What is the big deal about big data?
Big data are taking center stage for decision-making in many organizations, especially retailers. The McKinsey Global Institute has predicted that retailers embracing big data can increase their operating margin by more than 60 %. There is an explosion in data availability and collection. Business data double every 1.2 years. Specifically, customer-related data are growing by leaps and bounds. These data include online browsing data, social media data, mobile usage data, purchase data, customer satisfaction data and the like. For example, a retailer like Walmart collects data on about 1 million transactions per hour, contributing to 2.5 terabytes of data. Furthermore, with the runaway growth of the Internet of Things (IoT), more data are continuously collected from sensors in multiple devices such as smart watches, smart speakers and other wearables that are connected to the Internet. These data require massively parallel software running on thousands of computer servers often in a cloud-based environment. By some estimates, in 2020, one third of the data will be processed through the cloud, yielding 35 zettabytes (35 x 1021 bytes) of data, which may be spread across about half a million data centers across the world.
How can retailers better understand and leverage big data?
Retailers like Amazon are constantly collecting, curating, and analyzing data, and making critical decisions. Their decisions, in turn, fuel customer interactions with retailers with more data which are again recorded, processed and analyzed for further decisions. Many such decisions are made in real time. Thus, the cycle of constant data collection, analysis, decision, and further data collection keeps escalating with larger volumes of data. By some estimates, the market for big data is expected to be $56 billion in 2020. The framework in Figure 1 can help to understand big data analytics and its impact on retailing.