How is customer data changing the retail industry?

Jun, 27 2017

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We have all heard that the rise of e-commerce is leading to collapse of offline retail. 2017 started with Macy’s closing 68 stores through the year. And two days ago, Sears, which is one of the retail companies with most tenure in the industry, announced closing 20 more stores and hitting a complete 236 store closures in 2017

Is this momentum set to destroy the retail industry we know in the next ten years? What is the difference between retail companies who continue to survive and the ones who started collapsing? If brick-&-mortar is going to collapse entirely, why did Amazon launch AmazonGo - the cashier free convenience store? Or, launch and expand its physical bookstore investments? Or, lately acquired top grocery chain Whole Foods for $13B?

One might ask if Amazon is just burning money on crazy, expensive retail experiments. However, when we dig into the strategies behind each omni-channel move, we come to realize that this is the sign of the era of ‘data-driven retail.' It’s the next phase of integrated marketing. 

First, let's put together all the 'right moves' that retailers widely use which are 'omni-channel':

  • Consistent branding on both online and offline channels
  • Including offline buyers in digital marketing audiences
  • Promote store-specific deals and in-store events digitally
  • Provide free pickup from store when selling online
  • Make online purchases eligible for returning to the store
  • Run store abandonment campaigns

Some of these best practices are still considered ‘rocket-science’ for some big retail brands, because they are lacking the integrated omni-channel data to give themselves the solid foundation in which to power these omni-channel campaigns.

For example, store abandonment can sound weird to some consumers and even less advanced retailers. Want to know why many companies provide free wireless internet in their stores and ask for your email address? Leveraging some of your offline data can dramatically help digital marketers in targeting you with more personalized offers, based off your omni-channel buying behavior. Here is how AgilOne leverages wireless internet user data as useful insights. 

Even with employing many of these online-offline tactics, many retail giants are still struggling, like we see with Macy's and Sears. As mentioned in this blog's introduction - let's dive into how Amazon is adding a "data-first" step to it's omni-channel efforts and seeing payoff in a big way.

3 moves Amazon has made to dominate retail

  • AmazonGo: This is the pilot project for a fully-integrated and semi-automated, cashier-free retail store. This project emphasizes on making a shop as efficient as possible, but still, has the advantages a brick-and-mortar store can offer. Consumers can still touch the items, try, enjoy putting them to their shopping cart, but check out seamlessly just with their Amazon customer record. For Amazon, it means being able to track the whole customer movement in the store and use that data for optimizing the store and driving more revenue.
  • Amazon Bookstore: This is not a traditional ‘bookstore.' Two things are being done here. Firstly, Amazon analyzes the customers closer to the store, regarding the purchase and behavior dynamics and use this data for setting the store right regarding merchandising and inventory. The second thing is, Amazon analyzes which products would be the next purchase for these customers (even if those are not books), and add those to the inventory. They started applying the whole e-commerce experience we have on Amazon.com to the physical world. Maybe there will be some Amazon Bookstores that will act as ‘control group’ stores to see the incremental value of this data-driven retail approach – who knows?
  • Acquisition of Whole Foods: We all know Amazon’s weak point is groceries obviously since most of the customers don’t purchase groceries (especially perishable ones) from the Internet. Again, there are three reasons for that. Firstly, after trying it out in Amazon Fresh and Prime Pantry, Amazon saw those didn’t perform as good as other departments, and these departments were judged a lot by the consumers from the perspective of being worthy of the money.  Secondly, Amazon seems to lack acquiring high-end customers with higher spending; which is the reason creating Prime and which is the strong point of Whole Foods. And third, Amazon’s warehouse efficiency and optimization mean a significant cost-cutting advantage which will lead to a lot more margin. None of the three points would be reached without a strong data-driven approach.

Conclusion

When we look at how Amazon stimulates the change in the retail industry, it’s not hard to expect other e-commerce or retail giants start applying similar methods. We will see retail entirely changing in the next ten years. We are at the time that integration alone is not enough, but being data-driven and utilizing the customer data in the right way is the real advantage.

Want to learn more about a top retailer's omni-channel customer engagement efforts?

Tumi's Chief Digital Officer, Charlie Cole, shares in this webinar how his team broke down customer data silos and internal silos between teams to grow Tumi's customer engagement and revenue: 

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