There’s no denying that Big Data has changed the way retailers target and interact with their customers. In much the same way TV advertising in the 50s and the internet in the 90s completely revolutionized the way companies do business, data analytics is disrupting the retail industry today.
In times past, predicting trends was largely a guessing game marred by trial and error. Businesses now rely on years of aggregate data to make shockingly accurate predictions and create sophisticated customer profiles.
Data analytics is what allowed Walmart to dominate brick and mortar retail in the 90s before Big Data was even a term, and it’s what led Amazon to the forefront of internet retail in the early 2000s. But while Big Data was once reserved for large corporations, modern computer hardware paired with easy access to powerful algorithms has brought it to the masses.
Today, retailers large and small are leveraging the power of aggregate data to make more informed decisions and improve their customer’s shopping experience. Let’s take a look at how Big Data is disrupting retail today and how that might change in the future.
Who wants to buy my product? What else do they want to buy? Where, when, and how does my ideal customer like to spend their money?
Those are the billion dollar questions that retailers are answering more accurately than ever before by analyzing Big Data.
Data analytics allows businesses to focus their efforts on people who will actually buy their product instead of people who they think will buy their product. It also aids in predicting consumer demand so companies can prepare for market changes instead of reacting to them.
A customer profile once amounted to “male, 20-70, construction worker” and a product didn’t go on sale until nobody wanted to buy it. Now, you have a customer profile so detailed it could have its own Facebook page. Items go on sale gradually before their demand is gone.
Big Data hasn’t simply changed who business's target though; it’s changed how they target them, as well…
Although the internet has been the driving force behind retailers trying to reach a broader audience in recent years, that’s starting to change as companies use data analytics to narrow down their efforts.
It may seem counterintuitive, but companies who alienate the masses breed the most loyal customers. Think of brands like Apple or Harley Davidson who have fans, not just customers. They’re not successful because they appealed to the largest audience, they’re successful because they secured a loyal group of brand ambassadors who now do the bulk of the work for them.
Thanks to Big Data, businesses are starting to realize that reaching out to everyone on every platform is a poor strategy. Ultra-specific leads to ultra-high ROI.
Optimized Pricing and Payment
As I mentioned earlier, retailers are using data analytics to determine more accurate product prices and predict the ideal time to begin reducing the price of an item. However, the major change that’s coming from a consumer perspective is when you pay, not how much.
Big Data has revealed a vast number of consumers get right up to the checkout when visiting a store online only to leave at the last moment without completing their purchase. The theory is that they couldn’t find their debit/credit card or got distracted when going to get it and never came back. The solution is a switch from instant-payment to invoicing.
As online payment technology becomes more secure and we develop better methods of digital fraud prevention, you can expect a shift in retailers from prepaid to payment-upon-delivery or something similar.
Data as a Commodity, Not an Expense
When it comes to the future of Big Data in the retail industry, this is the biggest thing for businesses to focus on.
In the past, data collection has been viewed as an operating expense and proving ROI has been difficult in the long-term and impossible in the short-term. However, retailers have started to realize just how much potential revenue is lying dormant in all that aggregate data they collect.
Many businesses in completely separate market share a similar customer demographic. As companies get more comfortable dealing with aggregate data and the technology used to analyze it becomes more universalized, we can expect the data itself to become a product. Analyzing the data will be an expense, but the data will simply be another commodity to buy and sell.
From Walmart to Amazon and your local corner store, Big Data has permanently changed how the retail industry does business. And while we can’t know for sure what the future has in store, one thing is certain: you need to step on Big Data right now or it will step on you.