Loyalty programmes, cloud payment systems and ecommerce platforms have all become a huge part of retailers’ business offerings. As well as carrying out helpful functions, each of these services produces a flood of data points. More data can be gleaned from just about any part of a standard store.
However, as collecting data becomes ever more accessible, it’s increasingly difficult to harvest useful insights from all these numbers.
Many small-to-medium-sized retailers choose to outsource analytics to retail management companies, while big box retailers are investing more and more money into collecting customer data to improve their offering.
Loyalty programmes unlock customer trends and target demographics, while point-of-sale (POS) software gives accurate data relating to pedestrian counts and tracking behaviour such as visitation frequency. Retailers now have access to information surrounding how their customers spend, from understanding the actual dollars to identifying trends. It’s even possible to use geo-coded data to assess new store locations by considering how big the catchment area will be.
But retailers aren’t limited to information about their own performance. They can now gain insights into the performance of their area in general – collating data from the street or town to identify overall spending trends.
First Retail managing director Chris Wilkinson says while problems can arise in how retailers translate useful information from raw data, two dynamics are generally at play. The first dynamic is being responsive.
“This is where businesses are analysing real-time performance and making adjustments on an hourly basis to staffing, [or on a] daily basis to ranging and stock replenishment.”
The second dynamic involves being strategic, Wilkinson says.
“This is where data is helping drive pricing, merchandising, range development and more.”
First Retail works with major brands in New Zealand and overseas that are using GIS mapping and weather analytics to great effect. Using automated analysis of customer sentiment, behaviour and demographics is also a key part to most modern retail businesses.
“All are aspects we’d never have thought possible decades ago,” Wilkinson says.
The possibilities for retailers using data are endless and constantly evolving. New developments continue to improve logistics efficiency and inventory optimisation, making the tools invaluable to retailers.
Taking the risk
No decision in business is without risk. The primary concern for retailers using data is the safety of that data. In recent times there have been a number of major security breaches overseas where customers’ personal information has been leaked.
In late 2016, at least 10 major loyalty card schemes in the United Kingdom were hacked, compromising both the retailers and the customers. Hackers exploited vulnerabilities in retailers’ platforms, targeted individuals and compiled information from third-party sites.
The result was email addresses, phone numbers and the date of birth of hundreds of thousands of customers being stolen and posted for sale online.
Cyber security firms have warned the problem will continue to grow and retailers need to be vigilant. In December 2016, KFC was forced to urge its UK loyalty club members to change their passwords after discovering its website had been breached.
Despite this, Wilkinson says the risks are low and customers tend to trust the new system.
“Consumers seems to have dealt with the issues of ‘big-data’ and their information being held by retailers. Essentially it’s inescapable and over time, people have become confident sharing [their information].”
While the risk to data security is taken extremely seriously, any risk needs to be balanced with the benefits. Retailers should consider that not collecting or using data can be a huge risk to those who are trying to keep up in an environment where customers are demanding faster, more personal, connected ways to shop.
With data security being one of the biggest concerns to consumers, companies and analyst services are taking a number of measures to avoid any security breaches.
Loyalty NZ information security manager David Higgins says there are three key areas where data can be protected: in a company’s people, process and technology.
Information gathered from people is channeled from the first point of contact with a service. Whether that be when you fill in a customer feedback form, swipe a payment card or make a phone call to the customer service department.
It is vital that companies share with customers how any information will be used, shared and stored for as long as it is needed. To do this, each company needs to have a clear plan for what it is collecting and why, Higgins says.
“We need to balance providing great services to customers without being overburdened by process, with protecting customer data appropriately. This is strengthened by us being clear on why we’ve gathered it, where we are storing it, and how long we will store it for,” Higgins says.
With cybercrime now a very lucrative business, companies have to make sure their technology is protected through rigorous patching and maintenance. It’s crucial that outdated systems are upgraded regularly, to avoid exposing customers to a system which cannot be protected against a modern threat.
Retail management software
It’s unlikely most retailers have the resource or time to comprehensively analyse information collected through every channel. Increasingly, retailers are employing the assistance of retail POS software to securely run inventory management, ecommerce, customer loyalty and manage their business in the cloud.
Auckland bike store Cyco adopted cloud-based POS system Vend about five years ago to add more structure to the running of the business.
The software allows the independently-owned business to separate its customers into different categories, such as by gender, area or the type of cycling they participate in. Cyco is then able to evaluate its customers’ spending habits and anticipate where new business may come from.
Owner Darren Murray says it has changed the way the business is run.
“It has helped speed up a lot of our processes. We were doing everything manually before, which is very time-poor. Being able to do tracking very quickly allows us to always keep on top of buying and selling decisions.”
A system like Vend is appealing to retailers like Cyco because it easily integrates with other software systems targeted to small businesses, such as Xero. Murray says the small monthly charges and regular upgrading of the systems make cloud-based software an affordable option for small retailers looking to improve their business management.
The integrated platform also makes running sales reports and stock takes an easier task for his team, he says.
Retail management systems aim to do the heavy lifting for their customers, finding the solutions retailers seek while remaining affordable for smaller businesses. They translate the data so retailers can be clear about what changes might need to be made within their businesses.
For a service like Vend, the first hurdle is showing retailers a cloud-based system can manage information a business owner formerly kept in their head. The act of relinquishing their expertise to technology can be scary for some.
Vend director of inventory and reporting Jordan Lewis says data allows retailers to reinforce their gut instincts, and find ways of streamlining processes.
“Once they start using the system and digging into the data, they’re surprised at how it can pick up really important insights and trends, 10 times faster than they can.
“While tracking and using data seems like something that is very much behind the scenes, it’s biggest impact is actually on the shop floor where it can vastly improve the customer experience.”
