DATA MINING FOR DECISION MAKING IN RETAIL

PRESENTED BY: MD INTAKHAB ALAM ROLL NO. 110122 Free Powerpoint Templates

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ABSTRACT The propagation of retail in todays dynamic business environment has increased the demand and urgency of successful business organisation to be able to react rapidly to the changing market demands, by utilizing the latest data mining techniques of extracting previously hidden and potentially useful iformation from vast resources of unrefined data.
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An adequate information system finally requires that executives systematically integrate the information into their decision making .

- Peter F. Drucker in mangement Challenges the 21st Century .

for

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Data Mining
Data Mining is the principle of sorting through large amounts of data and picking our relevant information.
It is usually used by business intelligence organizations, and financial analyst,but it is increasingly used in the sciences to extract information from the enormous data sets generated by modern experimental and observational methods. It has been described as the nontrivial extraction of implicit, previously unknown, and potentially useful information from data and the science of extracting useful information from large data sets or databases.
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Data mining is filtering through the data to identify hidden patterns and establish relationship to predict future behaviour.
Extraction of data from repositories. Data cleaning and preprocessing: Its the the act of removing inaccurate records from database. Data reduction and transformation: The term data reduction in the context of data mining is usually applied to projects where the goal is to aggregate or merge the inforation contained in large datasets into manageable (smaller) inforamation nuggets. Data reduction methods can include simple tabulation, aggreagation (computing descriptive statistics) or more sophisticated techniques like clustering, principal components analysis,etc
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Data mining: search for patterns of interest. Pattern evaluation and knowledge presentation Visualization, transformation, removing redundant patterns, etc. Use of discovered knowledge to make decision the evalution from business data to business information, each new step has built upon the previous one. In retail, every time product handled it costs the merchant. By using data mining techniques, retailers can improve their inventory logistics and thereby reduce their cost in handling inventory. A retailer can identify the characteristics of its customers such as gender, marital status, number of children, etc and the products that they buy.
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This information can be extremely beneficial in stocking commodity in new store locations as well as identifying hot selling products in one demographic market that should also be displayed in stores with similar demographic characteristics. For nationwide retailers, this information can have a tremendous positive impact on their operations by decreasing inventory movement as well as placing inventory in locations where it is likely to sell. Globally, Wal-Mart uses Radio Frequency Identification (RFID) readers toreduce stock outs. As soon as goods are sold, RFID tags automatically update the database. A software monitors the syock to be depleted and automatically generates a list of items that need to be replenished.
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Various data mining or business intelligence tools available in market are RFID solution from Orizin, india which includes

Point of sales: Used for predicting customer shopping lists from point of sales data. Customer Management Security Checking un-authorized movement Stock Verification Merchandise Management- spoilage/Experiration, obsolescence, misplacement Out-of-stock position
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Problem Description
The difficulty of decision-making in business application is rapidly increasing, as the world is becoming information driven. Reyailers need to answer following questions quickly like: Which are our lowest/highest margin customers? What kind of strategy is required to increase sales? Which customer are most likely to go to the competition? How to manage customer relations to increase profits? How to identify customer purchasing patterns to improve inventory

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The cope with changing environment, new techniques are required. Features of this techniques are: Ability to handle changing qualitative and quantitative data. Short decision reaction time. Large and overlaping problem domains. Analysis of this results. Process rather than problem orientation. Flexibility of decision-making models to the evolving decision environment It becomes very important to take quick decision to retain and build a loyal customer base. Always remember happy customer is a loyal customer.
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Solution
Data mining is used to resolve these problems. It is also known as Business Intelligence for enterprise.

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Stages of Data Mining

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Evolutionary Step

Business Question

Enabling technologies

Product Providers

Characterististics

Data Collection (1960s)

What was my total revenue in the last five years?

Computer, Tapes, Disks

IBM, CDC

Retrospective, static data delivery

Data Access (1980s)

What were unit Relational Databases sales in New (RDBMS), (SQL) England last march?

Oracle, Sybase, Informix, IBM, Microsoft Pilot, comshare, arbor, cognos, Microstrategy

Retrospective, Dynamic data delivery at record levels Retrospective, dynamic data delivery at multiple levels

Data Warehousing & What were unit On-line analytic Decision Support sales in New Enland processing (OLAP), (1990s) last march? multidimensional Drill down to database, data Boston. warehouses Data Mi ning (Emergin Today) (1996) Whats likely to happen to boston unit sales next month? Why?

Advanced Pilot, Lockheed, Prospective, algorithms, IBM, SGI, proactive informaion multiprocessor Numerous Startups delivery computers, massive (nascent industry) database

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Application
There are various data mining applications which are used in retail Basket Analysis: Which items customers tend to purchase.Its a modeling to technique based upon the theory that if you buy a certain group of items, you are more likely another group of items. It helps in stocking and promotions. Sales Forcasting: Predicting the future sales of the company in a given market is called sales forecasting. It helps in examining time based patterns which helps retailers in making stocking decisions. Apart from various models, many new software tools have emerged for forecasting sales in a better fashion.
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Data Marketing: Information of existing customer is maintained to reduce marketing costs, enhance customer relationship, and produce long term loyal customers. Data mining helps marketing professionals understand customer behaviour. This understanding allows them to target marketing campaigns more accurately and to line up campaigns more closely with the needs, wamts and attitides of customers and prospects. Merchandising Planning and allocation: It is to determine that which products should be on the shelves, how much should be bought, how to price, what to promote, and what and when to mark down so you can maximixe sales while minimizing costs and constraints.
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Retailer

Line of Business

Solutions Used

Shoppers Stop Ltd.

Apparel, Home furnishing CRM: Business objects Oracle Financials & more

JDA Retail ERP (Merchandise Management System) VPN (Tata Indicom) Retail Pro (POS + Head Office + Warehouse) POS System integrated with MMs by Zensar, Pune.

Trent

Westside (Apparel)

RPG Group

Food, Household items, etc.

Pantaloon Retailer (India) Apparel, Food, Ltd. Electronics, etc

POS: Home-Grown solution Handheld scanners at Food Bazaar

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Retail Market Growth

Population in crores 2001 2025 (CSI)

Proportion of the total Retail market (In Percentage)

Metros & MiniMetros & Cities 18% 20% 28% . 6.7 . 6% . . . 6% .. . . . .. . . 7% .. 3% 2% 3% .. 10% 3.7 7.2 . 4% 13
.

15%

Large Cities (Pop: 0.05 to 1m) 32 Cities

2.4

4.5

..

Top Cities (Pop: > 1m) 27 Cities

77%

73%

69%

57%

Rest of India 87.4 115.3 5,500 towns + 6 lakh Villages 2010 2015 2004 2025

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Conclusion
In this paper we discussed about data mining, stages of data mining & applications which are used by top Retail outlets and challenges faced in india. The amount of data available is growing at an extraordinary pace. Once large databases are converted to data warehouses, data mining techniques can be used to extract information and discover hidden patterns can be used to make decision. Retail business is blooming in india at a fast pace so need of the time is to realize is the importance of undersatnding customer preferences in order to retain them to survive in this competitive market by taking correct decisions.

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