Most people think of the grand challenges in computing as big science projects. But with the holiday shopping season just ended, retail marketing is emerging as a real-world incubator for testing how computer firepower and smart software can be applied to human behavior.
Major retailers have long sifted through in-store sales and demographic information to aim goods at different stores and to tightly manage supplies. What is changing, experts say, is the rapid surge in the amount and types of digital data that retailers can now tap, and the improved computing tools to try to make sense of it.
The data explosion spans internal sources including point-of-sale and shipment-tracking information, as well as census data and syndicated services. Companies also track online visitors to Web commerce sites, members of social networks like Facebook and browsers using smartphones.
The better tools, they say, are ever less expensive and faster computers and so-called business intelligence or analytic software for finding useful information and patterns in that data.
Retailers are increasingly mining huge troves of digital information to improve the decisions they make about pricing, shelf-stocking and offerings.
“This huge and growing ecosystem of data is an asset that some retailers are really beginning to exploit for competitive advantage,” said Thomas H. Davenport, a professor of information technology and management at Babson College near Boston. “It brings more science into the business. Relying on gut feel is yesterday’s strategy in retailing.”
Mountains of data and whiz-bang technology are no cure for tight-fisted shoppers, of course. And this was a challenging holiday season for most U.S. retailers. Even computing enthusiasts acknowledge that the technology is far better at fine-tuning decisions on pricing, product assortments and shipments than the basic merchandising judgments about what goods to make and buy from suppliers.
“In the world of retail merchandising, there will always be a…