Guest post: Retail judgement day is coming – and it will be driven by buying intelligence
In this guest posting, Steve Tindall, director of retail at media agency Maxus, warns that the biggest revolution in the history of FMCG marketing is upon us
Judgment Day is coming in 2017. Not the apocalyptic version as foreseen by movie director James Cameron, but the beginning of the end of the ‘sales push, mass communication’, second tier retailing experience we currently enjoy(?).
Supposedly in eight years, Kevin Rudd’s fibre to the home, 100 mega bits per second, broadband network will be completed and a velvet revolution will be underway. To put this in perspective if every other country stands still (they won’t) Australia will have the fastest broadband network in the world.
Human behaviour tends to be fairly constant as it’s limited by the world surrounding us, but that world’s constraints are going to recede. Fanciful, optimistic imaginings or a very likely outcome, either way, retailing needs to evolve with the ever changing consumer, however the ever changing consumer is well aware of the kind of experience they want to enjoy with their product and service suppliers. Kevin Rudd’s new informed, interactive Australia will make provision of this experience a requirement to trade rather than a luxury.
Imagine having the world at your fingertips instantaneously rather than having an hour glass burnt into your irises every time you want to research or actually buy something. Imagine shopping in a physical village where every store supplies a personal service because they know what you want and what you’d like. Imagine the deli being able to print off recipe ideas and provide all the necessary ingredients for your perfect dinner party. Imagine going into the children’s clothes store and they’ve already got a range of school clothes to show you, as your first born needs to look the part in their first venture into freedom. Imagine if all the stores in the village combined to give you a complete service – e.g. a home delivery of all your shopping from your village. And then just to round it off, because you’ve spent so much money in the village they’ve sent you some money off vouchers for shopping and as you enjoy a nice Shiraz, a free ‘bottle on us’ (brand specific of course). This village already exists, it’s just that technological limitations stop us living there – but not for much longer.
Apart from the technology, however, there is one vital fuel to this utopian service engine – intelligence. This intelligence capability has to be built from as granular level as possible, ideally from personal information. Added to this would be buying habits across many categories from multiple grocery, apparel, IT requirements, travel and others as it grows. Add in financial information and geographic environment data and you now have the ability to understand behaviour at an individual level or at least develop multi dimensional clusters that allow the retailer to be much more precise in developing bespoke product offerings and services.
Even better news for the retailer is that it can fund this by reducing its spend of the variable marketing funds gleaned from their suppliers but because of the improved targeting, deliver better results. The consumer is happy because for once they are not being badgered into buying products that are totally irrelevant – far from it, they are being offered things they probably want or need and then being rewarded again.
Think this is unlikely? In the absence of Amazon Australia, how many of us already use their US or UK hubs and appreciate their ‘up sell’ targeting based on historical purchases and searches? Amazon though is restricted in completing the circle as it employs only one channel. The new retailers employ these principles in every channel (bricks, clicks, mail etc.).
Clearly the big Australian retailers think this is likely as Wesfarmers already has a framework in place (FlyBuys), and Woolworths is well on the way to completing theirs.
The key is to integrate the technology into an integrated bricks and clicks strategy as the web cannot and will not replace the physical shopping experience.
The consumer will embrace the retailer that can use all the touch points the consumer has with it to the consumer’s individual benefit. The consumer’s patronage will then be returned and depending on how good the retailer is at sustaining and growing this relationship, with even more devotion. The consumer will then compare the service they get from these ‘personal’ retailers to the shrinking dinosaurs forced to shout louder and louder to try and stay alive, creating further alienation.
Unlike Cameron’s vision of a possible future, this one is already under way, but it isn’t the machines that decide the fate of the retailers that cling onto the past: ultimately, it’s us.
Steve Tindall can be reached at steve.tindall@maxusglobal.com
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Steve, I totally buy that all of this can happen, but will it?
Surely it takes a great deal of investment by the retailers to put this into operation? With the cosy duopoly going on in Australia between the big two, it’s hardly like they need to bother with something this difficult.
We need Tesco to open here and shake things up a bit.
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Happy shoppa, thank you for your comments, interesting you mention Tesco as you’re right it takes a great deal of investment but Clive Humby of Tesco’s intelligence company dunnhumby once claimed, by using this technology and intelligent application thereof, he saved them $500M in one year. Even if he’s exaggerating by 50% the rewards are obvious
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Good piece.
It reminds me of the debate about targeted ads online. Will people give up their privacy (or some of it) online if it means getting served more relevant ads and offers.
Real world retail is lucky it’s not had the same level of scrutiny/ debate about privacy that online had had.
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I do understand the pure genius of the kinds of loyalty programs Woolworths etc are setting up and the marketing research student inside me salivates – imagine if we could actually understand exactly what people want based on true revealed preference data? Every want and desire can be catered for at full benefit to the consumer – but is this what we really want? I’m not sure its what I want.
I also worry what would become of the advertising/marketing/research industries – surely an all seeing all knowing corporate behemoth would kill the work we do? Don’t these industries live on educated guesses and bullshit and the fact that no one really knows whether a campaign really worked, that customers saw an ad at an exact time/date/channel/location etc?
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Steve
You say “The key is to integrate the technology into an integrated bricks and clicks strategy as the web cannot and will not replace the physical shopping experience.” Everyone (other than Amazon et al) would agree.
It’s a pity (I think – as an ad man!) but some people say that catalogues are the pinnacle of communications for the independents like Harris Farm Market. (Indeed I heard Cathy Harris say this at a conference recently, with the qualifying comment “catalogues may not appeal to everyone but they work.”) How do you see the (short term and long term) future of the catalogue in the high-tech world?
James
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Thanks James, I think Cathy is right in terms of the shopper wanting to compare prices, asses new products etc. the only difference is these messages can be more tailored to the individual because of the technology and data analysis. Catalogues will always exist if the shopper wants them (they do!) its just the delivery system will be added to i.e. paper and web
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This scares me a bit. I used to find it freaky enough when my Tivo thought it knew what I wanted…
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Great article.
As we know within every trend there is always a counter trend at play. The challenge for retail to create a unique experiences around each customer who then shares.
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