CommBank Retail Business Insights Report FY18. 2 Overview The Australian retail sector continues to respond to a range of competitive pressures and a desire to drive efficiencies within their businesses, to maintain or grow their performance. As a result, retailers appear to be increasingly adopting an innovative mindset to ensure they maximise available opportunities, leverage technology and enhance the customer experience. While many retailers are generating a substantial and timely return from investing in significant change within these areas, there are others yet to harness the financial and intangible benefits that innovation can deliver. State of innovation – retail industry vs national average Innovation Index – retail industry vs national average 19% 9% 16% 2% 4% 2% 30% 39% 35% 49% 48% 47% Retail FY17 Retail FY18 National FY18 Disruptors Harnessers Adopters Resistors National FY18 Retail FY18 Retail FY17 29.5 32.0 26.2 100 75 50 25 0 -25 -50 -75 -100 Innovation Active Have Not Implemented Change Abandoned Innovation Improvers (Improve But Don’t Innovate) CommBank Retail Business Insights 87% of retailers are either Innovation Active or Improvers About the Retail Business Insights Report The CommBank Retail Business Insights Report is based on a sub- set of a wide-ranging quantitative survey of 2,473 business owners, decision makers and managers, as well as 16 in-depth qualitative interviews. This sub-set comprises responses from 262 retailers within sectors including homewares and hardware, clothing and footwear, food and liquor, and other retail. The survey was conducted on behalf of the Commonwealth Bank by DBM Consultants between August and October 2017 and analysis by ACA Research between October and December 2017. Participants were drawn from businesses across Australia with an annual turnover of more than $500,000 and at least two employees. Additional analysis on this data set was conducted in December 2017 to January 2018. The CommBank Innovation Index measures 15 core elements of innovation across management capability and entrepreneurial behaviour. The index combines the results into a single numerical indicator to rank businesses on a scale from –100 (innovation restrictive) to +100 (disruptive innovation), creating the concept of an innovation curve or spectrum. For further information on our tool and methodology see page 7 of the National Business Insights Report FY18 available at commbank.com.au/businessinsights 3 State of innovation - retail channel Innovation Index – retailers by location 18% 5% 4% 7% 5% 51% 59% 20% 24% 36% 71% Bricks & Mortar Pure Play Online Multichannel Innovation Active Have Not Implemented Change Abandoned Innovation Improvers (Improve But Don’t Innovate) Metro 31.9* 2016: 27.6* Regional 21.6* 2016: 21.8* National: 32.0 National: 32.2 Regional retailers tend to be smaller, are more risk averse an.

1. CommBank
Retail Business
Insights Report FY18.
2
Overview
The Australian retail sector continues to respond to a range of
competitive pressures and a desire to drive efficiencies within
their
businesses, to maintain or grow their performance. As a result,
retailers appear to be increasingly adopting an innovative
mindset to
ensure they maximise available opportunities, leverage
technology
and enhance the customer experience. While many retailers
are generating a substantial and timely return from investing in
significant change within these areas, there are others yet to
harness
the financial and intangible benefits that innovation can deliver.
State of innovation – retail industry vs national average
Innovation Index – retail industry vs national average
19% 9% 16%
2%
4%
2%

2. 30% 39% 35%
49% 48% 47%
Retail FY17 Retail FY18 National FY18
Disruptors
Harnessers
Adopters
Resistors
National FY18
Retail FY18
Retail FY17
29.5
32.0
26.2
100
75
50
25
0

3. -25
-50
-75
-100
Innovation Active
Have Not Implemented Change
Abandoned Innovation
Improvers (Improve But Don’t Innovate)
CommBank Retail Business Insights
87%
of retailers are either
Innovation Active
or Improvers
About the Retail Business Insights Report
The CommBank Retail Business Insights Report is based on a
sub-
set of a wide-ranging quantitative survey of 2,473 business
owners,
decision makers and managers, as well as 16 in-depth
qualitative
interviews. This sub-set comprises responses from 262 retailers
within
sectors including homewares and hardware, clothing and

4. footwear,
food and liquor, and other retail.
The survey was conducted on behalf of the Commonwealth
Bank by
DBM Consultants between August and October 2017 and
analysis by
ACA Research between October and December 2017.
Participants were
drawn from businesses across Australia with an annual turnover
of
more than $500,000 and at least two employees. Additional
analysis
on this data set was conducted in December 2017 to January
2018.
The CommBank Innovation Index measures 15 core elements of
innovation across management capability and entrepreneurial
behaviour. The index combines the results into a single
numerical
indicator to rank businesses on a scale from –100 (innovation
restrictive) to +100 (disruptive innovation), creating the concept
of an
innovation curve or spectrum.
For further information on our tool and methodology see page 7
of the National Business Insights Report FY18 available at
commbank.com.au/businessinsights
3
State of innovation - retail channel
Innovation Index – retailers by location

