Data Mining in Retail Industry

1. Data Mining in Retail Industry By Hui Qin Zhe Liu Yu-hsuan Chen Le Shen

2. Seminar Breakdown Section 1 Introduction Section 2 Fraud Detection Section 3 Increase Sales Section 4 Reduce Operational Cost Section 5 Conclusion

3. What is Data mining process of exploration and analysis automatic and/or semiautomatic means large quantities of data to discover meaningful actionable patterns and rules (that were previously unknown or unexpected)

4. The data mining cycle Identify suitable business problem(s) – where data analysis might provide business value Transform data into actionable results – using data mining Act on these results Measure the impact of the actions

5. Data Mining – Fraud Detection Using Data mining to prevent fraud by employees In the UK, staff related fraud in the rtail industry costs a massive £1.4 billion per year. Intellio (www.intelliq – global.com), based its Netmap Retail Solution, runs on the Red Brick Warehouse system.

6. Data Mining – Fraud Detection How to work! In the case of River Island, The Data Mart is populated from the Elctronic Point of Sale (EPoS)systems. It then uses data visualisation techniques to build up a picture of the links between seemingly unconnected pieces of information.

7. Data Mining – Fraud Detection Solve problems In one study, the analysis started by looking at refunds that occurred before the stores were open. Another investigation looked at larger than usual discounts. ‘…simply to get a solution to a real problem. ’ So, data mining is proving itself as a technology that can be a source of real business success

8. A new battlefield for supermarkets Building relationship with customers and using proper marketing tactics have replaced price-cutting.

9. Tesco Clubcard Customers’ details are collected by Tesco. Customers will be rewarded when they shop in Tesco. Tesco retained existing customers and attracted new customers. Tesco became the leading retail store in the UK.

10. The Data-Mining of Tesco Each transaction has valuable information. Data-Mining is applied to identify buying patterns and helps to predict sales. Managers can order products more accurately, based on the information. Making the best of promotions and cross-selling. The mailing campaign will be more accurate.

11. Reduce operational cost Stock Control Data mining allows Tesco to predict product order levels weeks into the future across their entire store chain. Based on Data mining, Inventory Forecasting Solution accurately predicts sales trends and prevents out-of-stock situations for retailers. Data mining can also predict the quantities of inventory to stock to keep overstocking costs to a minimum.

12. Reducing the cost of mailing Tesco’ s traditional mailing campaign, offering a prduct or service for sale. 1% of the customer base will be "responders. Data mining techniques enable customer relationship marketing

13. Staff Planning Peak time planning Off-peak time planning Reduce the staffs redundancy in off peak time, and increase the quantity of staffs in peak time by identify the buy patterns such as location, occupation status, and check out times then forecasting the when is the peak shopping period for tesco’s local stores.

14. Conclusion Happy Ending for Retailer Extension • Banking – Detecting fraudulent credit card use – Identifying loyal customers, potentially profitable customers, ... – Customer profiling – Predicting customers likely to change their credit card (churn) – Credit scoring – Targetted marketing

15. Extension Insurance – Claims analysis (fraud) – Predicting which customers will buy new policies Medicine – Identifying successful medical therapies – Identifying potentially useful drugs Library stock management Land use analysis (satellite image analysis) Astronomy (image analysis) Forecasting (e.g., TV audiences) … and many many more

16. Reference www.tesco.co.uk/ http://www.db2mag.com/ http://www.redbooks.ibm.com