The Evolution of Data in Retail

A fundamental difference between brick and mortar and e-commerce retail is the role of data.  While every retailer collects and utilizes data in a distinct manner, the opportunity to leverage data to grow sales is much more accessible in e-commerce.  However, as more retailers recognize the value of data, we will see increasing efforts from brick and mortar retailers to find new ways to collect consumer data.

Collecting consumer data is nothing new.  According to Colloquy, a loyalty-marketing researcher in Cincinnati, as of 2011 there were more than 2 billion loyalty program memberships in the U.S. (18.4 per household).  With loyalty programs, retailers can track some consumer behavior; however, the data they collect is limited to purchase behavior.  A typical example is when you use a loyalty card at a supermarket – you use a card at the point of purchase to receive special pricing and coupons.  The retailer tracks the items you purchase and sometimes offers you coupons or other promotions for your next visit to the store.  If you return, in order to use the coupon, you must use your loyalty card again.  In this example, the retailer collects information about the items you purchase, as well as the impact of the coupon or promotion on your purchase behavior.

E-commerce retailers are able to collect all of this data and much more.  Whereas data collection for most brick & mortar retailers begins with the transaction, it begins as soon as a customer visits a website for web retailers.  A web retailer typically logs traffic source, IP address, page views, cart abandonment, and purchases.  This means the retailer knows how you found their site, where you are, all of the products you look at, all of the products you put in your cart, and the products you purchase.  The store can collect this information whether you are logged in or not.  Some web retailers, such as flash sale sites, require users to log-in to browse products.  These retailers are able to track everything that each individual user does on their sites, thus enabling personalized marketing, promotions, recommendations, and even pricing.  Other web retailers that do not require a log-in still likely recognize logged-out users who have registered on the site. For example, Amazon can recognize you even when you are logged out.

As e-commerce continues to gain steam, due in part to this data advantage, brick and mortar retailers will look for ways to track more than just purchase behavior.  This Harvard Business Review blog post suggests this could work through the use of sensors in stores that can detect a range of behaviors.  While data collected from such sensors would be useful, the costs are still too high for widespread adoption.  What we will see more of in the near future is the use of apps that are meant for in-store use.  Foursquare and Facebook already allow users to check-in to a specific location, and sometimes users receive a reward for doing so.  What would be more useful for collecting information is an app that integrates into the shopping experience.  Walmart just released a shopping app that is meant to be used throughout the shopping process.  The app, currently being tested, allows consumers to scan products with their phone while they shop and then pay at a self-checkout counter.  While the company markets this as something that will increase convenience, in reality it is a tool that enables them to collect lots of data about individual consumers.  The business potential for tracking individual consumer behavior is great, and we will see more brick and mortar retailers explore ways to do so.  Whether consumers perceive these efforts as invasive remains to be seen, but we've already become accustomed to this type of tracking in many parts of our life.

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