In 2018, total retail sales worldwide are set to top $24.8 trillion. By the end of 2020, they’re predicted to reach $28 trillion. Despite what you’ve heard or read, retail isn’t dying. But it is evolving in an era of accelerating Digital Darwinism.
The average consumer now has global access to more than one billion products, and with that, the power to choose the seller that offers not only the best price, but the best experience. For most, the best experience is a highly personalized one. According to Accenture’s 2018 Personalization Pulse Check of 8000 global consumers, 91% say they are more likely to shop with a brand that recognizes, remembers, and provides them with relevant offers and recommendations.
With this in mind, innovative retailers are quickly creating a competitive advantage by connecting the data they already have (such as customer feedback, personal information, product searches, and purchase history) with insights gleaned from social media, digital devices, voice, and IoT sensors to transform their customer experience and perfect their personalization skills.
Customers themselves are also becoming more willing to contribute data for a better brand experience. Eighty-three percent (83%) say they are now willing to share their data to enable a personalized experience, and 74% say they would find a “living profile” of their customer data valuable (and would contribute to it) if it was used to curate the experiences, offers, and products they receive.
Creating a Competitive Edge
A 2017 State of Personalization Report shows how data-driven personalization, or the lack of it, is already impacting customer acquisition and retention. In the report, 44% of consumers say that they will likely become repeat buyers if a shopping experience is personalized, and 39% say they will also tell friends and family about the brand.
In addition, 49% have purchased a product that they didn’t initially intend to buy after receiving a personalized recommendation, and 40% have purchased something more expensive. On the other side of the coin, 71% of consumers say they find it frustrating when their shopping experience is impersonal, and 81% are frustrated when the shopping experience remains unchanged after negative feedback is provided.
For retailers with both online and brick-and-mortar stores, there’s a strong competitive edge to be gained by brands that can deliver seamless personalized experiences. Forty-one percent (41%) of consumers say they now expect employees in a physical store to know what they have purchased from the same brand online. Yet only 19% have ever experienced this. In fact, only 17% of consumers think that retailers are currently personalizing the in-store experience.
Getting the Experience Right
Retailers working on personalization should be warned that there is a high price to pay for poor or incorrect data. According to the State of Personalization Report referenced above, if a brand gets customer information wrong when directly marketing to them, 37% say they will be less likely to continue with their purchase, and 20% will relay the negative experience to others.
The reward for getting it right, though, is impressive. According to McKinsey, data-driven organizations are 23 times more likely to acquire customers, six times as likely to retain customers, and 19 times as likely to be profitable as a result.
Data mining for insights to know who customers are, what they like, what they want, when they want it, and what they might like to be offered in the future is no longer a nice-to-have. It’s a necessity for any retailer set on surviving. (Read how Domino’s deployed Talend, Hadoop, and MicroStrategy to integrate customer data across multiple platforms.)
Delivering on New Business Models
Data-driven customer experience personalization is only part of what will make or break retailers in the future. Supply chain management and costs are a top concern, as is evolving from a traditional business model to address the growing sharing, subscription, on-demand, and services economies. According to Accenture, adapting business models to accommodate these new trends could add $2.95 trillion in value for both the industry and consumers.
We will explore how data and analytics is driving the discovery and delivery of new business models in a future post.
Want to learn more about how data and analytics accelerate personalization, growth, and new business model creation? Get MicroStrategy’s 18-page Q&A eBook featuring key insights and advice from analyst, author and adviser Ray Wang. Download The Role of Data in Digital Transformation eBook here.