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?