JD Sports uses analytics to plot store growth

British sports retailer JD Sports will use analytical technology from IBM to make sure that future stores are opened in the right areas for the best sales.

It will use software from SPSS, a data analytics firm recently bought by IBM for $1.2 billion, and part of a $12 billion spending spree by the tech giant on a new business analytics portfolio.

According to JD Sports site research and development manager Alastair Browne, the software will play a "crucial" part in deciding where to successfully place new stores, because it could be very costly for the business to get that wrong.

Before 2005, JD Sports relied on gut feeling to decide where new stores should be opened, but after Browne joined JD Sports it set up a specific site research department.

This was tasked with providing and collating information, for a much more scientific approach to decision making.

Browne had already used standard sales forecasting techniques using existing data with success, but decided to start using the 'SPSS Modeler' as JD Sports now covered a vast amount of the UK.

"We need to drive and understand in more detail the interaction between the number of different variables that drives a stores performance," he said. "By understanding that, it might open up new markets which we previously disregarded."

"Secondly given our coverage of the UK now, we also need to understand the impact of sales cannibalisation on our existing estate," he added.

"We don't want to be opening new stores and finding they are drawing trade from existing stores, and all we're doing is moving our sales around and not generating income."

The analytic forecasting predicts what happens if a store was opened in a certain area, by looking at factors such as the catchment area, demographics of the town and how friendly the population are to the JD brand.

Once the profile of the population is looked at, the software examines what size of store will be required, and whether other retailers in the area fit well with the sports business.

"A lot of the big companies, in particular Debenhams and Tesco, have embraced this technology for a number of years," Browne said.

"I think those with customers that have a loyalty card and a volume of customer data coming in use this software to make sure that the right products reach the consumer, as well as place stores in the right places," he added.