Instrumented Interconnecteds Intelligent

By Michael Haydock, IBM Business Analytics Optimization Chief Scientist & Distinguished Engineer

Last week, I was sitting on a panel with Ellen Davis of the National Retail Foundation on Back to School shopping trends. We engaged in a spirited hour-long discussion around changing consumer shopping behaviors, the state of the economy and of course, predictions for the upcoming fall retail season. Ellen and I both work with retailers every day, and we continuously find our clients challenged with the age-old question: “What do consumers want?”

One of the reporters that I met at the meeting dubbed me a ‘data geek.’ It’s fairly accurate considering I’ve been collecting retail data for the past 22 years and combining it with current economic trends to create a predictive retail forecast.

My latest forecast, for the third quarter, predicts that the fall season will be moderate to strong (depending on the category) for retailers, particularly in the categories of children’s and women’s apparel, as well as footwear. Despite the economy (which is not as strong as in the 1st quarter of this year), consumers still are showing signs that they are ready to shop – given the right conditions.

This quarter I decided to take these numbers a step further and couple them with an IBM Social Sentiment Analysis. The big insight from the data revealed that consumers do plan to shop, but they are deferring some purchases and waiting to see if retailers can offer them the right deal.

My team looked at nearly 237,000 posts on social platforms, such as Twitter, blogs, message boards and news sources from mid-April to mid-July 2011, and the same time period for 2012. We found a 50 percent increase in online chatter around coupon and promotion sharing in the span of a year. Yet, women’s satisfaction in the quality of online offers decreased by 20 percent this year, as compared to last.

In 2008 at the start of the recession, many retailers overstocked on inventory, later being forced to slash prices by 60, 70 even 80 percent. Consumers, no doubt, were delighted with the quality and quantity of these sales. The IBM Social Sentiment Index shows that consumers are still clinging to the discounts of the past, as they are still looking for deep discounts, and holding out on their purchases until retailers can provide better offers.

Today retailers are in the tough position of trying to reset consumer expectations that a 25 percent-off coupon is, indeed, a good deal.

The reason that we produce these analytics-based retail forecasts and social sentiment reports is to help retailers understand their market influences and customers, better. We try to arm businesses with insight into what items are going to sell, what promotions might work and what items and categories that they may need to stock up on.

This fall season is poised to be a promising one – led by women’s and children’s sales. Personalized and timely promotions will be key to securing consumer purchases. Retailers—go ahead and stock up, but don’t forget the coupons!

This post is the first in a series of posts about retail shopping trends.  See part two of the series here.

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