Retail and the Data Revolution

December 4, 20199min

What’s really driving the change in how we shop?

As we dive head-first into the holiday season, we can expect to see a familiar set of stories about the changing face of the retail industry. Headlines will no doubt focus on consumers’ increasing reliance on online shopping and how it is compounding the tight margins and challenging trade environment that retailers with physical locations must battle. This is, in fact, a disruption which has been taking place since the dot-com bubble – and nearly as long as the term ‘disruption’ has been in popular business parlance.

A more recent consequence of this disruption has been the emergence of omnichannel retail, in which the Customer Experience online and in-store is brought together and purchasing journeys can move seamlessly between online store-fronts, social media, targeted advertising, mobile apps, and physical retail locations.

As a way of converting a greater portion of product interest into product sales, omnichannel has emerged as a key defensive measure against tightening margins and falling footfall. One Harvard Business Review study found that omnichannel shoppers spend four percent more during each store visit and 10 percent more online than shoppers who only use one or the other channel.

Even more bullish analysis from the ICSC found that operating across multiple channels leads to an average follow-on spend of $167 online for every $100 spent in-store.

The business upsides of an omnichannel strategy, like the business pressures driving its adoption, are well known and broadly accepted. Much less, however, has been said about the technological change which lies beneath this evolution. Traditional retailers are increasingly moving essential IT infrastructure to the cloud, tempted first of all by the lure of being able to scale costs with demand and in line with often fluctuating revenues.

Combining these reduced overheads with increased revenue, however, means not just replacing traditional IT infrastructure with public cloud solutions on a like-for-like basis, but taking the opportunity to optimise the huge data sets that retail generates. Unifying duplicated data, rationalising database structures, and opening lines of communication between silos of information means that the product on a shop floor, the product’s page on an ecommerce site, and the product photo displayed in an online advert can all, from the perspective of the business’s IT systems, be understood as the same item.

While this transformation in how data is managed – together with a boost in available processing power – is bringing different retail channels into alignment, it also establishes the foundations upon which emerging technologies can be implemented.

If Step One for a retail business is converging its data, and Step Two is using that data to converge its physical and digital channels, retailers are increasingly discovering the benefits of a Step Three in which it is made more valuable with AI. As cloud computing becomes prevalent, we will see the addition of AI bring unexpected benefits to how personalised shopping can be, how environmentally friendly it can be, what kinds of experience it can give – and a retail sector which can disrupt even as it is being disrupted.

To take personalisation as an example: this is already a familiar experience for all of us from shopping online. In its simplest form, retailers promoting items on the basis of ‘customers also shopped for’ find significant potential for upselling, as an online shopping basket gives so much more detail about what a customer needs than where they are in a store does.

Data sourced from the context of physical retail stores can also be collected, analysed, and applied in ways which are analogous to this. From how many customers visit a location, to the route they take through the shop, to how they interact with different product lines, there is a rich source of information in traditional retail which is only now – thanks to AI-based analysis – becoming available.

This unstructured, organic information is fundamentally more difficult to make use of than the natively digital information of online shopping baskets and website interaction. As retailers on-board these capabilities, information on how factors from outside the business affect shopping behaviours also becomes available.

Weather or sporting events, for example, or broad cultural trends which pertain to specific segments of the buying audience, or cultural factors which are specific to a store’s location all change what people buy and when. Businesses which have invested in the technology needed for omnichannel retail find themselves in a position to collect this data and go beyond the personalisation which is prevalent in online shopping. Rather than focusing on correlation – ‘people who buy x also buy y’ – AI-powered analytics is opening up the potential for causation-based shopping predictions – ‘people buy y because of x’.

Looking beyond the immediate task of upselling, it’s easy to see other ways in which this level of insight might be applied. Anticipating when someone will need a product and shipping it to them just in time, connecting people with locally-stocked or manufactured products to minimise transport carbon emissions, and offering specific product configurations on an individual basis are just a few examples.

People with an interest in retail marketing or disruptive technology, or both, will be aware that the retail industry has for some time been engaging in consumer-facing demonstrations of this kind of technology – such as Westfield’s AI-powered Trending Store.

Beneath such one-offs, however, there is something more fundamental happening: as retail businesses upgrade their ability to gather, analyse, and apply data, traditional shopping as a whole will begin to behave more like its online counterpart in how it responds to the customer. We might therefore look at retail’s emerging data-driven potential also as its post-disruption reality – and other industries might want to look to retail to see what’s in their own future. How will access to rich contextual insights into a person’s needs and requirements affect sectors like finance, healthcare, or transport?

Well, retail has been in the thick of disruption for longer than anything else; that should be where we look to find the next steps.


Grant Caley

Grant Caley

Grant Caley is UK & Ireland Chief Technologist at NetApp.




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