Big Data Sends Traditional Retailing into the Future

INDUSTRIAL AND COMMERCIAL COMPANIES ALIKE NEED TO MINE CUSTOMER DATA TO IMPROVE CORPORATE MANAGEMENT AND RELATIONS WITH CONSUMERS. THIS CHALLENGE IS PARTICULARLY FELT BY RETAIL CHANNELS

by Sandro Castaldo, Dept. of Marketing, Bocconi
Translated by Alex Foti


An impressive amount of valuable information is created by retail distribution channels, and can be used to help optimize company management and improve the existing relationship with the customer base. Think about the information potential already generated in traditional retailing when data from receipts were crossed with those coming from loyalty cards. By doing that, it’s been possible to know the purchase details for every individual customer who went shopping at a traditional point of sale or used an e-commerce channel. Today, the quantum leap made by information technology allows to greatly enrich this capital of information by monitoring navigation data coming from either points of sale (thanks to facial or transit detectors which can be installed in stores) and the web, both for users just perusing information and consumers making purchases.

Looking at the issue from the supply chain perspective, there is a huge amount of information that industry and retailing exchange on daily basis concerning orders, catalogs and product codes, contract conditions, while the tracing of increasingly intricate supply routes give information about technical specifics and food ingredients which are appreciated by producers and consumers alike.
 
In short, retail channels are more than ever filled with information that is further enriched by advent of the new technologies which activate not only new methods of data collection, but also new opportunities for distribution and communication (via web or new touchpoints). In the past, this wealth of information had never been fully exploited by either manufacturing or commercial companies, who were too busy managing their products and their price promotions.

The reasons for this omission were mainly due to the difficulty of effectively handling such vast amounts of data, something which is now possible with the new analytical tools that enable accurate summarizing and constant reporting and go under the name of Big Data. This could be a handicap for Italian companies, which are often neither equipped nor oriented to the quantitative analysis of large amounts of data. A further reason, which is linked to the previous one, is that information assets are often considered of poor quality, i.e. collected in a way that is neither rigorous nor structured, thus making it difficult to mine data for managerial purposes.

To overcome this limit, it is necessary to fill a cultural gap in manufacturing and retailing corporations with regard to quantitative analysis, which needs to be extended beyond the traditional analyses evaluating the return on promotional investment. In parallel, companies must invest in the quality of data at the systemic level, to be sure that whatever flows from raw materials suppliers to the final customer is reliably traced and all the precious data returning from the final markets are always unequivocal and well-structured. Once these two gaps are bridged, both actors will be able to create new value for the end consumer, who, for example, will be increasingly able tp take advantage of personalized offers, communications, and even promotions.

This way, both retail and manufacturing companies will be able to find new ways of differentiating their supply, finally released from the implacable logic of price and undifferentiated promotions, so that new venues for collaboration on sales channels can be activated. It will therefore be possible to move away from the traditional arm-wrestling between suppliers and retailers over price, where the bargaining logic is often of the win-lose type (and even lose-lose), to arrive at more appealing win-win partnerships. The sole goal here is to innovate and create value for end consumers, who, with the information provided by their shopping behavior, continue to send important messages to businesses that are still playing deaf for the most part. In reality, many players in the digital economy have developed superior skills in listening to the customer and his/her needs: this is a fact that traditional retail channels can no longer ignore!