Retailers differ on the value of location analytics

Discussion
Photo: Getty Images
Mar 20, 2018

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.

RSR’s first benchmark on location analytics in retail showed there are significant differences in focus depending on what kind of products a retailer sells, and some of the differences are counter-intuitive.

Retailers across the different verticals, performance and size all agree that “more targeted marketing” is essential to their future well-being.

But why, for example, would almost twice as many fashion retailers as fast-moving-consumer-goods (FMCG) and general merchandisers (GM) rank “improved merchandising plan localization” as a high-priority? Fashion retailers introduce new collections every season and typically execute relatively few replenishments after the initial allocation is delivered to the stores. Grocers, drug stores and big box merchants, on the other hand, have many more SKUs in their standardized assortments and replenish very frequently. The payback from assortment localization based on customer-centered analytics are far greater.

Soruce: RSR Research

And why would almost twice as many FMCG and GM merchants as fashion merchants value location analytics to make smarter store site selections? Grocers and big box stores don’t flip locations nearly as often. Many fashion and specialty retailers are moving towards shorter leases and have a huge opportunity in pop-up store strategies. Such a strategy would be challenging without strong location analytics to back it up.

What are we supposed to make of these findings? Well, aside from the obvious need to put much more relevant content in front of consumers as they use their mobile devices to inform their shopping journeys, retailers have a lot to learn about locations analytics’ capabilities and promise. That’s a challenge for vendors selling location analytics solutions to retailers. They either have to put their backs to the wheel and educate the industry or find early adopters who are willing to be showcased.

The potential competitive advantages to be gained from using location analytics are compelling enough that I don’t expect early adopters will want to show the rest of the industry the way. And so when it comes to using location data for competitive advantage, the distance between Retail Winners and Laggards will get very big very fast.

DISCUSSION QUESTIONS: What do you think the retail industry knows and still has to learn about the potential benefits of location analytics? Where do you see the biggest potential benefit for retailers using location data analytics?

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Braintrust
"There is no one area where a large majority sees the utility of location data. Makes me wonder..."
"Location analytics can’t save bad retail. It takes humble leadership and a willingness to pivot..."
"Location data is one way to target people at relevant moments. It has great promise, especially for retailers but ultimately, it needs to be proven..."

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11 Comments on "Retailers differ on the value of location analytics"


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Dr. Stephen Needel
BrainTrust

What strikes me about the results shown in the chart above is that nothing stands out. That is, there is no one area where a large majority sees the utility of location data. Makes me wonder whether this is technology in search of an application. Remember — this is not new data. We’ve had the ability to geofence for quite some time.

Joanna Rutter
Guest
4 years 1 month ago

Right. It’s almost as if location analytics is often only tech for tech’s sake….

Frankly, retail has bigger problems. Why spend thousands of dollars to ping the phone of a customer on aisle 6 who’s already encountered underpaid, unhappy associates and gotten lost in a bad store layout, or can’t find a changing room? By then, you’ve already lost.

Location analytics can’t save bad retail. It takes humble leadership and a willingness to pivot in order to adopt a more agile mindset where location analytics might actually be usefully applied as part of a holistic customer experience focus. I have hope that some retailers will be able to pivot and get there.

Nir Manor
Guest

New technologies evolving alongside higher penetration of smartphones, the use of mobile apps and more advance sensors inside newer phone models — all these enable retailers more easily analyze location and target audiences. Retailers can get via use of these technologies many insights that few years ago were more difficult to obtain, such as foot traffic volume, sources and destinations, which other stores are visited by the same consumers/shoppers, how often they visit the vicinity of the store, media consumption, demographics, social media activity, income level and more.

Contrary to the claim that the the distance between winners and laggards related to location analytics will grow, I believe that the more mature, affordable and readily available technologies will cause this distance to decrease and will cause wider usage of location analytics.

Neil Saunders
BrainTrust

Understanding the nuances of local demand is useful. And some retailers don’t have a clue, even about simple differences. Here’s looking at you, J.Crew, with your recent winter sweater display in Arizona. Come down and see how many people wear sweaters here, even in the depths of December and January!

