@reinasierra via Twenty20
Can location intelligence provide a lifeline for retailers?
Through a special arrangement, what follows is a summary of an article from Retail Paradox, RSR Research’s weekly analysis on emerging issues facing retailers, presented here for discussion.
With online growth crashing any assumption that consumers need to head to the store to get highly-replenishable products cheaply and quickly, fast moving consumer goods (FMCG) and general merchandise (GM) retailers are racing against time to rethink their physical selling locations in the context of consumers’ digitally enabled shopping journeys.
That trend is evident in RSR’s recently-published benchmark entitled, “Location Intelligence In Retail: The Value Of Where.” As shown recently in other RSR benchmark reports, FMCG and GM retailers are more enthusiastic about new data analytical capabilities than others, particularly fashion and specialty merchants.
The greater interest might be because product differentiation is among the most important value drivers in verticals such as apparel. For FMCG and GM retailers, price and convenience are top value drivers — and those value attributes are under constant strain because of competitors like Dollar General, Walmart and Amazon.
Granting that we are still in the early days for analysis of geo-location data typically generated by consumer “smart mobile” devices and the insights that can be generated, the study finds FMCG and GM retailers believing the analytics can play a vital role.
Technology adoption still faces considerable hurdles. Among all respondents, the top organizational inhibitor was found to be overarching privacy concerns, cited by 59 percent of retailers and up from 46 percent in the 2018 study. Other inhibitors were seen as proof of ROI, 49 percent; concerns over the “creepiness ” factor of tracking, 53 percent; and the retailer’s profitability based on standardized assortments and store layouts, 44 percent.
- RSR Uncharted: Location Intelligence Could Be A Lifeline For FMCG & GM Retailers – RSR Research
- Retailers Want To Know Customers’ Geo-Location – A Lot – RSR Research
- Location Intelligence In Retail: The Value Of ‘Where’ (study) – RSR Research
- Rule #1 of location analytics in retail – don’t be creepy – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: Will geo-location analysis gain traction as a retail tool this year or are the privacy concerns and other hurdles too high? Do you see sufficient ROI from the technology to support investments at this point?
Poll
BrainTrust
Paco Underhill
CEO of Envirosell Inc., Speaker, NY Times Best-Selling Author
Charles Dimov
Vice President of Marketing, OrderDynamics
There are definitely serious concerns among consumers about geo-location. A great example was Fitbits sending public location data on the exercise routines of soldiers. But for most consumers the key will be to offer the opportunity to EASILY turn it on and off.
There can be a tremendous ROI if the tech can provide in-store locational data (using beacons). This rich data tells store managers exactly where the sweet spots are in their store — where customers linger, where customer pick up the most items and where they give in to impulse shopping. Sounds like an easy ROI to me! Especially if you are selling the key end-cap locations to brands.
Technology searching for a use. If you can’t find the canned beans in a store with signs that say “CANNED VEGETABLES,” they should take away your drivers license.
With all the recent developments and concerns about privacy issues, consumers expect to have a choice in the matter of location services. By providing consumers with the opt-in or opt-out capabilities, and being completely transparent what their geo-location data is being used for, then retailers will gain their trust and confidence. However, by no means are location services a lifeline for retailers. Rather, geo-location should be treated as an enhancement to what makes the brand unique.
This is yet another classic case where these technological innovations have to solve a real business issue and enhance the customer journey, For the retailer, the ROI value proposition is removing some of the common friction points for customers without making the shopping experience more cumbersome.
Here in the U.S. privacy is not as much an issue as in Europe and other countries. That being said, it is becoming more and more a concern and we are likely to have our own version of GDPR shortly (courtesy of California most likely). For retailers and CPG, understanding more about shopper behavior is of significant value. Being able to precisely target people based on their movement and location will open up many opportunities for better communication and a greater chance of driving sales.
