How can data science level up Retail Businesses?

Since you were five, you've loved flowers. They smell nice and they make people smile. Fast forward 25 years, you're sick of your corporate job and you've finally decided to fulfil your dream of owning a flower shop.

Let's talk about how data science and AI can help you level up your retail business, in this case, your flower show.

Google Search

Let's assume you've already got a store set up in a town called Unicorn Town but you're not exactly sure what type of flowers to stock. You head on to Google and type in "most frequently bought flowers". Soon enough you have compiled a list of 30 flowers that you can stock your store with and additionally, you've also managed to find wholesalers that will supply you with the flowers and you've also found someone to build you an online store.

This is the first example of how you've harnessed the power of AI to help you level up your business. This was by using google search to provide you with the most relevant results behind the scenes is RankBrain, a deep learning algorithm that is constantly updating search results based on multiple variables such as click rate, searcher's location, time of the day of the search, etc.

Social Media Ads

Let's get back to our flower store. In your first month of operation majority of your sales are coming from people walking by your store, word of mouth advertising, and people searching for flowers in Unicorn Town.

You also notice that the majority of your sales are happening in-store rather than on your e-commerce site. Recently you also read a business report that stated that 95% of purchases will happen in an e-commerce store by 2040. This got you worried, so you've started looking for ways to promote your store online.

First, you created an Instagram page and then a Facebook page and you link those to your e-commerce store. Then you started running ads on this platform by stating the demographics of your potential buyers and geographical location which was simply a 50-kilometer radius of your store as that's your shipping limit for your same-day delivery service.

This is the second example of how data science and AI have helped you level up your business. AI is being used behind the scenes to not only find your relevant audience by using the demographics data but also by analysing user behaviour on the platform and the types of ads they click.

For example, a person that clicked on a flower ad six months ago is more likely to click on your ad as opposed to someone who's not interested in flowers similarly the AI algorithms control how often your ads are shown to your potential audience. This is very different to traditional advertising which suggests showing your audience an ad as often as possible and this also explains why you see the same ad twice in a given ad break whenever you're watching TV but Facebook on the other hand has found that if you show someone an ad too many times they're actually less likely to click on that particular ad. So after setting up ads on Facebook and Instagram you've noticed a huge uptake in your e-commerce sales and this has really excited you.

Personalised Purchases

Fast forward a few months and you notice that majority of your sales is coming from first-time customers and repeat customers are spending roughly two to three times more than your first-time customers. Naturally, you want to try to maximise the number of repeat customers you have.

You start off by creating a loyalty program for your in-store and online store customers and this way you can compile a list of customer emails you then sign up for a customer data platform like Segment to manage your customer data. This platform allows you to analyse your customer purchase behaviour as well as send personalised emails. Now you can remind customers to buy flowers just in time for their wife's birthday and you can also find out who your high-value customers are so that you can work harder to retain them.

Now that you have set up an efficient system for getting customers and getting more sales your store is gradually growing but you're still not providing a fully customisable service. You want to be able to customise your flower sales based on each customer so you hire a data scientist from Upwork or Fiverr to build you a recommendation system based on your previous customer purchase history in the segment. The recommendation system uses AI to tell you exactly what a customer is likely to buy based on season and similar customer purchase behaviour. Now you can send a customised product recommendation straight to your customers' email.

That's a rough example of how data science can help you level up your retail business and these are the types of problems I worked on in a previous life working for a customer data platform.