Joanna Rutter
Guest
4 years 1 month ago

Wow! As my teenage brothers say, “That’s SO cringey.” You don’t ever need Location Analytics to solve that problem … maybe just pulling basic weather forecasts would do. 😀

Ricardo Belmar
BrainTrust
Ricardo Belmar
Retail Transformation Thought Leader, Advisor, & Strategist
4 years 1 month ago

I’m most surprised in these results at how low correlating traffic analysis with store performance ranked. Having seen so many deployments of analytics technology in retailers where this was of prime concern makes me wonder if the value of the insight was not as high as originally perceived.

I still believe the insight on what your customers are doing in the store and what products they gravitate to before making a purchase is invaluable. Perhaps what this really tells us is that retailers still don’t know how best to use this technology. Since nothing really stands out as the killer app in the chart, it may be that retailers are still viewing location analytics as a Swiss army knife of data insights, personalization enabler, etc. without a clear value winner.

Joel Rubinson
BrainTrust

There are two elements to consider with location data. One is the ability to trigger advertising based on location. The other is creating targetable segments based on how an individual user habitually navigates the real world. I have seen a lot of success with the later, providing accurate segment classifications.

Location data is one way to target people at relevant moments. It has great promise, especially for retailers but ultimately, it needs to be proven out via AB testing. I am optimistic such testing will support its value based on a series of experiments I have an indirect relationship with at the Mobile Marketing Association.

Michael La Kier
BrainTrust

Location analytics is a big, “complicated” space. For retailers and others, it may be overwhelming to find out and understand all this new data — and data-driven answers always beget more questions. Could it be that it’s too massive to wrap your arms around? I believe there is a need to “productize” location analytics against key questions and objectives within the retail industry vs talk on a macro level. When asked are you interested in where best to add a store, how to improve merchandising or how to gauge store performance, all retailers would likely say yes. This solves real problems vs offering up data.

Craig Sundstrom
Guest

I think the responses correspond closely to what I would have expected: localization was most important to fashion retailers, while site was more important for general retailers. Isn’t that what one would expect for image-driven, luxury goods versus highly competitive commodities?

Beyond that, given the different ways different people interpret questions, I don’t think it’s productive to obsess over perceived inconsistencies.

Dave Nixon
Guest

Technology at the edge means better insights into shopping behaviors if analyzed correctly, and the appropriate action is taken if there is a need for intervention (out of stocks, low sell-through, low dwell time, real-time promotions, etc.).

Location data can help retailers make product assortment decisions much more efficiently/effectively PRIOR to distributing items that have to deeply discount to unload. One of the largest fashion retailers I worked with in the past could not make demographic decisions very efficiently because the store planners and merchandisers were working off of very old static transactional data (primarily), and consistently shipped poor product assortment to stores they KNEW couldn’t sell those items unless deeply discounted. This retailer could not even adapt to environmental changes in the field and one of their brands went belly up. Not leveraging location data, from choosing locations to choosing the merchandise assortments is a bad deal all the way around.

Bad experience for the customers (irrelevant products, out of stocks, etc.) and poor for the profitability of retailers. Data and analytics solve these issues.

Gary Sankary
BrainTrust
Every retailer across fashion, CPG, food, you name it, is looking for ways to be even more relevant for their customers. If you’re going to protect your market share and grow incremental sales you have to be able to understand who your customers are and what they like. From my years on the other side of the aisle as a retailer (full disclosure: today I am head of retail at Esri and we sponsored the RSR report noted above), the way you do that successfully is by being more precise in your assortments and more relevant in your offers. Location technology enables those specific capabilities. For example, no retailer for a moment would consider making a real estate decision without understanding the nuances and dynamics of the market are investing in. Increasingly, these same techniques of market optimization are being applied to assortment planning and target marketing. In my retail career I found that making local adjustments to facings in as simple a category as paper towels realized a 9% increase in sales. It came… Read more »
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Braintrust
"There is no one area where a large majority sees the utility of location data. Makes me wonder..."
"Location analytics can’t save bad retail. It takes humble leadership and a willingness to pivot..."
"Location data is one way to target people at relevant moments. It has great promise, especially for retailers but ultimately, it needs to be proven..."

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