Late last week, Amazon made headlines (again) for receiving a patent on a method that predicts the eventual shipping destination of a product (see coverage on TechCrunch). The proposed method enables Amazon to leverage various data points to begin shipping an item before it is actually ordered — something that is both creepy and cool! In a way, it isn’t any different than the big data solutions that the NYPD is actively using to fight off crime or what top national universities use to recruit students.
While it may seem somewhat futuristic, it actually isn’t much different than a grocer watching the weather and ordering extra beer in anticipation of a run before a snowstorm. For Amazon, it is also the natural extension of their Subscribe & Save Program which gives customers a 15% discount on regularly purchased products, such as toilet paper, cereal, and dog treats. As this program enters its third year, Amazon is poised to not only see an incremental improvement in operating costs through real-time ordering/inventory management but also to prevent others from taking this same path.
As some retailers may be concerned that their competitive advantage is slipping while data-driven organizations like Amazon are gaining marketshare, the reality of the situation is that retailers aren’t that far behind. They simply need to initiate a “test and learn” methodology where there’s a focus on measuring an outcome through data collection and analysis. As part of a holistic data strategy, retailers can collect and stitch together information from several good data sources. For example, retails can understand:
- Shopping intent by collecting web traffic data on product reviews, weekly circulars, online shopping lists/wish lists.
- Buying patterns by collecting in-store transactional data (along with loyalty program data).
The key is for retailers to define a strategy!
This also reminds me of a recent slide that I came across from a Big Data presentation by McKinsey that showcases the profitability that UK-based Tesco experienced over the past 15 years:
It seems that the inflection in profitability didn’t occur until a significant investment was made in data collection/analysis.
For retailers looking at this graph, it is telling a story that there’s no better time than now to make such an investment.
What additional steps do you think retailers should take to secure a foothold in the marketplace?
Back in December, I wrote how my family cut the cord. It was basically a financial decision — our cable bill was growing from $120 to $180 a month and that seemed ludicrous considering how few TV shows watched. So we joined the 60M Americans that use only over-the-air signal. Surprisingly, we’ve survived and we’re not going back. In case you’re thinking about it, here’s what you can expect if/when you take this route:
1. The first two weeks without cable are the toughest! When I shared my decision with my oldest, he cried saying his world was coming to an end. And for the first two weeks, it felt that way because we constantly swarmed around the television looking for background or “filler” shows that we would watch whenever the TV was on. Luckily by the third week, we finally stopped looking for them and started doing other things.
2. You will miss your DVR. With cable, I used to record primetime shows and then wait 10 minutes just so that I could rewind them to the beginning and skip the commercials. I could also pause a show whenever there was an interruption. Once I cut off cable, I had two options: attempt to watch it live (and hope that you don’t get interrupted) or wait a day and watch it for “free” online. The frustrating part about online shows is that you have to sit through several 3 minute commercial breaks. It seems no different then cable until you realize that the commercials tend to repeat over and over, and there are only so many times that you’re willing to listen to the Internet Explorer 10 jingle!
One of my favorite quotes about life comes from Yogi Berra who said, “it’s tough to make predictions, especially about the future.” Yogi is absolutely right — it woud be nice to predict the future by simply analyzing our past behavior. If life was that straightforward, then every armchair quarterback of an investor would make millions off the stock market by simply looking at past stock performance. In reality, life is just more complicated and far less predictable.
I was excited to read an article in the New York Times by Quentin Hardy* about the potential analytics as a service offering from Amazon. While Mr. Hardy was somewhat unclear regarding what type of analytics service Amazon may provide, the article seemed to indicate that they are interested in developing a predictive analytics service. Predictive analytics is incredibly valuable to marketers as it allows brands to analyze volumes data, such as purchase history or social analytics chatter, to determine when will segments of consumers are most likely respond to a marketing tactic or to complete a purchase.