Why has retail’s transition to data-driven enterprises been so arduous?




The ability to understand, predict and ideally shape consumer behavior lies at the heart of today’s heightened interest in analytics and the growing appreciation for the huge potential of data-driven insights. The retail data revolution started when Walmart launched Retail Link and data-driven supply chain management more than 20 years ago. This has been carried forward with a vengeance by Amazon, which is leveraging data to understand what prices to list, customer paths to purchase and monetizing insights.
In the recently released “2016 Retail and Consumer Goods Analytics Study” from RIS News, retailers consistently ranked analytics as a strategic priority. Retailers now know that data management is the core foundation of getting things right. They know that uncovering and acting on data-driven consumer insights is essential to stand out in a crowded market place battling for a well informed, highly connected and technology empowered consumer.
However, efforts towards improving analytics maturity are to-date unimpressive and underwhelming. In the RIS News study, retailers are equally split regarding the two primary challenges they claim are keeping them from adapting to analytics and becoming more data-driven:
- Difficulty shifting away from a culture that has relied on intuition rather than data.
- The absence of clearly a articulated analytics strategy in most retail organizations.
The time for retailers to act is now. While access to data scientists is tight, the basic enterprise analytics solutions available are relatively inexpensive compared to the potential return on the investment. Perhaps more importantly, the lack of investment in this critical technology may result in a competitive disadvantage that negatively impacts the company for years.
- Amazon Is Quietly Eliminating List Prices – The New York Times (tiered sub.)
- 2016 Retail and Consumer Goods Analytics Study – RIS News
DISCUSSION QUESTIONS: Do you agree that retailers have been too slow to leverage analytics compared to other industries? Has being data-driven and analytics-focused become operationally essential for retailers looking to compete with Amazon.com and other rivals?
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21 Comments on "Why has retail’s transition to data-driven enterprises been so arduous?"
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Founder & CEO, ReturnLogic
There is no question that retailers have been slow to leverage analytics, but with unproven ROIs it is a big step to take. Early adopters are companies that have a data-driven culture and believe. Hence why we are seeing e-commerce companies among the first to leverage their data, and with great success. They have the advantage of being born into an environment where the customer experience drives data-driven decisions. Old school retailers will come around, but it may be too late for many of them.
Using analytics to drive key business decisions may very well define the winners and losers of retail. The bar has been raised.
Co-founder, CART
There are two sides to the data question: product data and consumer data. Retailers were driven to leverage product and logistical data to keep up with Walmart in the late 90s and have done a pretty good job staying on top of the technology on that side of the house. It’s the consumer side that has been lacking. The ironic part is that most every retailer out there has a mantra of “focus on the customer” while they’re not in a position to use data to back it up. I’m with Peter that consumer data — and the enterprise-wide application of it — will define the winners and the losers. Especially as the online and offline worlds continue to merge.
Advisor, MyAlerts
I believe the perceived slow leveraging of analytics has emerged from one factor: that there simply are too many choices and the pitches by these companies are too complicated to understand their differences and their value once implemented. Consider this recent headline from LinkedIn: “400+ VC’s poured over $11 Billion into 323 marketing tech startups in 2015”.
Also, this excerpt from Venture Beat. “It turns out that marketers are spending well over a third of their budgets (on average) on analytics. This in spite of the report finding that levels of confidence in analytics’ ability to generate insight are mediocre, at best.”
President, The Ian Percy Corporation
You know, sometimes the problem is the answer.
This will be anathema to some readers, but perhaps retail shouldn’t abandon their intuition and normal human communication for technology and data. Maybe the slowness to do so is the universe telling retailers that it’s not the way to go.
As I was reading this I had the picture of customers and retailers in a data-duel. Customers are using their data tools to define and find their preferred retailer. Retailers are using their data tools to define and appeal to their preferred customers. That’s like a dating service where two people stare at each others’ picture and review data but never actually meet, or have dinner, or a dance or a hug. No one is going to say “Let’s be a couple, I love your data.”
Relationships ARE intuitive — of the heart. I’d say we need more of that not less.
Principal, Cathy Hotka & Associates
I have near-weekly meetings with retailers and have been asking this question for over a year. Their answer is remarkable: while nearly all have multiple analytics packages, they are silo’ed by department, without a master plan for execution or vision for what could be accomplished. It’s hard to accomplish something without a plan.
President and CEO, ProLogic Retail Services
Most retailers understand that analyzing their shopper data and applying the insights to their business can have a profound impact on their growth and profitability. However, they also perceive that these solutions are complex and expensive. Retail is a low-margin business and retailers are consequently risk-averse when evaluating new technology. The reality is that analytics solutions today are affordable and easy-to-use, and can be highly beneficial to retailers in enhancing their competitiveness and value to shoppers.
Founder, Grey Space Matters
If you need evidence that retailers have been too slow to be leverage analytics and be more data-driven, just look at their stock prices. There is an increasingly clear and sizable gap between retailers that are customer-centric and data-driven versus and more traditional merchants. Using data and, in turn, analytics to support, inform and drive the business is essential and a core element of being customer-centric. Like Amazon.
