One of the most basic foundations upon which a successful business can be built is information. This information is usually related to the day to day proceedings of the business.

It can be in the form of product details, customer feedback, customer reviews, sales data, etc. Having proper knowledge of all these parameters can benefit a company or organization greatly.

It provides a clear picture of the present state of the business and what it will be in the future. This allows the owners of that business to make educated choices and more effective administrative decisions.

1. What is Business Intelligence?

Every data is not available in a form that can be used directly for comprehension and analysis. The raw information needs to be converted to a format understandable by the agents appointed for the very task of evaluating the same.

In other words, chunks of essential and valuable information need to be extracted out from the vast amount of data collected primarily.

This is where Business Intelligence or BI steps in. Business Intelligence is a technology that deals with the collection, simplification, and production of analyzable data. Business Intelligence is proven to have increased profits of companies by pretty high margins.

A survey conducted by an American research company called Nucleus Research showed that for every $1 spent on Business Intelligence, about $10.66 were earned. That is a return of investment of around 1,000%.

What is Business Intelligence

2. Why Business Intelligence?

Business Intelligence saves time in the data evaluation process by replacing the job of human minds with highly efficient and well-tested programs and algorithms.

This also results in the reduction of human error and an increase in data precision. This further allows the company to frame more effective marketing and sales policies, increasing overall revenue.

And not just increased taxes, it can also help in deduction of unnecessary expenses leading to an increase in profits. All of these can be made possible by the growing implementation of BI systems into the company’s decision-making processes.

Why Business Intelligence

BI aids the growth of several forms and categories of businesses, but the one about which we will talk in this article is e-commerce. E-commerce deals with the commercial interactions between a buyer and a seller conducted through an electronic medium over the internet.

Hence for an e-commerce business, the main goal is to move towards and stay at the top of the market to ensure competitive advantage against rival companies.

This can be achieved by adopting BI practices specific to the field of e-commerce. Although most parameters are almost as same as any other form of business. A few important factors, having scope for Business Intelligence implementation, related to the e-commerce industry are:

  • Performance analysis: This branch deals with the identification of advertising campaigns with the most profitable returns, most bought products, customer feedbacks, segments, sales channels, etc.
  • Evaluation of trends: This sector focuses on the detection of changing customer choices, search terms, preferences, and behavior. It keeps a check on the products and services in most demand.
  • Evaluation of margins: This is a study of the prices and cost benefits of products and product lines. It keeps a check on sections where margins can be raised, cost responsiveness or sensitivity, and demand flexibility.
  • Marketing analysis: This branch keeps a check on reports related to product dropped into carts, abandoned carts, newsletter responses, search keywords, etc.
  • Sales analysis: Sales reporting and analysis deals with matters regarding sales, taxes, shipping, returns, credit card collections, refunds, promotional offerings, and discount coupons.

  • Reporting of inventory: This involves the collection of data regarding sold items, new items, items to be reordered, available quantities of products, orders which are yet to be shipped, inventory in transit, and a lot more.

A Business Intelligence system will produce a simplified version of all the data gathered from the divisions above, following a process called ETL, meaning extract, transform and load, highlighting only those aspects that require more attention or further rectification.

Using this information decision-maker can bring the necessary changes in each division, thus improving the overall business structure.

3. Impact of BI on e-commerce

An improved e-commerce business architecture offers numerous benefits to the company as well as other franchises involved with it. Some of these advantages are:

Making precise decisions or choices: BI systems provide a statistical approach to data analysis allowing companies to make decisions based on current and future business conditions. This guarantees a beneficial future for the company as the predictions made by BI systems about the market are overly precise and seldom wrong.

Impact of BI on e-commerce

Elevated revenue scores: Business Intelligence assists in maximization of profits by discovering sales improvement opportunities. It does so by assessing customer behavior, sales history, shopping experiences, and feedback, buying patterns, reaction to ads or promotions, etc.

This allows the system to identify trends and enables the company to point its business practices in the appropriate direction.

Efficient operation of the business: Business Intelligence helps in designing improved business strategies. It identifies all the possible sources of errors in the system and helps in determining suitable solutions.

These errors can be in the form of dissatisfied customers owing to the poor performance of the customer service department, inadequate market research, lost sales opportunities, a decrease in productivity, etc. The elimination of these errors will lead to an increase in the overall efficiency of the operation of the business.

Having the edge over rivals: An enhanced business structure improves the position of a company in the market, giving it a competitive advantage over its competitors. Business Intelligence systems offer a high level of reliability to its users so that they can take more confident decisive steps than others. It helps in charting a better course of action for the company’s desired goals.

Spotting problems beforehand: This is important for ensuring a smooth run for the company as the lesser the mistakes made faster is the rate of growth of the business.

One of the most common problems of the e-commerce industry is the overstocking and understocking of goods. Business Intelligence systems provide detailed information regarding sales history, the pattern of buying as well as customer demographics.

This data helps in forecasting the number of particulars to be demanded in the future by customers for a specific item, thus amending supply quantities.

Venn diagram

We will conclude by drawing a Venn diagram (picture above) that appropriately describes the Business Intelligence model. It defines BI as a sum of the business, its management, and the incorporation of Information Technology. A perfect balance of these three will make any e-commerce company perform to the best of its ability and advance rapidly towards success.