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If data is the new oil, physical retail needs to build oil platforms - fast

I want to take the narrative further from my previous post and talk about the specific actions a physical retail store (or retail store chain) could take to get closer to that elusive digital future - and to compete as Amazon is moving in on the physical turf.

Kjartan Slette

COO & Co-founder

Jun

16

2017

Kjartan Slette
COO & Co-founder
Jun 16, 2017

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In my previous post, I wrote about the struggles of the brick and mortar retail industry, and how they could escape their hardship. I used the analogy of how Napster, in hindsight, ushered in the modern digitally confident music industry – and that Amazon, similarly, is symbolic of a digitally confident retail industry where physical stores (=the concert venues in the music industry) could coexist and thrive with the digital stores (=the streaming services of the music industry).

Read my previous post “Is Amazon the Napster of Retail?”

This time, on the back of the recent news of Amazon buying Whole Foods for $13.7 billion, I want to take the narrative further and talk about the specific actions a physical retail store (or retail store chain) could take to get closer to that elusive digital future - and to compete as Amazon is moving in on the physical turf.

I’ll try to sort these actions by the sequence they could be taken. I am not an expert at various retail categories, so I’ll refrain from talking about specific tactics for specific products and product categories – but rather focus on what I believe to be the foundation of retail success: Data. Lots and lots of data.

Read the Economist article about how “The world’s most valuable resource is no longer oil, but data”

But where and how to drill for data?

1. TRULY understand that the customer is always right

The music industry woke up too late and lost billions of dollars and countless of jobs on the journey towards this realization: Customers had chosen digital services because they offered superior usability, availability, and value for money. In that order. I know this first-hand as I was part of that music industry.

Likewise, for retail, one cannot truly control its own destiny before clarity on the situation at hand is achieved. I covered this in the previous post, so I won’t dwell on it outside restating the importance of a deep understanding of the fact that the customer is right – and it is impossible to sway them away from their path. You must align with it.

So, after understanding the strengths of physical retail, and the weaknesses, it is time to act on it.

2. Where’s my data at?

Make no mistake. Amazon has the upper hand (for now) for one core reason: They know more about their customers than you know about your customers. I’ll even wager they know more about your customers than you do yourself.

So, you’ll have to locate all the data you already have, and there’s a good chance you have quite a bit. Between your POS-system, CRM-system, e-commerce presence, loyalty cards, apps, competitions, and more, you probably already have a fair bit of information on who are using your stores and products – and how. To find, structure, and match these existing data pipelines into one system and database is not a small task, so better get started. For most it doesn’t make sense to build a proprietary DMP (Data Management Platform), and luckily there are many available technology solutions in the marketplace already. Start sourcing such a platform today.

3. How do I get the data I don’t have yet?

One data type you likely don’t have, and which is comparable to Amazon’s knowledge of how their users browse their site even if there is no purchase, is data on the movements of your customers outside and inside the store. This family of technology is often referred to as proximity technology, and is the perfect companion to traditional GPS-based location technology.

Check out Proximity.Directory to source your preferred proximity technology vendor

Different proximity technologies have different uses, and you’ll probably find that a mix between them is the best solution. One combination we have seen working for many of our partners is a combination of geofencing, beacons and NFC. Geofencing interacts with the users’ phones outside the venue, proximity technology takes over from the door and to the aisle, while NFC is perfect on the product itself (Note, NFC only became a truly powerful proximity technology when Apple recently opened up for use outside Apple Pay). Combine the strengths of these technologies, and you get closer the holistic picture of your physical customers that Amazon has on their digital customers.

To learn more about how different retailers use proximity technology you should download the two Proximity.Directory Reports focused on retail.

Download Proximity.Directory Report on Retail – the 1st and 2nd edition here

4. Where’s all the data at?

After getting the data you have on a platform where you can utilise it, and you have started to implement technology to gather data you don’t have yet, you inevitably come to this conclusion: You can only see and understand your customers when they interact with your entities. To put it another way, your customers seize to exist before and after a visit to your location(s).

And to be honest, the rest of the market isn’t very advanced here either. It’s not just you.  Consequently, there is no easy way to remedy this right here and now, but I can give you the blueprints of a construct to achieve it.

You sit with pieces of the puzzle, and other locations (being competitors or not) sit with other pieces of the same puzzle. By sharing (non-brand specific) data from your DMP (or similar) with other venues around you, you’ll start to fill in the gaps. There will be platforms tailored to this need at some point, and you should prepare for that already now. Therefore, make sure your data is organized and prepared to share with others - to get data back.

5. How do I organize and use all the data I now have?

When you source a DMP you’ll get help in sorting your data after a more or less robust taxonomy logic (likely less robust), but that shouldn’t stop you from taking leadership yourself. You know best what your data really means, and how it should be used today and tomorrow. When you catalog your data, you should do so with (at least) the following use cases in mind:

1.     Digital advertising. How to reach your physical customers in digital domains, to bring them back to store

2.     Retail analytics (including data sharing). How to understand behavior in your own stores, and outside

3.     Indoor mapping. How to provide mapping services and end user value by adding context to indoor mapping

4.     Powering products. Everything from apps to bots and AI will thrive on your data sets, to provide you with services you don’t yet know you will need

You’ll likely have more use cases than this in mind, and the important point here is that you think of them as you structure your data.

Read The Drum article “Understanding Human Behavior Through the Power of Data”

 6. To execute or to be executed

What are you waiting for? You’ve come this far, now you must go live, succeed with something, fail with other things, and iterate, and iterate, until data starts flowing up from deep below and rain down as gold.

Yes, data is the new oil, but so much harder to get up from the ground than oil – and Amazon and its likes have been pumping for many years already. Best you get going.