How knowing the environment helps retailers

One of the key uses for big data analytics among firms in the retail sector in the coming years will be more closely monitoring consumers' purchasing habits to identify patterns they can take advantage of.

However, analyzing customer buying behavior should only be the start, as by combining this with contextual information that may be affecting their decision-making, organizations can better create a positive environment that entices individuals to make purchases.

For instance, one recent study to utilize the power of data analytics has revealed that even seemingly inconsequential factors such as the ambient temperature can factor into a person's thinking – without them even being aware of it.

This is according to research conducted by Professor Leonard Lee of Columbia Business School, along with Jacob Goldenberg of the Interdisciplinary Center in Herzliya, Israel, and Yonat Zwebner of the Hebrew University of Jerusalem. They examined both lab data and real-world information gathered from online shopping websites to see how this was affecting purchases.

For the online test, they looked at how purchase intentions for various items on a price comparison website were affected by the daily temperature over a 24-month period.

"They found that warmer temperatures increased the probability that shoppers would buy a product, even after controlling for seasonality and factors specific to individual products and despite the fact that shoppers were hunting for bargains," Columbia Business School stated.

Lab tests also indicated that participants would be willing to pay an average of ten percent more for an item when sitting in a room at 79 degrees F than when they were in surroundings measuring 64 degrees F.

The effect was even more dramatic when researchers showed consumers a pen and asked them to hold either a warm or cool therapeutic pad. Those with the warm pad valued the pen 21 percent higher than those with the cool one.

Prof Lee explained: "When people feel physical warmth, it activates the concept of emotional warmth. Emotional warmth generates positive feelings, and, as a consequence, people actually place a higher value on a given product."

The researchers observed this could be highly valuable for retailers, as by optimizing the temperature of their environment to ensure it is slightly warm, but still comfortable, they may be able to boost sales.

It therefore indicates that there are a wide range of factors that may be impacting on a retailer's performance – many of which are not immediately obvious and can only be uncovered with the assistance of big data analytics that use data from multiple sources. 

For instance, by studying data about the demographics of users, patterns in how they view shelves or move around the store, or even upcoming weather forecasts, businesses can improve their selling strategies to better turn browsers into buyers.

By effectively harnessing the power of this technology, retailers may be able to make small changes – even if it as simple as turning the in-store thermostat up a couple of degrees – that can nevertheless have a significant impact on their bottom line.