additional $30-million in gross profits per year.

I’ve broken down the top five reasons why outsourcing data analytics can make more sense than having it in-house:

1. 1. Cost and Time Savings

Outsourcing makes sense for cutting upfront costs and reducing employee workload. Your upfront investment is minimal as operations do not need to be setup in-house and your company only pays for the cost of production, maintenance and improvements. As a result, the financial barriers to entry are lowered. You’ll likely see that the investment quickly pays for itself through higher sales and profits derived from smarter decisions based on analytics.

There is a known theory called the “experience curve,” examined and popularized by the Boston Consulting Group in the 1960s. The theory says that an organization reduces its cost by 25% every time it doubles its production. The concept is still valid with data analytics. As a data analytics company increases production, it learns how to better use its software and how to standardize and optimize processes.

Economies of scale due to pooling also mean that outsourced retail analytics cost less and take less time than the same analytics performed in-house, particularly for low-level or repetitive tasks.

1. 2. Talented Data Scientists and Data Analysts

It’s a well-known fact that it is hard to find talented data scientists and analysts who actually understand your business. By looking outside of your own company walls and reaching out to specialized data analytics companies, you'll have immediate access to some of the best and brightest data scientists and analysts that have worked on projects with similar requirements as yours.

When you outsource your data analytics, you don't have to spend time recruiting, hiring, training, and housing employees for short-term projects. There is also the issue of internal resources of your company not having the capacity to globalize your company's business. Outsourcing your retail data analytics will bring the scale and dimensions required in data analytics to manage that aspect of your business worldwide.

1. 3. Focused Strategy with Flexible Operations

Outsourcing your retail data analytics means that your company can focus on its primary business strategy — to have a competitive advantage — rather than getting bogged down in secondary strategies to build out retail analytics capabilities and processes. Focusing on your core competencies sets you up for success as you’re spending more time putting into action new insights from your data analytics partner with predictably successful outcomes.

Another secondary benefit is that while you’re focused on your business strategy, you can rest assured that your retail analytics partner is focused on how best to serve your business needs. It is currently a buyers’ market for retailers, and because of this, many analytics partners have very flexible engagement models that allow them to adapt and customize for new retail business challenges as they arise.

1. 4. Keeping Up with Technological Advances

It’s no secret that technology is quickly evolving around the world in every industry. Grocers striving to gain a competitive advantage by using the latest in technology, especially in areas outside of their everyday expertise such as data analytics, are far better off outsourcing to fulfill those technological needs. Companies dedicated to providing data analytics platforms and services are continuously making large-scale investments to update their toolsets, ensuring they stay competitive by providing retail clients with the best solutions and tools available.

1. 5. Improved Risk Mitigation, Compliance and Accuracy

Outsourcing your retail data analytics means that you can depend on existing best practices and compliance systems that reduce human error and follow-ups.  Outsourced data analytics will also improve work accuracy in terms of given deadlines on projects because of strict contractual agreements with your data analytics partner.

Of course you can further mitigate risks by choosing a data analytics partner that has a proven platform and project management process, saving your company from the inherent risks of trying to develop, maintain and improve upon these for the first time internally.

Outsourcing large parts of your data analytics not only reduces your internal costs, it reduces risk and allows your company to focus on its core competencies. In our fast moving technological world, it is unlikely that your company will be able to efficiently design, manage and continuously improve upon a whole spectrum of retail analytics platforms and processes needed to see increased sales and profits.