Customer-centric data: the foundation of all decision making in retail
29 May 2018
Nigel Wilson, Managing Director - Hitwise
The evolving expectations and demands of the consumer – this is the greatest challenge retailers are faced with today. We have become hyper-connected, time-poor, mobile and social, which impacts heavily on how retailers must market, attract and retain their customers.
The explosive rise of Cyber Week has also put even greater pressure on profit margins. Discount and promotional periods are extending; competition is getting fiercer on a product-by-product level.
In a constantly disruptive retail environment, the key to success lies in harnessing the power of customer-centric data in order to stay ahead.
Why do retailers fail to turn data into profit?
A key hindrance often comes from not having the right data sources to inform decision making. A prime example of this is the “retailer black box”. Brands rely on retailers and third parties to drive sales but often lack the visibility of their true performance on these sites.
A second hindrance comes from having too much data, such as CRM, social media and external research. Without strong processes, there can be little cohesion across the various data sets, therefore businesses struggle to leverage it.
The Amazon challenge
Rising consumer demands are also driven, in part, by Amazon. The e-commerce giant accounts for 25 per cent of all online retail traffic in the UK. Amazon has pushed the boundaries in terms of personalisation, pricing and delivery and continues to build a presence across different retail categories.
But not all retail businesses have taken the hit. The likes of Ocado, Charlotte Tilbury and John Lewis have instead grown rapidly and outpaced the market. Despite their differing categories, these businesses are aligned on using customer-centric data as the foundation of decision making.
Hitwise’s solution – audience-based insights
Hitwise is part of the solution of connecting businesses with audience-based data that is actionable. Our platform provides clients with almost real-time insights into their current (or potential) customers and their digital behaviours.
The richness and frequency of our data allows clients to profile their target audience, understand their needs, and devise ways to acquire them. This allows us to feed into numerous functions, from digital marketing, to channel management to e-commerce teams.
To learn more about Hitwise’s data solutions – click here.
In our latest report, see how Hitwise has addressed the top retail challenges, including examples from Ted Baker, Sainsbury's Tu Clothing and Nike.
Welcome to Business Reporter's Future of Retail Campaign. According to Forrester Research, we are in the age of the customer. They are driving the decisions. Business owners must have the highest resolution portrait of their customers and their competition. Decision makers are flooded with data, sales figures, social medias, and surveys. How to tell which data matters the most-- this is what we're going to explore with Nigel Wilson from Hitwise. Morning, Nigel.
So Nigel, tell me what is the greatest challenge that retailers are dealt with?
Well, I think the greatest challenge retailers are faced with is really how much more demanding consumers have become, mainly through online. So I think today, consumers are hyperconnected. They're always comparing prices. They're taking personal recommendations from friends, from reviews, from social influencers. And fundamentally, they're much more demanding when it comes to delivery, and speedy delivery, and service, as well. And this creates real pressure, I think, for retailers to be on their game.
The second key thing is obviously, Black Friday, which is now a major shopping event in the UK. Our own data at Hitwise shows that consumers are researching retailers and bargains and looking for discounts way earlier than ever before. And really, that discount cycle, it can often continue all the way up to Christmas, as well. And that creates real challenges, I think, for merchandising, for stock, for margins, as well. And obviously, for delivery sequences, as well, for retailers.
It's an ever challenging market, isn't it? So with that in mind, what's the difference between a successful retailer and one that is lagging behind?
So I think for successful retailers, it's all about them really understanding who their target audience actually is. They've done that research. They absolutely understand who their core customers actually are. And they can follow and understand who those customers are through every part of the customer life cycles, from that initial grabbing of interest, through advertising and social media.
As the consumer builds interest in the brand, in terms of their online presence, it's tailored towards that target audience, all the way through to the immediate action of buying and the follow through with delivery. Again, all tailored to that particular audience and what they want, what they need, and their interaction, as well. And a great example of this, I think, is Ocado. They've had a very successful year in 2017. They've got a great interface.
They're brilliant at spotting new emerging opportunities online, as well. So I think they're vegan offer and their free from offer in 2017 is a great example of that, as well. And indeed, they grew online visits, according to Hitwise data, by some 36% in 2017 compared with the category as a whole. Growing about 12%, still quite healthy. But clearly, Ocado outperforming.
And I think another great example is Charlotte Tilbury, who are a premium beauty brand, if you don't know those guys. And they've also had a great year, grew online visits by some 65% versus the category average of about 12% in that category. And again, it's through absolutely understanding their core customer, providing relevant, inspiring content online. A great service and delivery, as well. And also, protecting their brand values by also partnering with other like-minded retailers like NET-A-PORTER and Cult Beauty is [INAUDIBLE].
It's amazing to think that's a beauty industry yet, people are still relying on the expertise to buy it. So it's fantastic. Now to contrast that, who is lagging behind?