5. 18%
5% 4%
7%
5%
51%
59%
20%
24%
36%
71%
Bricks & Mortar Pure Play Online Multichannel
Innovation Active
Have Not Implemented Change
Abandoned Innovation
Improvers (Improve But Don’t Innovate)
Metro
31.9* 2016: 27.6*
Regional
21.6* 2016:
21.8*
National: 32.0 National: 32.2

6. Regional retailers tend to be smaller, are more risk averse
and have less of a focus on networking.
QLD
40.6*
NSW / ACT
26.5*
VIC / TAS
32.0*
SA / NT
29.4*
WA
24.9*
2016:
25.5*
All industries:30.8All industries: 26.7
All industries:
34.7
All industries:
29.4
All industries: 37.7
2016:
28.9*
2016:

7. 30.9*
2016:
N/A
2016:
N/A
* Caution, low base size
(below n=75), results are
indicative only
Innovation
performance
While the overall rate of innovation
within the Australian retail sector
has remained steady over the
past 12 months, we have seen a
moderate uplift in the presence
of entrepreneurial behaviours and
capabilities that support innovation
(as measured by the CommBank
Innovation Index).
However, despite maintaining
innovation activity, and increasing
adoption of many behavioural traits
that foster innovation, retailers
have now fallen behind the national
average. It is clear that innovation
activity is at its highest among multi-
channel retailers, falling dramatically
when you consider pure play online
and even more so for bricks and
mortar only operators.

8. CommBank Retail Business Insights
71%
of multichannel
retailers are
Innovation Active
4
While retailers have further
embedded a range of behaviours
and capabilities that enable
innovation over the past year,
they are less inclined than the
average of all industries to look
for and respond to opportunities,
incorporate innovation into
their staff hiring and evaluation
processes, or be willing to take
risks on uncertain ventures.
The top drivers of innovation
and improvement for retailers
– productivity, leveraging
technology and growth – align
with expected benefits, with
retailers focused on enhancing
outcomes for customers, raising
competitiveness and internal
processes. However, with only
a fraction of retailers looking to
innovate in response to their
customer’s direct feedback or

9. observed behavioural changes,
and an even smaller number
innovating to stave off industry
disruptors, there appears to be
unrealised opportunities for
retailers to leverage innovation to
better adapt to change.
Innovation behaviours of retailers
Drivers of innovation and improvement for retailers
The dynamics
of innovation
68%
69%
72%
75%
78%
41%
44%
46%
47%
57%
Willing to spend time as well as caital on uncertain ventures
Willing to put financial security on the line and take risks for an
idea
Actively looking for creativity and innovation skills in the
hiring process

10. Using formal process to network outside the company
Evaluating employee creativity or innovation skills as part of
appraisal
Cultivatin new ideas by giving employees opportunities to
observe
Expect employees to offer creative ideas for how the company
could improve
Looking for new ideas or ways to benefit from changes in the
market or technology
Encouraging employees to ask questions that challenge
Adapting products and services to make the most of
opportunities
28%
29%
30%
30%
38%
10%
10%
15%
17%
Adapting products and services to make the most of
opportunities
Encouraging employees to ask questions that challenge

11. Looking for new ideas or ways to benefit from changes in the
market or technology
Expecting employees to offer creative ideas for how the
company could improve
Cultivating new ideas by giving employees opportunities to
observe
Evaluating employee creativity or innovation skills as part of
appraisal
Using formal process to network outside the company
Actively looking for creativity and innovation skills in the
hiring process
Willing to put financial security on the line and take risks for an
idea
Willing to spend time as well as capital on uncertain ventures
Improving efficiencies or productivity
Needing new avenues for growth or revenue
Taking advantage of new or emerging technology and solutions
Keeping up with what competitors are doing
Improving the quality of offering
Feedback from customers
Observing changes in customer needs

12. Changing nature of the workforce
Protecting against disruptors in the market
Top innovation behaviours for retailers
Least prevalent innovation behaviours for retailers
Top drivers of innovation and improvement for retailers
Least prevalent drivers of innovation and improvement for
retailers
Perceived benefits of innovation and improvement
for retailers
Improved market position
Better outcomes for customers
Improved efficiencies
Increased productivity
Better competitive advantage
38%
35%
34%
30%
29%
Challenges of innovation and improvement for retailers

13. Lack of time dedicated to implement these changes
Lack of human resources or personnel
Lack of financial resources
Lack of skills
Difficulty quantifying the returns of investment 16%
20%
25%
28%
32%
of retailers are
adapting their
offering to
make the most
of opportunities
78%
CommBank Retail Business Insights
5
Areas of investment
6%
10%

14. 11%
14%
16%
21%
31%
41%
48%
13%
18%
16%
20%
12%
16%
36%
36%
36%Sales and marketing
Staff training and expertise
Technology

15. Buying or renovating premises
Supply chain and logistics
Modified internal management structure
Customer centricity
Research and development
Domestic or international expansion
Retail FY18
National FY18
In line with high levels of
marketing activity occurring
within the industry, retailers
are most likely to invest in
innovative sales and marketing
approaches. Staff training,
store renovations and supply
chain enhancements are also
high priorities while investment
in technology, research &
development and customer
centricity lags behind the
national average.
For those retailers that are
investing in technology, it is
not surprising that the top
priority is their website or digital
presence and payment systems.
Investment in the Internet
of Things is also well above

