Applied Market Basket Analysis – Illustrative Case Study

Market Basket Analysis and insights can greatly influence critical business metrics, like sales growth, customer retention, and inventory management.  

To further illustrate this, we’ll continue our blog series on Market Basket Analysis by exploring a a scenario with RetailX, a fictional major retail chain with thousands of stores throughout North America. 

RetailX wanted to improve product placement and inventory control to increase sales opportunities. Despite having access to extensive transactional data, they were unable to translate it into actionable insights due to a lack of appropriate analytical tools. 

In this blog we’ll see how RetailX Market Basket Analysis to analyze customer purchasing behavior. This enabled precise product placement recommendations, improving both sales efficiency and inventory management.  

1. Capturing the Retail Pulse

The first step was to gather data from multiple sources across RetailX’s operations. This included: 

• Data from in-store POS systems and online platforms with thousands of transactions daily 

• Inventory data with frequent updates on stock levels and product movement 

• Marketing and promotion data on active campaigns and discounts 

To handle this diverse data influx, RetailX turned to two AWS services: 

• Amazon Kinesis Data Streams for real-time data ingestion, capable of handling hundreds of thousands of transactions per second 

• AWS Glue for batch data processing, using its serverless ETL capability to automatically scale with increasing data volumes 

2. Data Storage: Building a Scalable Foundation

With the data flowing in, RetailX needed a robust storage solution. They opted for a two-pronged storage approach: 

• Amazon S3 served as the data lake for raw data, such as CSV files with POS transactions and JSON files with marketing metadata. 

• Amazon Redshift housed clean, structured data, allowing fast querying of large datasets. 

This combination allowed RetailX to store everything from raw transaction logs to detailed inventory tables, providing a solid foundation for analysis. 

3. Turning Raw Data into Consumable Form

Raw data rarely tells the whole story. RetailX used AWS Glue to: 

• Clean the data by removing duplicates and correcting errors. 

• Join datasets to link purchases with inventory data 

• Aggregate data to track trends over time and across locations 

AWS Glue’s automatic schema inference feature helped RetailX understand and stardardize the various data sources. 

4. Uncovering Hidden Patterns with MBA

With clean, structured data in hand, RetailX was ready to go into Market Basket Analysis. They chose the FP-Growth algorithm for its efficiency in handling large datasets. Amazon SageMaker was used to build, train, and deploy FP-Growth models to identify frequent itemsets and generate association rules. 

This analysis revealed valuable insights like “customers who buy gym equipment are 70% likely to also purchase protein supplements” – information that would prove crucial for optimizing their business. 

5. Visualization: Bringing Insights to Life

Numbers and rules alone cannot do much, so RetailX needed a way to make these insights accessible to decision-makers across the company.  

Amazon QuickSight created intuitive dashboards, allowing store managers to visualize the association between gym equipment and protein supplements, enabling data-driven decisions on product placement and marketing. 

6. From Insights to Action: Driving Business Outcomes

The real change happened when RetailX applied these insights across their operations: 

• Product placement optimization in stores led to a 15% increase in cross-sell sales for fitness products. 

• Stockouts were reduced by 20% as related products were restocked together. 

• Their online recommendation engine boosted average order value by 12%. 

By following these 6 steps, RetailX completely revamped their operations by utilizing AWS services to create a comprehensive data pipeline. The process started with data ingestion through Kinesis and Glue, followed by storage using S3 and Redshift. For deeper insights, they applied SageMaker for analysis, and finally, data was visualized using QuickSight. This seamless integration of tools led to a notable boost in both sales and customer satisfaction. 

RetailX’s journey shows how businesses can leverage MBA and cloud services to turn data into actionable insights, aligning with the key business outcomes we discussed earlier, such as sales growth and customer retention. 

Conclusion 

The RetailX story can be applied to any business. All we need is a systematic process to think about the outcomes we want to drive, and then working backwards from it.  

Market Basket Analysis (MBA) is a strategic tool that can change the way companies run their operations, not only a means of determining which products consumers purchase in concert.  

By means of MBA, businesses can maximise product placement, strengthen customised marketing, enhance inventory control, and even guide product development.  

Are you ready to wield this power for your business? Whether your objectives are higher sales, better customer loyalty, or operational optimisation, our team of data science professionals is here to help you reach them. We offer tailored advice and demos to show how MBA approaches might be easily included into your corporate plan. 

Get in touch with us right now to learn how we might help you to use the most current data analytics technologies towards strategic success. Let us work together.