There was a demo Microsoft gave at NRF this year featuring Kroger installations of screens showing promos on aisle ends that I feel will be leapfrogged by the type of technology Brian describes. Everyone already carries a screen around with them and they allow an infinite amount of personalization that isn’t available with mass view advertising or even in-store promotion. Why spend hundreds of thousands of dollars to outfit a store with tech that could very well be outdated before any ROI can be seen? While privacy is still very much an issue with this tech, it can be overcome with the right incentives and the absence of any “creep” factor. The folks at Microsoft and Kroger aren’t going to like this, but beacons in-store and elsewhere that send offers the shopper agrees to receive on her smartphone, not fancy in-store screens, is the way of the future.
This might have some utility, but privacy concerns are a top issue and the reality is, geo-location is way down on the needs list for most retailers and FMCG/CPG brands. Any entity that thinks the fix to whatever is ailing their retail success can be found in geo-location, is out of touch.
Geo-location analytics and analysis will likely continue to grow in the next year. Special attention to privacy concerns and opt-in policies that allow consumers a choice to participate or not are key to limiting the creep factor. Just because you can, doesn’t mean you should.
As long as you give consumers something of value for opting in to a retail mobile app, you will garner higher participation rates. The value may be a loyalty program, personalized discounts, enhanced services, product locator capabilities, etc. While there is a technology investment, the value of geo-location intelligence is extremely valuable, especially for grocery and general merchandise retailers.
The first issue here is whether consumers will want retailers to access this kind of information. Many don’t and if that continues, the technology is dead in the water.
The second issue is what is the point of this technology? What problem is it solving? Most supermarkets, for example, fail to improve traffic and sales because their stores and underinvested in and their product innovation is weak. This doesn’t solve that.
Tough. Merchants have had census data for decades that gives a very good picture of who is where. Ethnicity, income, etc. The interesting question in a data-rich retail setting is – who has the power to take that data and do something with it? Several years ago I was in a Target Store in Jersey City – I asked the store manager if she stocked Banana Ketchup. She was puzzled. I explained that her store served the largest concentration of Filipino Americans in North American and having the most popular Filipino condiment might be a good idea. Is retail ready to give store managers the power to use location data? The bigger the chain the bigger the challenge. Chains like armies are define by the quality and training of their non-commissioned officers not necessarily their generals.
I see geo-location gaining wider adoption outside the U.S. first, and then, just like streaming video coming to mobile phones first overseas, geo-location will begin to be seen more in the U.S. We’re a bit more trepidatious in the U.S., it seems. I do see ROI from the right technologies being less of a hurdle, actually.
I disagree with the post that predicted beacons in-store and elsewhere that send offers the shopper agrees to receive on her smartphone is the way of the future. This has already been tried in grocery stores and failed to catch on. Shoppers may initially agree to accept the ping of a special offer. “Hey, that’s a cool idea!” But they will change their minds once they are pinged to death in the aisles.
People like me will conflate geo-location tools with other nefarious encroachments that I want to control and probably eliminate. I don’t think transparency alone helps. I think adding incentives may help. However, the cost-benefit analysis may not warrant that approach.
Geolocation needs to find applicable scenarios that will change the value prop for the customer. An example might be delivering geo information in parking lots for store pickup where the customer’s experience is improved. The value of geolocation can also extend to personalization of experiences. The hurdles are not necessarily around privacy but more around complacency of solutions offered. Investments here and ROI depends on the retailer and the maturity of their capabilities such as BOPIS. It will grow over time as new applications and where customers are located. Lastly, retailers shouldn’t underestimate the value of collecting data through geolocation. Combined with time stamps and product info, specific retailers can gain substantial customer understanding.
As with anything where a customer gives away any form of private data, customers will be OK as long as they are getting something of value in return. A great case could be by offering to have a customer’s BOPIS order ready as they walk into the store. Based on the customer passing a geofence, this saves the customer waiting around for the customer — so there is a benefit.