Retailers Will Win By Embracing Big Data
Retail is in the beginning of a massive global transformation. In North America, all of the large retailers that started off as brick-and-mortar are finally experiencing slow or flat e-commerce growth. This means they now have to look to optimize and compete more aggressively rather than relying on natural market growth. In emerging markets like Asia, we're seeing a leapfrog of consumer behavior from offline first to mobile first.
Underlying these global trends, one common denominator is surfacing as critical to retail success: the ability to understand, predict and tailor product and marketing solutions to all customers. This actually isn't a marketing problem, as the tools to execute this already exist. This is a data problem — one that most retailers aren't equipped to handle yet.
There's ample evidence to support this. In Canada, we've witnessed the closing of several notable brands in recent weeks, including Sony and Target. Both retailers provided various reasons for the closings, but the common thread was a lack of "knowing their customer." Last month, RadioShack filed for bankruptcy and Staples merged with Office Depot.
How Retailers Can Keep Up With Consumers
In 2015, retailers need to truly understand customer segments and behaviors in a dynamic way across all channels. This means going beyond basic customer segmentation, merging data across channels in a way that predicts changing trends and specific marketing promotions.
One misconception is brick-and-mortar businesses feel online stores could eventually make offline stores obsolete. I disagree. There will always be a need for physical locations. Between 80 percent to 90 percent of retail transactions occur offline. While that number can be significantly higher or lower depending on the segment, it's clear the offline experience is still critical.
To win, retailers have to accept that the online channel has transformed offline retail. By collecting valuable data from customers across multiple channels, retailers are given numerous opportunities to drive purchasing decisions wherever the customer prefers shopping. To obtain and use big data, retailers need to do the following:
- Develop promotions and engagements that encourage consumers to input their personal information. Gathering demographics and likes/dislikes gives retailers an advantage, and provides an opportunity to build customer loyalty.
- Know the mixture of product, channel and customer segment/persona, and how they change. For example, a specific segment or persona may prefer to buy a particular type of product on their mobile device vs. in-store. We don't all buy the same things in every channel.
- Retailers have to understand what marketing promotions cause customers to convert and why.
- Be ahead of the game when it comes to technology. The right tools enable retailers to collect more and better data. Cloud-based point-of-sale systems and beacons foster richer data by providing more opportunities to collect customer data. As we see things like proximity technologies make their way into stores, consumers are being offered more exciting and engaging interactions in the offline world.