According to data from Mastercard, 2018 saw the strongest holiday retail season in six years, capping at $850 billion and up 5.1 percent compared to 2017. But while retail is thriving in many ways, there has been a multitude of store shutdowns and insolvencies—Toys ‘R’ Us, Sears and Brookstone, to name a few.
This poses a pertinent question of what sets a successful retailer apart from the rest.
The infusion of a data-driven approach in the retail business has opened a world of opportunities that still needs to be explored and implemented, and it has the capability to enhance every aspect of the industry. This poses an exciting opportunity as we look forward.
But what does it mean to be a data-driven retailer?
Being a data-driven retail business means measuring everything there is to measure in the organization, burnishing the data to determine how this maps to business objectives, and delivering higher value to customers.
Retailers that amalgamate their silos of data across the organization are the ones that are truly set up for achieving a competitive advantage. More importantly, they enhance their ability to better understand their customers, enabled by technologies such as the cloud, predictive and cognitive analytics, IoT (Internet of Things) and artificial intelligence.
Most data-driven businesses have these tools and it’s about bringing in the culture to leverage data for business growth.
Here is a quick synopsis of what it takes to be a data-driven retailer with digital business transformation at the core:
1. The customer is the true custodian of change
The priorities of many retailers are more driven by company structure than by what matters to customers.
How do you organise and use your data in the right way for your customers? How do you identify the most profitable customers to invest in? Does the business have the right tech roadmap to make this happen?
2. Integrated cross-channel decision-making
How do you make sure what is happening in-store every day is supported by data? How do retailers get data into the hands of store managers and those on the ground running the stores day-to-day? How can we aim for data democratization in an effective way to make a difference?
3. Every customer interaction should be data-driven
All actions and strategies should be supported by customer data – including pricing, promotion, and personalised communications.
4. Consumer intelligence powered by customer data platforms
Not many retailers are actively leveraging data platforms that are considered fundamental in driving strategic initiatives around creating real-time personal experiences and driving marketing effectiveness.
5. Adoption of AI-driven automation
Becoming data-driven requires tools that provide a complete view of your customers — and using real-time data to power in-the-moment responses to their activities. Only then can you give your customers the relevant and personalized experiences that make them come back for more.
6. Personalization to drive growth and engagement
Solving for challenges around predictive personalization and instant gratification are pertinent. They are important elements for creating the meaningful experiences that brands are chasing and customers are craving.
According to Harvard Business Review, despite feeling the pressure, many retailers have been unable to fully execute here. Seventy-three percent of consumers feel brands have failed to engage them in a personalized way. According to a Salesforce report, 37% of shoppers who clicked a personalized recommendation during their first visit came back, compared to only 19% of shoppers who didn’t click a recommendation.
7. Customer loyalty strategy and programs
Actively investing in customer loyalty programs is important to drive better customer engagement and is a huge opportunity for retailers. It’s evident how customer acquisition and loyalty strategy is paying off for Amazon – Prime users spend an average of $1,400 per year on Amazon vs. the $600 non-Prime members spend, according to an October 2018 study from CIRP.
8. Embracing the culture of experimentation
It’s key to set-up and engage in a culture of experimentation and embrace a fail-fast philosophy.
Fundamental change has to occur in the speed with which businesses make the shift to a data-driven culture. Many say their firms are trying to move in that direction, but few have succeeded. Businesses need more concerted programs to achieve data-related cultural change.
Many start-ups have created data-driven cultures from their beginning, which is a key reason why large, established firms fear disruption from them.
Causes of failure
To survive in this unstable environment, retailers must make every possible effort to embrace digital business transformation. Despite spending huge amounts in advertising and marketing, retailers are failing to impress their customers and are in constant pressure to deliver consistent growth.
Surveys reveal that the problem is not with data availability or the technology ecosystem, it is actually the inability to get to the right actionable insights and undergo the paradigm from anecdotal changes to data-driven action.
One of the biggest reasons for failure is that individual customer touch-points are not making the best use of the vast customer data available, which exists in silos and does not provide an integrated view needed to personalise and enhance customer experience.
Today’s customer has high expectations and if you are not able to provide them with ‘right experience, right time’ and value for their money, they are forced to look elsewhere. Until and unless retailers realize that data is the key to make informed decisions, the situation will not change.
Data-driven retailers are the future of the retail industry
The retail industry is getting more competitive day by day. Retail owners are still facing huge challenges because they are unable to integrate data in the heart of their organization. As a result, they are missing out on an ocean of opportunities offered by data analytics and are unable to change the way they perform.
With digital advertising spending forecast to overtake traditional ad spending this year, retailers should be further empowered by this robust data opportunity to drive media effectiveness and personalized experiences.