During an economic downturn, retailers' need to understand their business — which way it is going, how to cut costs and boost sales — escalates. With that comes a greater interest in the technology — called business intelligence (BI) — that attempts to provide some understanding by analyzing all aspects of the business.

“We are seeing an increased number of queries about BI, especially after the economic downturn,” said Shilpa Rao, solutions manager of merchandising in the retail practice of Tata Consultancy Services, a Mumbai, India-based firm with offices in New York. “They want to leverage BI to understand where their costs are and measure them.”

In particular, she said, retailers want to use BI to predict consumer behavior and formulate a more accurate assessment of inventory requirements. “Inventory is the biggest issue during an economic downturn,” said Rao.

BI tools come in a variety of forms. “Some retailers have data warehouses but want reporting tools that allow more analysis, such as those from MicroStrategy and Cognos,” explained Savitha Nallasamy, solutions manager for loyalty and customer analytics, Tata Consultancy Services. “Others are more mature BI users and have made investments in powerful databases that support a lot of users and real-time queries, such as those from Netezza and Teradata.”

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Spartan Stores, Grand Rapids, Mich., uses software from MicroStrategy, McLean, Va., for a broad range of BI applications. According to MicroStrategy, Spartan's applications include sales and profitability reports to monitor business performance, merchandising reports for detailed insights into gross margins and category management, marketing reports to evaluate sales promotion trends and opportunities, and supply chain reports to manage supply chain management.

In May, Spartan expanded its deployment of MicroStrategy to enable store and department managers to evaluate and manage individual store and department performance.

But for retailers using BI tools, a number of challenges remain. “They are struggling with the time it takes to generate reports,” Rao noted. “And we are seeing planners having to go through piles of reports and trying to make sense of them.”