Why Would Amazon Open Physical Bookstores? More Data, of Course

February 9, 2016
Birte Steen
VP Strategic Partnerships & Business Development

As VP of partnerships, my job is to travel the world to grow and strengthen the Unacast PROX network. After a full month of extensive travelling, it is time to stop and reflect on my latest learnings and insights of where the proximity industry is at this point.

I’ll get back to why Amazon is getting all physical further down in this blog post, but first join me on a journey.

Until now, location-based services have been widely associated as the industry of push messages. This is an accurate description, and according to Proxbook Q4 Report, 75% of PSPs offer mobile communication.

This approach to location services is now being challenged as 75% of PSPs are now also offering analytics, up from 60% in Q3.

Location analytics and maximizing data accuracy were also the primary focus of the Top 10 investments in proximity companies in 2015. Unacast sees this first hand, as we are being contacted directly by retailers and brands that don’t want to send a single push message. They want to deploy beacons for the sole purpose of understanding their customers better in order to create more relevant communication and offerings later.

We are clearly at an inflection point, where the focus of proximity is turning more to the value of the data itself.

This trend is being experienced across various  industry sectors. In the report, The Big and Fast Data; The Rise of Insight Driven Business, Capgemini surveyed 1,000 senior decision makers in nine regions and nine industries. 64% of respondents believed that big data is changing traditional business boundaries and 58% expect to face increased competition from startups enabled by data. 24% already report of disruption from new competitors moving into their industry. According to research released by the Economist Intelligence Unit, 83% say it is making existing services and products more profitable.

Companies can’t ask “if” or “when” transformation will occur any longer, but must ask “how”.

Consumer loyalty demands relevance

In today’s marketplace, few consumers stay loyal to a brand. Consumers of today will be loyal to the brands that invest in getting to know their individualities, interests and habits in order to give them offerings that are relevant and help them in their daily lives. Big online players like Amazon are able to collect a hugely diverse amount of information about customers, whereas offline retailers have not had the same possibility to do so. That is until beacons arrived. 70% of our time is spent offline and in terms of either gathering data about customer’s offline behavior and providing relevant communication based on that, there is no better and more efficient solution than proximity.

That is why Amazon opened its first brick and mortar location in November of last year. “Amazon’s Retail Store Has Nothing to do with Selling Books”, and everything to do with data, according to Rob Salkowitz’ Forbes article.

Many retailers and brands are so preoccupied with the potential risks of realizing the value of their data, that they forget why the data is valuable in the first place. The truth is that as long as consumer trust and transparency are handled well, they are open for their behaviour being tracked in return for products and services that make their lives easier.

Consumer insight as a service

The ability to extract value themselves is often limited by retailers’ and brands’ internal IT teams’ capability to process the data in a timely manner. This can be resolved by granting proximity solution providers (PSPs) the right to collect and refine their data for them, and provide it back as a service in a reliable and secure manner.

By choosing PSPs from the PROX network, retailers and brands can truly maximize the value from their location data for better decisions or new insights. The PSP will ensure a great in-store experience and analytics while Unacast will connect these granular and highly contextualized datasets to online domains. This way retailers and brands increase the effectiveness of their marketing campaigns through hyper-relevant advertisements that consumers appreciate and bring them back to their stores.

Suddenly retailers and brands can see their customers as both digital and physical at the same time (now this is the true OmniChannel).

The value of collaborating on data

“For data to mean something it must be placed in context to the marketplace”, says Michael Palmer of the Association of National Advertisers, in his blog post, “Data is the New Oil”.

When you walk into the new physical Amazon bookstores there are no prices listed. Each book has a shelf tag with a barcode that you scan with the Amazon app on your smartphone. This will provide you all the information you need on the book. What really happens is that in the moment you scan the barcode, Amazon matches your offline behaviour in the bookstore with your buying history and preferences in Amazon’s online store. This way, Now Amazon can give you a tailor made set of offerings based on what they know about you and the context in which you are shopping, to close the sale. In other words, Amazon has matched your physical self with your digital self.

One way for retailers and brands to gain more holistic understandings of customers’ behaviour, like Amazon is now doing, is to collaborate and aggregate their location data.

By scaling the information base to include a much more comprehensive dataset of customers from multiple locations, insights could be made which are impossible to generate individually.

Unacast can help you reap the same benefits as Amazon

Unacast has built a platform that makes use of the data collectively to benefit the industry as a whole while protecting retailers’ data individually. In order to make use of collective data, it needs to be structured into one language so that equal data sets can be paired and aggregated. As a member of the Unacast PROX network, PSPs can integrate directly with our Sensor API and in that way translate their customers’ location data into one industry taxonomy from the first beacon interaction. This is a win-win as it helps proximity companies translate beacon interactions into context in order to provide more advanced analytics and segmentations back to their customers; like cross-store-analytics.

Another value of structuring the granular data from retailers’ and brands’ individual visitors into one language is that it enables the aggregation of audience segments across PSPs. The segmentation of customers that this kind of comprehensive data allows is far superior to what individual retailers can access alone. Each retailer/brand contributes with a portion of the aggregated segments. In return, they get an understanding of the aggregated insights of their whole target group or industry, and not only their own visitors. With the power of this new knowledge they can create innovative and relevant offerings in order to retarget existing customers back to their store, and attract new ones based on the value of the aggregated datasets.

With the power of this new knowledge they can create innovative and relevant offerings in order to retarget existing customers back to their store, and attract new ones based on the value of the aggregated datasets.

A third opportunity of collaborating and aggregating data is segmenting on behaviour across many segments. The sheer diversity of retailers and brands contributing can add completely new dimensions to the value of the network. Since Unacast collects location data from many PSPs and locations, we can offer insight into where a consumer came from and where they went. This creates a whole new understanding of a consumer’s behaviour and even lifestyle that can be used to create more relevant products and communication.

Unacast has made sure that privacy and data protection measures are included from the start, ensuring that data remains completely anonymous and aggregated.

Why data is like crude

I’ll summarize the blog post with Michael Palmer’s expansion on Clive Humby’s quote “Data is the new oil”: "Data is just like crude. It's valuable, but if unrefined it cannot really be used. It has to be changed into gas, plastic, chemicals, etc to create a valuable entity that drives profitable activity; so must data be broken down, analysed for it to have value.”

So why does Amazon with its 188 Million visitors per month bother opening a retail location? Because it’s all about the data, and “to create a valuable entity that drives profitable activity; so must data be broken down, analysed for it to have value.”