Retailers have under-invested in technology to leverage data — especially beyond systems to support merchandise information — and have been lagging in areas like relationship and loyalty marketing. While there are plenty of (generally weak) retail loyalty programs, the key value of such programs is the data yield and the output is a better customer experience. Like Amazon.
Until retail leadership makes the customer a priority in the overall business plan, leveraging analytics, moving beyond mass marketing and creating more valuable customer relationships to drive the business won’t happen.
In my experience, the challenge with internal data is operational silos. This results in multiple views of the shopper. Further, many retailers eschewed D2C marketing therefore their customer insights are incomplete.
For bigger retailers, who have the capex to invest in IT (e.g., Target) they posses the insights and act upon them.
Keep in mind, its not a silver bullet. SHC invested heavily in IT and does posses a superior view of the shopper. Data does not mean insight or even actionable insight.
As all CIOs say, “retail ain’t for sissies!”
Global Vice President, Strategic Communications, SAP Global Retail Business Unit
After being in the data and analytics business for many, many years we have seen many situations where retailers WANT the data and want it fast. When that finally took place the data and information were available real-time and there were groups that jumped on it and others still ran on gut feel.
Many of the top retailers in the world that are targeting Amazon vs. being targeted by them live by real-time, instant access to inventory positions, channel action, trends and social activity. They have found that the data science element is not as critical as the press thought and that the user interface is what makes data the better weapon.
We are seeing more retailers adopting the data analysis tools in centralized, single versions with access across all key departments and regions. This is mid-market and large enterprise.
Amazing ideas make amazing retailers and data is the core of amazing retailing.
President, Global Collaborations, Inc.
All industries are struggling. Some retailers have done an outstanding job with analytics related to logistics and replenishment. Some retailers are experimenting with innovative loyalty programs. Some retailers are sharing data with partners to develop products, services and/or experiences for joint consumers. None are doing all of these things.
Analytics is a broad term including logistics, consumer data, pricing, product development, pricing and assortment. No retailers excel in all areas but this is a journey that needs dedication to one area at a time every year to stay competitive.
Independent Board Member, Investor and Startup Advisor
Retail Strategy - UST Global
The challenge in adapting to being a data-driven enterprise relates somewhat to the Yin and the Yang of retail, art and science so to speak. Data is plentiful, “context” to that data is illusive at best. Some retailers take pride in their success in understanding the customer, and applying “merchant sense” to the market, whether that is gut feel, or fashion sense, this non data driven intuition is a necessary ingredient for success. On the other side of the table is the pure data driven analytics; scientists sometimes end up with an answer in search of a problem. Success requires putting these two often polar opposite skills and approaches together in a single business. Data and context — easy to say, really, really hard to combine for success.
Strategy Architect – Digital Place-based Media
Change management is at the heart of data-driven approaches and analytics, where more data than ever before is now available and competitive pressures are so demanding.
Nobody likes to be wrong and analytics can show that some actions should not be taken. Meanwhile, data can indicate that new or different action are required, for which expertise or time is limited.
Analytics take strong leadership and even better soldiers.
Chief Amazement Officer, Shepard Presentations, LLC
The problem with using data is that many companies/retailers get too much data and don’t know what to do. They either get “analysis paralysis” or make a mistake by using it the wrong way. But data is powerful, and the best retailers know how to use data. They use Big Data to spot trends. They use micro-data to individualize the experience for individual customers. I’ve had the wonderful opportunity to attend conferences focused on data analytics (Sounds boring, but it is not!) and learned how the best retailers are using data to grow revenue and improve the CX. It’s nothing short of fascinating — how they acquire it and how they use it.
Managing Partner Cambridge Retail Advisors
Chief Data Officer, CaringBridge
Strategic Market Communications, Upstream Commerce
President, Protonik
There is a fundamental weakness in this data argument: nearly all the data expected to be used is observed behavior data.
Using this type of data is fraught with extraordinary danger — in marketing I’ve found it to result in Rorschach data analysis. That’s the analysis where the data scientist or manager projects their own beliefs into the data in order to fill the gap of what’s entirely missing in this data: the why behind the behavior.
These leaps of faith filling in they “why” are dangerous. Because very often the data merely reveals some very tiny things. But managers and data scientists are expected to find big things — so they invent the whys and overstate whats in the data.
Retailers need to be cautious about the data fad.
Scientific Advisor Kantar Retail; Adjunct Ehrenberg-Bass; Shopper Scientist LLC
SVP Sales & Business Development, Theatro
SVP, Corporate Development
Inventory visibility should be a key component of any discussion about leveraging data analytics. As we have seen with retailers who fully embrace analytics and excel when it comes to implementing them, their success is nothing without the ability to make successful matches between what the consumer wants and what they have available to sell to them. The most innovative, data-driven retailers realize that item-level RFID is the key to knowing what is in-stock, where it’s located and having confidence that inventory levels are accurate.