Pervasive Customer Insights: A Key Retail Priority

Retail Industry Leader, SAP Southeast Asia

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Retailers are hard-pressed to differentiate themselves.

Back when moving products profitably through channels was a viable growth strategy, operational efficiency was one of the key differentiating factors. Retailers invested in im­proving forecasting, streamlining the supply chain, rationalising inventories, and the like. However, as more retailers started to adopt similar practices in a bid to outdo their competitors, operational efficiency became the bare-minimum requirement.

As retailing evolved, more competitive means emerged. Retailers competed and differentiated based on price, promotions, format, location, and assortment. Even so, this is no longer sufficient to meet the demands of the always-connected, value-conscious, and outcome-driven consumers of today.

Faced with major forces driving unprecedented change, retailers need to find new routes to differentiation. This is crucial if retailers are serious about capturing the future global retail growth that is driven by a rapidly expanding middle class.

The burgeoning middle class opportunity in Asia

The size of the global middle class will increase from 1.8 billion in 2009 to almost 5 billion by 2030. And global middle-class retail spending will rise from $21 trillion to $51 trillion in 2030.

Figure 1. The emerging middle class will reach close to 5 billion by 2030. (OECD) Source: Quartz

But what does this mean for Asia? The fact is the bulk of this growth will come from Asia. By 2030, Asia will represent 66% of the global middle-class population and 59% of middle-class consumption. What’s that in retail spend? We are looking at a rise from $4.9 trillion in 2009 to $32.9 trillion in 2030.

That’s a 571% opportunity we are talking about.

Differentiating with data: Customer insights in the center

With these sheer numbers, it is clear retailers in Asia must act quickly to establish or cement their competitive edge.

Retailers have been one of the early movers in looking to analytics for that advantage. They gather data to generate intelligence. They tap on analytics for defined informational outcomes. However, for analytics to act as a real level-up advantage, the key is that retailers need to move past looking at analytics as a tool for maximising the profitability of a consumer transaction, and think about how to use it to maximise lifetime customer value.

Retailers first need to shift the focus from carts to hearts.

In terms of strategy, it is about positioning pervasive customer insights as an enterprise-wide strategic capability. That’s putting the customers’ point of view—or contextualised customer insights—at the center of every decision, across every business function.

Put the customers’ point of view—or contextualised customer insights—at the center of every decision, across every business function.

So, what will it look like with the customer in the center of a retailer’s universe?

In the store, this will translate into personalised promotions based on past mobile browsing history, or mobile clienteling with feel-good, VIP offers to shoppers. Or we may see personalised marketing with RFID that engages customers by providing real-time recommendations about products they have taken into the fitting room. In call centers, associates will respond to predicted shopper issues in a way that wows them, as well as cross-sell based on what customers want—from real-time customer insights across all channels.

In other business areas, we will see closed-loop processes (such as social and digital feedback mechanisms) incorporating real-time customer feedback and quality ratings to directly influence sourcing, assortments, and pricing. Or flexible supply networks enabling make-to-order assortments and flexible fulfillment models that provide customers with more choices. Proactive and prescriptive fulfillment will also allow retailers to deliver products to a customer’s doorstep based on predictive insights and predefined preferences.

This is no longer a novel idea. It is happening in real life. Take China’s Alibaba as an example. It is launching fresh-produce grocery stores with 13 already open in three key cities. These stores allow customers to order, eat in, take out, or arrange for delivery—all without frontline staff. Payment is via Alipay – Alibaba’s affiliated payment app. This gives Alibaba unequal insight into customers’ buying behaviour, enabling knowledge of their preferences, prediction of their needs, and the ability to make personalised recommendations on customers’ mobile devices wherever they are.

Tying it all together: A complete view of the business

It’s key to reiterate that for all these to work, customer insights must be pervasive across the system. Business functions across the retail organisation need a complete view of the customer and supply chain. Whether a marketer, buyer, or merchandiser, they need the right insights delivered to them at the right time to empower decision making.

Collecting customer data is great, but the point of failure is often the inability to infuse customer insights into key decision-making processes. This is typically due to low levels of analytics maturity across business functions, the inability to leverage insights in a contextual and timely manner, and complexity built up—layer upon layer—over the years.

But because we just don’t know what we don’t know, this can be very dangerous.

For example, data shows sales is declining in one particular store. We need to respond. What should we do? Lower prices? Invest in marketing? These may be sound answers, but if the cause is customer dissatisfaction arising from one specific area, then those action points would have been useless or even detrimental.

The new differentiator

Powering the business with customer insights is a key retail priority. That’s the first step. The next step is about how nimble and agile retailers can be in translating these insights into value-adding propositions for customers, or building new business models for that same end.

How are retail innovators using customer insights and pushing their digital agendas forward? Find out more in these exclusive resources for the retail industry.

This blog post originally appeared in the Digitalist.

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