With the customer data market set to double in value in coming years, retailers are confronted with an unprecedented opportunity, writes Kylie Gleeson-Long.
The Australian retailer is experiencing an unprecedented level of disruption thanks to the changing regulatory landscape, macroeconomic pressures, and new competition, such as Amazon’s entry into the Australian market. In an attempt to preserve profit and market share, some retailers are banking on new technologies to help them get ahead, such as Coles’ recent investment into AI and robotics.
Finding ways to stay competitive in a tough environment – it’s a familiar situation in retail markets around the globe. We’re seeing an increasing number of retailers seeking to unlock new revenue streams by monetising one of their most valuable assets – their data.
Retailers have an enviable amount of data compared to many other businesses. Those with a permissible way to identify customers through their data can understand the interests of customers far better than browsing behaviour on social media ever could. They own the physical store environment where the majority of purchases still take place (though in some verticals this is being eclipsed by online). And they can drive superior targeting for advertising on their own channels and beyond.
But before deciding to monetise data, retailers should take stock of their data sources and assets – such as transactional data, loyalty data, price and promotions data, and on and offline ‘real estate’, including clickstream data – and analyse how these can create further value and potential revenue streams for the business.
Many retailers have also become publishers to capitalise on advertising revenue. Just take Amazon as an example – it is able use its own data sets to create streams of profit which are redirected into research and development for new products and services. Amazon has now extended its profitability beyond selling products, and can be competitive in other areas. It is now the third largest media owner in the U.S., with advertising being its most profitable business segment.
Data monetisation value set to soar
According to McKinsey, the number of retailers monetising customer data has increased by 40 per cent in the past two years. dunnhumby estimates the customer data market will double in value in the next three years.
The opportunity this presents is huge, particularly for those traditional retailers who are adding to their bricks and mortar presence by investing in digital channels, such as apps or ‘click and collect’ functionalities, giving them the competitive advantage to link behaviours in the physical and digital environments.
This represents more ways to reach customers whether at home on the sofa to in-store, and higher quality extractable data to measure the impact on sales and customer perception. It then has knock-on benefits for the customer, as they’re now offered more relevant and innovative products, and more personalised offers.
Investing in a monetisation strategy requires careful planning and preparation to ensure your approach will drive sustainable growth. Monetisation done properly can have a positive impact not only on revenue, but on a retailer’s relationship with suppliers. Failure to treat customer data in a respectful manner might impact customers’ experience with your brand and could lead to reputational harm and a decline of customer trust. Indeed, a recent study found Australian consumer trust in the way businesses collect, store, and use customers’ data ranked the lowest globally.
There are three key questions retailers must ask themselves before delving into the opportunities of data monetisation:
- How ready is my organisation?
In order to monetise, your data must be fit for purpose. This can be assessed with a comprehensive audit of a retailer’s current data capabilities, including identifying gaps and opportunities, and considerations of how data can meet business needs and grow value.
The debate around GDPR legislation extends far and wide. Having a transparent understanding of the origins of the data the business holds, the consents associated with its collection, and what policies, processes, and governance reinforce data strategies is crucial – both from a compliance standpoint, and for using data to service customers in meaningful and sticky ways. GDPR enforces strict rules about how personal data can and can’t be used, and adherence to these policies will ensure your data monetisation strategy is grounded in a way that sets the business up for success.
- What is the size of the opportunity?
A core tenet of data monetisation is the nuanced understanding of collaborating with suppliers, and the appetite for insightful customer data from both sides. Therefore it’s important to take a helicopter view of data monetisation at the outset, particularly when considering if you have the adequate people and technology in house to execute on the strategy. There are many options around possible investment priorities and partnerships that can make the road to data monetisation smoother, particularly if the size of the opportunity, due to supplier base and media partners or customer base, is extensive.
- What monetisation route makes sense for my business?
Successful data monetisation programs require a strong customer-first approach to business strategy. Any moves towards data monetisation activities that do not put the customer at the forefront risks alienating the very enabler to making monetisation a success – the customer themselves. Some other routes that might make more sense based on your business include creating retail media revenue opportunity from owned store and online real estate.
Despite the groundwork requirements, investing in a data monetisation strategy really is a win-win-win approach for retailers, their suppliers and most importantly, their customers. Opportunity to create direct income from selling actionable insights, targeted media and helping drive growth for your supplier base (which in turn helps your sales), is an attractive enough proposition. But if the resulting outcome leads to markedly improved levels of customer engagement through a more relevant shopping experience, then data monetisation really is a no-brainer.
By Kylie Gleeson-Long, Managing Director ANZ, dunnhumby