Having the right insights into product and sales data can help retailers better predict demand, predict reorder and lead times for products. One element of online shopping that can be a deterrent for customers is long wait times for deliveries. Now better data insights have significantly improved freight, giving customers peace of mind by enabling them to see where the courier is with their product.
Data is particularly important for inventory-heavy stores, which need to be able to forecast for new seasons and busy or slow periods.
Three years ago Amazon announced it was going to start ‘anticipatory shipping’ – a system which predicts what people will order based on previous buying patterns. Items are already packaged up and on the truck before the customer has even pressed ‘buy’.
An anticipatory shipping service is a clever use of data, but it is out of reach for smaller stores. Retail management systems help bridge the gap.
The Salvation Army, a Vend customer, has traditionally used old-fashioned, clunky cash registers and done without visibility of stock movements or sales data across its New Zealand stores. Since adopting retail management software, it’s been able to make informed decisions on what stores should stock from its warehouses, and what stores it would be best for that stock to be in.
The wider market
As well as helping retailers run their businesses more efficiently by actioning internal processes, data analysis can provide insights that can guide them in positioning themselves within the wider market.
Consumer specialists at MarketView analyse spending patterns to help retailers gain a deeper understanding of how consumers behave. It’s an area of the industry that has changed exponentially in the last 10 years.
Client solution specialist Michael Stechman says the aim of the game is help retailers find their competitive edge, providing insights into an industry that can be a mystery to many. MarketView analyses consumer spending information from BNZ customers and Paymark payment terminals and translate it into actionable insights for retailers.
On a basic level all retailers monitor their own sales, but it is now also crucial to monitor performance and trends within your specific industry, area and wider retail environment.
“This provides a much-needed context for your own sales figures, understanding if it’s internal or external factors driving changes, and whether it is part of a wider industry trend,” Stechman says.
Such information can provide benchmarking for sales targets, and the ability to forecast future sales based on historical trends. Retailers can also monitor one-off events, such as promotional campaigns. While traditionally retailers could measure a hike in sales during a promotion, it is now possible to collate information across a wider board.
The result is retailers are able to create more effective marketing campaigns, and tailor their products and promotions to their existing customers and a new customer base.
“The number one priority for our clients in the current retail environment is understanding who their customers are,” Stechman says. “Online behemoths such as Amazon know everything about a customer without them needing to leave their living room, so retailers need to provide a compelling reason to visit their shop by matching their level of personalisation and tailoring.”
To deal with the critical issue of security, services like MarketView depersonalise data completely, meaning all names, personal address and other identifying factors are stripped out.
Each card is given a unique ID, so spending habits can be monitored without identifying an individual consumer. General information such as the area they live, their age and gender is retained to get accurate insights – but all customer data is completely secure, significantly reducing the risk to the customer.
Data on a large scale
Nationwide retailers operate on a much bigger scale, which is why it is extremely important they have stringent processes in place to ensure customer information is secure.
Foodstuffs NZ collects customer information through its two loyalty programmes, New World Clubcard and Pak’n Save Sticky Club. Sticky Club was launched earlier this year throughout the South Island to allow Pak’n Save customers to collect fuel savings each month, while the New World Clubcard offers rewards to members in-store.
Both schemes collect data about customers’ purchases which is used to send customers relevant offers, based on their previous shopping behaviour.
Foodstuffs NZ group general manager marketing Steve Bayliss says both outlets take every measure to protect customer privacy.
Authorised third parties include Loyalty NZ (which owns Fly Buys) and Air New Zealand, which are integrated with the Clubcard. There are more than 2.4 million cardholders on the Fly Buys programme, reaching 74 percent of New Zealand households – making it the biggest customer loyalty programme in the country.
Loyalty NZ collects transactional data through the Fly Buys programme, which gives insights into who is shopping where, when and even provides a record of the items purchased. Data is anonymised to protect individual privacy and aggregated to help retailers understand a lot more about their shopper base. The aim of the game is enabling retailers to better meet the needs of their customers.
Fly Buys has been part of the New Zealand shopping experience for the last 21 years, which helps analysts identify long-term trends in the retail industry. With more than two decades of longitudinal behaviour change to draw on, more accurate data can be presented.
Loyalty NZ senior data product manager Andrea Patterson says shopper analytics can provide a much deeper understanding of retail performance than sales alone.
“If a store or brand has declining retail sales, shopper analytics can help us understand the shopper behaviour that is driving that: are fewer people shopping, or are they just spending less, or visiting less frequently?”
Once these questions have been answered, retailers can implement a new strategy to improve sales performance.
Fly Buys has partnerships with a number of well-known New Zealand brands including New World, Z and Noel Leeming, but is now in the process of increasing the range of businesses with its new product, Fly Buys GO. This service is specifically targeted to SME businesses and is entirely online.
Loyalty NZ also offers Shopper Science, an online analytics tool which enables users to quickly and easily slice and dice data to get the answers they need. While every company is different, Patterson says they generally have similar data needs.
“There tends to be a lot of commonality amongst the questions asked in seeking growth. Businesses both large and small need to understand their shoppers and develop strategies for sustainable growth.
“Targeting analytics to each company’s unique needs is really about understanding their situation and aspirations and employing good data analytics to help answer the questions they need to achieve these goals.”
Changing with the times
As long as retailers stay educated about the importance of data security, there’s no reason to fear the rapidly changing tide of the retail sector. It has never been easier to collect useful data from a huge range of areas in business, but extracting useful insights from raw data remains a challenge for retailers today.
Nothing will completely replace a retailer’s intuition about what their customers want. But with the right tools, trends can be identified and customer profiles can be built ten times faster than using traditional methods.
This story originally appeared in NZ Retail magazine issue 753 December 2017 / January 2018.