Why Big Data Matters

Anyone who has attended a retail industry conference in the past two years to three years has likely seen a shift in focus. Where once it was all about merchandising, which led to shopper marketing, it's now all about mobile and big data. Many retailers are struggling with both of these ideas; they know they should be taking action, but exactly what action is unclear.

While food stores have to worry less about the showrooming phenomenon than an office supply or consumer electronics store does, the fact remains that mobile use in-store is common and continuing to grow. Shoppers all want more information about the products they buy, from price to peer reviews to alternatives. For retail operators to be effective, regardless of what channel they operate within, they need to have that same level of insight about their shoppers.

The interesting thing about big data is that the concept has been around for a couple of decades, ever since the introduction of the first shopper loyalty programs in the late 1980s. Loyalty programs are a misnomer for what's essentially a data-gathering device, and many retailers have been building massive data warehouses for years using shopper behavior gathered through card usage. But very few have done anything meaningful with the data collected. Most shoppers have key tags for multiple stores, which is a sign of anything but loyalty.

The value proposition for a loyalty program goes like this: use some sort of data-gathering device (i.e., loyalty card) that identifies shoppers uniquely; offer incentives to use the card (i.e., price incentives); gather relevant information on what, when, where, etc.; mine the data for insights; and act on the insights to drive behavior. The industry got the first part right but never effectively got past the data-gathering stage. Few shoppers have ever received any incentive from a loyalty program. Most just belong to loyalty programs to get the "card price."

This is where big data comes in. A typical supermarket with 20,000 shoppers weekly will gather one gigabyte to two gigabytes of data each week per store. Multiply that by 52 weeks, and 200 or 2,000 stores, and it's easy to see how bits and bytes can start to pile up into a daunting collection of data. The challenge lies in making all that data useful and gleaning actionable insights from it.

One of the major stumbling blocks to an effective loyalty program has been the complete lack of strategy as programs were developed. Retailers rushed to get cards out to shoppers in the 90s and 2000s, but with little thought of why or what problem they intended to solve with the program. Add to this the fearmongering by some of the public about privacy concerns that accompanied many card program rollouts, which caused some retailers to issue cards with no shopper information attached. This created an expensive program that brought no benefits to either the retailer or the shopper, and was the result of jumping in without a strategy.

Shoppers in general aren't averse to sharing information; the growth of online shopping has shown that. But they do expect something in return for having their behavior tracked, which is the point of a good loyalty program to begin with. Millennials are quite comfortable with the idea, but are more likely to have high expectations for benefits.

Maybe it's time to talk less about big data and more about shopper transparency. Learning about shopping behavior, and how to motivate purchase, change trip behavior and turn secondary shoppers into primary ones is really the point of big data at retail. It's not the size of the data warehouse in petabytes or exabytes, it's what you do with all that stuff that matters.

Retail in the future will require more than friendly service and low prices. In-stock conditions, relevant value and a clear understanding of what customers want before they know to ask for it are the keys to success going forward. Big data holds the keys to unlocking this value, but doing so effectively will require investments, vision and, perhaps most of all, a strategy for getting there.

Jeff Weidauer is vice president of marketing and strategy for Vestcom International Inc., a Little Rock, Ark.-based provider of integrated shopper marketing solutions. Jeff can be reached at jweidauer@vestcom.com.