Customer insight expert Paul Alexander examines the concept of Big Data and the benefits it potentially could offer to retailers wanting to drive more store-based sales
Over the last few months, people have been queuing up to talk about ‘Big Data’. But Paul Alexander, co-founder and group chief executive of customer data insight and strategy company Beyond Analysis, observed that many people in the retail sector are asking themselves (in their heads, if not aloud) is “what if it’s just another buzzword?”
Indeed, recent research by McKinsey Global Institute
found Big Data could increase retail profits by 60%. But Alexander, who has helped some of the UK’s top High Street brands to turn around their store strategies, admitted that even though this is a compelling statistic, the impact it can have on retail stores and its ability to unlock profit potential is even greater.
“One of the advantages of Big Data is the power it has to guide the way retailers think about the relationships they have with their customers within existing and potential store catchment areas,” he said. “It can also help to influence which products they put on the shelves, and when their stores need to be open to meet the needs of customers, while not blowing the budget on overheads.”
Unpicking the Big data opportunity
Alexander said many retailers are still not using all of their available the data; they are still trying to figure out what Big Data is, exactly, and whether it’s worth the investment. “Others don’t quite know where to start and have no idea what to expect in terms of results, even if they do figure out a way to apply it,” he added.
“The truth is, Big Data need not be overly complicated: it is simply about joining the dots between an organisation’s various data sources,” Alexander continued. “From customer data and local market information, to social media and communications data, every company out there has some readily available data sources which, with the right analysis, can be quickly used to improve day-to-day operations.”
With all this potential for insight at their fingertips, the customer expert said it seemed strange that many retailers still place a heavy emphasis on using demographic data alone to drive business decisions. “There’s so much more to customers (and their needs) than their location, age, sex, and how much they spend instore with one retailer,” he commented. “In order to get a true 360-degree view of customers, retailers need to look beyond traditional demographic data indicators.”
But what other sources of data are available to retailers? “The best sources can sometimes be the less obvious ones – for example, using card transaction data (in strict accordance with data protection laws, of course) to find out where your customers shop when they’re not shopping with you,” he suggested. “This will show you how much they’re spending elsewhere, with whom and at what time. By understanding the opportunity for incremental spend, retailers can drive truly informed decisions about where to open new stores, what products and services they need to offer and when their stores should be open in order to win custom from the competition.”
External influences grow insight
He also said retailers can further develop an advanced customer understanding by analysing the competition and local environment. Are rival stores succeeding? How are they set up – and what can be learned from this? Is the store within a retail park or next to a train station without parking? “All these factors play a vital role in defining the type of stock that goes on sale and the type of customer it attracts,” he said. “For example, in city-based stores without car parks there’s no point in loading up the shelves with large, heavy products - customers won’t be able to carry them home.
“This may sound like common sense, but in our experience, you’d be amazed at how often it is overlooked,” he added. “With the right type of data analytics strategy in place, retailers can factor in all of these seemingly minor – but critical – details, helping them to take decisions that drive the business forward. Only in this way can retailers leave hearsay and hunches behind in order to arrive at solutions that are based on data-led, actionable insights.”
Getting access to third-party data sources, in particular transactional data, can show retailers how they rank against the competition within their particular retail sub-segment – such as fashion versus restaurants, according to Alexander.
“This gives them valuable insight into the potential headroom (incremental spend) opportunity available across their customer base, and how they could win spend from their competition. Knowing whether you’re leading the pack, or falling behind within your competitive set, will make a fundamental difference to store, sales and marketing strategies.”
He said the key point is that this kind of game-changing insight should not just be available to the biggest names in retail. “Retailers need to take off the blinkers and invest in Big Data this year,” he urged. “Once they have brought together and analysed relevant and available data sets, they need to ensure they use the resulting insights to drive their wider store development strategy and business plan – both on the High Street and online.
“In the fast moving, cut-throat world of retail, Big Data is the secret weapon that can help transform store performance during 2014,” he concluded.