Despite the potential benefits of “big data” — an evolving term that encompasses extremely large volumes of information on consumers and products — relatively few retailers are taking advantage of it yet due to lack of vision, technical limitations and concerns around privacy/security, according to a new study.
The study, conducted by Brick Meets Click, Barrington, Ill., looked at how a cross-section of the retail industry understands and plans to leverage big data, a topic that has garnered widespread attention with the explosion of digital information. The study is based on a June survey that attracted 113 responses, including consultants, marketers, retailers, wholesalers, manufacturers, IT professionals and others.
Big data was defined in a 2011 report by the McKinsey Global Institute as “datasets whose size is beyond the ability of typical database software tools to capture, store, manage and analyze,” but the term is still evolving in the retail industry, said the Brick Meets Click study. Survey respondents described it as relating to consumer transactions, in some cases including individually identified transaction detail, but also extending “beyond current transactions”; the latter information could include “unstructured” data from social media, mobile phones and other digital sources.
The data also includes product attributes such as dimensions and supply chain location, as well as store-specific data used in product authorization, planograms and ordering, noted Bill Bishop, chief architect of Brick Meets Click and chairman of Willard Bishop, as well as author of the big-data report.
Although respondents said they expect big data will help retailers better understand and serve their customers, fewer than 20% indicated retailers were actively working on it, and only 21% reported seeing retailers putting plans in place for beginning this effort, according to the study. In addition, most of those surveyed felt that retailers were considering big data, but had not yet made plans to work with it.
Nonetheless, respondents recognize the potential of the data, notably as a vehicle for customizing promotional offers, including geo-targeted promotions. As one put it, big data has the ability to “aggregate large, diverse sources of information using business intelligence and analytics to target customer segments in order to more efficiently and effectively use marketing dollars.”
To a lesser degree, they suggested that the data could benefit consumers in non-monetary ways as well, such as supporting shopping plans and helping to discover more options in areas such as nutrition. Overall, the data will support shoppers’ growing “influence over the direction of the market” and their “power relative to retailers,” the report said.
“It is clear to a small but growing number of retailers that big data is the only solid route to shopper centricity,” a strategy that makes consumers the focal point of business activity, said Bishop. He cited Kroger, Meijer and Giant Eagle as among the food retailers following this path.
Bishop expects more retailers to embrace big data over the next one to two years. “Everybody’s pressed by the economy and inflation is coming back, so they’ve got to find new ways to win and this will click into focus,” he said. In addition, thanks to breakthroughs in processing speed and memory capacity, he sees the emergence of systems that can help retailers make sense of voluminous social-media inputs or quickly analyze huge numbers of transactions.
Marketing and merchandising were the retail functions respondents identified as benefiting the most from big data, which the report said would enable those functional areas to work “in a more integrated way.” But the report noted that operations and supply chain practices could potentially benefit as well. “Big data will bring help dispel historical norms in operations, and replace them with practices more congruent with shopper needs and wants,” said one respondent.
But there were several challenges to adoption of big data identified by respondents. Topping the list was the need to create “a clear vision of how big data will add value to the business.” Other challenges include finding a skilled staff, handling the volume of data, and overcoming privacy concerns.
The rise of big data may serve as an impetus for companies to upgrade their information infrastructures, the report said. Bishop noted that he is “seeing retailers starting to loosen the purse strings” to spend on data-related systems, which include business intelligence and data warehousing.
The big-data report can be accessed for free at http://www.brickmeetsclick.com/big-data---retail--where-are-we-today-
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