16. the national average while
investment in cloud technology
is significantly below.
Investment
in innovation
Areas of investment for retailers investing in technology
7%
10%
15%
15%
16%
25%
32%
43%
51%
55%Webstie and or digital presence
IT software
IT hardware
Payment systems
Apps for smartphones or tablets
Internet of Things
IT infrastucture
Cloud technology

17. Service through chat apps
Video assistance Retail FY18
Impact of investment in technology
10%
11%
14%
20%
16%
20%
22%
25%
32%
33%
40%
41%Staff will be able to focus on delivering better customer
care
Staff will be able to focus on generating revenue
Staff will be able to take on more management responsibility
Will need more specialist staff
Staff will be able to focus on product development
Will need less staff
Retail FY18

18. National FY18
of retailers invest
in their website or
digital presence
of retailers invest in
sales and marketing
55%
48%
CommBank Retail Business Insights
6
While retailers appear to be
spending approximately a third
of the average investment
into innovation compared to
the national average of all
industries, the estimated return
on this investment is almost
identical. Retailers are receiving
almost two dollars for every
dollar invested in innovation,
suggesting that they don’t need
to have significant budgets to
generate a substantial return on
their innovation activities.
In most cases, retailers expect to
realise a short-term return from

19. investing in innovation, with one
in two anticipating a pay-back
period of less than six months.
Returns from
innovation Investment Additional
Earnings
Return on
Investment
Retail FY18 $101K $198K 1.96
National FY18 $300K $592K 1.97
Estimated investment and returns from innovation
Timeframe for return on investment from implemented
innovations for retailers
4%
24%
22%
30%
5%
2%
14%
An immediate
return
1-3 months 4-6 months 7-12 months 1-2 years 3+ years Don’t
know

20. of retailers expect ROI within 12 months
80%
CommBank Retail Business Insights
7
Talk to us
Visit www.commbank.com.au/retailinsights
Call 13 19 98 to access Australian-based Business Banking
Specialists around the clock.
Things you should know: This report is published solely for
information purposes and is not to be construed as advice or
recommendation. This report has been prepared without taking
account of the objectives, financial situation and capacity to
bear loss, knowledge or
experience or needs of any specific person who may receive this
report. All recipients, before acting on the information in this
report, should consider the appropriateness and suitability of
the information, having regard to their own objectives, financial
situation and needs,
and, if necessary seek the appropriate professional or financial
advice regarding the content of this report. Any opinions,
conclusions or recommendations set forth are subject to change
without notice. Any projections and forecasts are based on a
number of assumptions
and estimates and are subject to contingences and uncertainties.
Different assumptions and estimates could result in materially
different results. The report makes reference to data sourced
from an online survey of 2,473 businesses – specifically a

21. subset 262 retailers within
sectors including homewares and hardware, clothing and
footwear, food and liquor, and other retail – that occurred in
August to October 2017. The fieldwork was conducted by DBM
Consultants and analysis by ACA Research on behalf of the
Commonwealth Bank between
October and December 2017. Additional analysis was conducted
on this data set in December 2017 and January 2018. All
analysis and views of future market conditions are solely those
of the Commonwealth Bank. Commonwealth Bank of Australia
ABN 48 123 123 124.
AFSL and Australian credit licence 234945
MITS6002 Business Analytics
Assignment 3
Q1. Carefully Read the “CommBank Retail Business Insights
Report FY18” provided with this
as an attachment and answer the below questions.
i. Comment on the insights report based on the overall features;
including the
quality of visualisations, presentability, and the information
provided.
ii. List the key information you derive from this insights report
and explain how

22. they will be useful in decision making.
iii. Write an abstract (one paragraph) summarising the insights
report.
iv. Suggest improvements to this insights report.
Q2. Regression analysis is a commonly used technique to find
relationships among
variables. Answer the below questions based on regression
analysis.
i. Provide an example where regression analysis can be
effectively used.
ii. Collect height and weight data from 10 friends/relatives of
yours and complete
the below table. Every student in class should have a unique set
of values.
Height Weight

23. iii. Draw a scatterplot based on above data. Based on your plot
comment on the
relationship between height and weight.
iv. Compute the equation of the regression line.
v. Calculate the R2 value and comment on the goodness of the
fit.
https://www.commbank.com.au/content/dam/commbank/busines
s/pds/retail-business-insights-report-fy18.pdf
vi. Use an analytics tool of your choice to calculate the values
for iv, and v. Compare them
with your answer.
Q3 Classification and regression are commonly used processes
in business analytics.
i. Briefly explain the difference between classification and
prediction.

24. ii. Give examples for classification methods you know.
iii. The following diagram shows a neural network with one
hidden layer.
Write down the algebraic equation for y1 in terms of input
values i1,i2 and weights w.
Briefly explain how neural networks are used for classification.
iv. Give at least three examples how clustering can be used in
business analytics. In your
answer explain how each business case could be addressed
using clustering.