Blog | Data Is The New Oil For Retail
It’s back to work and for many companies the new year means a clean slate, but for most retailers it’s a different story as they near the end of what’s been long and busy period.
In the US, Black Friday typically signals the start of six to eight weeks of sales and shopping mania. Black Friday, fast becoming a global phenomenon, is followed by Cyber Monday and Super Saturday, where last December almost half of all US adults dashed to the shops for some last minute ‘holiday’ shopping. After that, Boxing Day brings with it the promise of bargains before the start of the January sales – British shoppers were expected to make some £5bn of transactions on Boxing Day just gone.
These retail trends and spikes in transactions are evidence of the constant and fundamental changes afoot in the retail sector, and of the pivotal role data will have in shaping the future of retail.
Data, everyone wants in on the action
Data is to this century what oil used to be to the last one, a source for growth and change to our lives. With the advent and advances in technology and gadgets connected to the internet (IoT), we are creating new infrastructures, new monopolies, and new economic realities. Big Data is unlike any previous resource we have had as it can be extracted, transformed, bought and sold in different ways to obtain new business insights. The value of data has simply increased, and it is natural to expect it to keep increasing in value as the world collects more of it.
Data comes at a price and rightly so
It also changes the fundamental rules and demands new approaches from regulators, such as the new European data privacy regulations (GDPR) that came into force in May earlier this year. This regulation was an important step in the right direction for gaining better control and insight into how personal data is collected and used. The aftershock of the Cambridge Analytica-Facebook data scandal is still being felt and shows that the world needs a new regulatory regime (and mentality) for managing and using personal data.
Digitization disrupts, but for the greater good
For many decades, the retail industry has followed the same formula to obtain growth—simply, open new stores at the right location to attract more customers. Digitization is now disrupting that tried-and-true growth formula. Arguably, after lagging behind other industries, the retail sector and consumer packaged goods (CPG) companies are at a tipping point where we’re seeing a new interest for taking e-commerce and the customer experience to the next level. But, before those gains can be realized, I see four major issues the retail sector must work on:
Number 1: Rethink the role of the store. Let’s be clear, with as many as 9 out of 10 retail transactions taking place in-store, the bricks and mortar store is not dead. But it has to play a different role. In an omni-channel world, the ‘physical store’ still provides a fair share of the competitive advantage. For example, a ‘click and collect’ offering is growing in popularity and is an excellent example of how an ‘old-school’ approach can be updated in response to changing shopping habits. We’ve also seen the appearance of ‘pop-ups’ as part of the marketing mix. Yet, retailers cannot focus on the store exclusively even with these new concepts. Any store transformation will be futile unless you also have a strong and competitive online channel where customers enjoy the offered experience and are willing to come back, either online or to your store, for their purchases.
Number 2: Embrace AI and machine learning. Artificial Intelligence and Machine Learning are slowly coming of age. And, I say that, because they have been around for almost 40 years masquerading as business intelligence or analytics before someone coined the new phrase “Machine Learning,” rekindling interest in the topic in the process. Machine Learning is all about finding the algorithm that describes the data set at hand so it can be used for descriptive or predictive modeling or forecasting purposes. With the right data set and the right data quality, the algorithms can be very powerful. They help retailers gain foresight and better optimize the business to drive top-line growth and improve efficiency. I see three important data sets that stand to gain the most from this emerging tech:
- Collection and storage of transactional data, including what is bought, how much, at which price, etc.
- Collection and storage of social data such as consumer sentiment data from social media platforms
- Collection and storage of experience data such customer viewpoints collected at the point of sale (in other words, when the transaction is happening).
Number 3: Reinvent the shopping experience. The store of the future will require tech savvy sales staff that can combine technology and data to make the shopping experience as seamless and easy as possible. The new gadgets that sales staff can use alone are not enough, as retailers need to build in a multi-channel approach to include store layout as well as the training of the staff. So, this requires a mindset and willingness to constantly experiment and test out new digital technologies to improve the shopping experience. Crucially, retailers need to increase their investment budgets in new digital technology dramatically. I believe, looking forwards, we’ll see a different cost structure for successful retailers where the IT spending might consume as much as 20 to 30% of the cost base.
Number 4: Realize the synergies of customer and workforce experience data combined. Understanding customer experience is not enough. The secret sauce is made by combining customer experience data with the workforce/employee experience. When discussing these issues with executives at retail companies, we explain to them that only looking at and analyzing customer experience data merely exposes the symptoms of an issue. In order to understand and identify the root causes and action plan effectively, you have to also access the experience and viewpoints of the employees. Perhaps this is best brought to life by our own approach to employee insight at Questback. Here our employees express their experience along four dimensions:
- The work environment
- Our business processes
- Our offerings and products
- Our business strategy and targets
It is only by combining these four dimensions with similar input from customer experiences that you can gain deep enough insight to drive new top-line growth and improve efficiency.
It’s certainly a very exciting time to be in the retail sector. And equipped with the right data and insight, I don’t doubt for a moment that the opportunities far outweigh the threats. By integrating customer and employee engagement, something that in retrospect seems obvious and second-nature, retailers will have the freedom to embed experience data into their strategies, objectives, and goals by capturing insight in a variety of ways: driven by business processes, on an ad-hoc basis, in an always-on manner, or in a scheduled approach. The future retail winners will be those companies that ignite new technology and data initiatives as the new fuel for growth.