ENTRIES TAGGED "consumer behavior"
Big data and mobile are changing retail. NFC? Not so much.
Here are a few stories from the commerce space that caught my attention this week:
Mom and pops sidelined by big data?
Gary Hawkins at the Harvard Business Review took a look this week at marketing and research in the commerce space and argued that the costs associated with big data advantages may be wiping out the little guy. Hawkins writes:
“In this war for customers, the ammunition is data — and lots of it. It began with transaction data and shopper data, which remain central. Now, however, they are being augmented by demographic data, in-store video monitoring, mobile-based location data from inside and outside the store, real-time social media feeds, third-party data appends, weather, and more. Retail has entered the era of Big Data.”
Hawkins points out that this level of consumer intelligence is highly advantageous and even more expensive, thus only retailers with adequate resources (read: deep, deep pockets) can compete. Citing a study (PDF) by the Grocery Manufacturers Association, he notes that “annual industry spending on shopper marketing at over $50 billion, and growing.”
In addition to sidelining smaller retailers, the shopper marketing trend is having a more pervasive effect on the industry as a whole by changing the distribution of budgeted marketing expenditures. “Trade promotion accounted for 44% of total marketing expenditures by manufacturers in 2011, lower than any other year in the past decade,” Hawkins notes. The reason for the shift is all about the ROI — quoting Matthew Boyle of CNN Money, Hawkins writes that “the partnership of Kroger and dunnhumby ‘is generating millions in revenue by selling Kroger’s shopper data to consumer goods giants’ … It is widely understood that Kroger is realizing over $100 million annually in incremental revenue from these efforts.”
This model not only caters to large retailers over smaller retailers because of the size of their wallets, but because it’s easier for brands to interact with the corporate headquarters of a major retailer with 1,000 stores than to interact with 1,000 owners of independent stores, Hawkins writes. He goes into detail about how this business model will affect the industry on several fronts — you can read his piece in its entirety here.