Well, I think unfortunately, a great example of someone lagging behind was Toys R Us, who clearly, that sad news recently of going into administration. And here, I think, was an example of an organisation that was faced with the changing ways that consumers were buying toys, moving to online, them lagging behind in terms of their online investment and presence. Probably they're left with too many retail stores and possibly the wrong locations, as well, and creating a really challenging set of headwinds for that business.
And that structural change happens from time to time. So for example, in the book sector, we've seen what Amazon has done, and new technologies like e-readers. And so again, if you look at the online visits data for-- or visit shared data for the likes of WHSmith and the book people, you see again, those challenges continuing with their online share going down in 2017, their online share of visits, that is.
However, I think one good news story in 2017 was Waterstones, who absolutely did understand who their target customer was. They gave the power of their store managers to merchandise the stores tailored to what they thought their local customers wanted around that particular store.
I must admit from a personal side, I've been into Waterstones and gone for a book. And ended up coming out with a gift, as well, and a card.
So it's covered a lot more than I expected from a bookstore.
Yeah. They've moved into gifts. And also, I think, they benefited as well from great product and increasingly, I think, they recognise that book buyers want to treasure that purchase. And these days, I think, publishers have recognised that, too, by having a great product in terms of embossed covers, and just quality around the book, as well. So in a way that's not been there before perhaps. So yeah, Waterstones has had a great year.
Now data seems to be the heart of your company. Now where have people found problems turning data into profit?
The first challenge, I think, would be that not all retailers or brands have access to the right data. So if you have a brand selling through a third-party retailer, you're one step removed from the customer. And if that customer is way more demanding and creating pressure, getting those insights on that customer really means you've got to invest in third-party research data and third-party panel data to understand who that customer actually is.
Conversely, there are some organisations that have got just way too much data, whether it be from their CRM systems, or e-commerce, social media, search insights, et cetera. And they struggle to put those insights together to create that picture of who the customer actually is. Emerging trends are online. And they struggle to take action against those insights when they can spot them, as well, and move fast, as well. So I think too much data can be a challenge.
So do we have the right skills and technology in place?
I think we do. I think there's some great low-cost technologies out there, as well as enterprise solutions. And many of the organisations I deal with are hiring the right sorts of people, the right skills in social media, digital advertising, e-commerce, and the like, as well. But I think those retailers who absolutely do very, very well are those ones that actually also have the processes in place, whereby they can combine those insights from different parts of the organisation-- digital, social media, in-store, et cetera.
Can you give me an example of somebody?
Well, I think Argos and Dixons Carphone are two great examples of organisations who I've come across who can recognise online insights. And then can actually put those insights into practise very, very quickly, as referred to their e-commerce offer.
Now, we know what they're all doing. What do Hitwise bring to the table?
Well, Hitwise are part of the solution because we actually have a very large online panel tracking what consumers are searching for and where they're visiting online. And this helps us actually, with our clients, identify who our target audience actually is, or describe that target audience in more detail in terms of their online behaviours, how they're behaving with the competition, how they're searching and researching for products and services.
And then our clients use those insights to help plan their search, organic search, and paid search strategies, their digital advertising strategies, how to tailor their content to counteract the competition, as well. Again, all about really understanding who that customer actually is and giving a much more relevant experience, as well.
Can you give me an example of that?
If you take maybe a premium retail brand often, a premium retail brand will have a core loyal customer base.
Something like John Lewis, for instance.
Yeah, John Lewis, Ted Baker, or somebody like that. At the same time, though, they need to appeal also to other target audiences, as well. So the aspirational consumer, as well, who occasionally might splash out and purchase with them. And maybe the discount shopper who's really looking for that Black Friday deal.
So the sorts of data that we have available can really help the likes of, say a Ted Baker, understand in detail the profile and behaviours of each of those three segments-- the core loyal brand follower, the aspirational consumer, as well as the discount consumer. And how to appeal through different advertising channels, search operations, merchandising offers carefully placed on the internet, really understand how to appeal to each of those three segments. But without diluting the brand values or confusing their core customer.
Now, we know that the retail industry is in a constant flux. Amazon is there. It's got a huge share of the market. How are people responding to them?
Well, I think first of all, you look at Amazon in the United States, they're a huge successful organisation, as they are over here. But the account in the US was something like 44% of all e-commerce activity in the United States. They have invested just recently in Whole Foods, which means they're further expanding into their Amazon Fresh offer, which is their grocery offer.
They're investing heavily obviously, via Amazon Echo and Fire Stick in voice search, as well. So collecting much more information on consumers. And I think we know that Amazon are great at combining their data assets together and making personal recommendations. And we all love them for their service, as well.
And what about in the UK?
In the UK, they account for about 25% of e-commerce. So one could argue that there's still more to come from Amazon in the UK. So how retailers respond is clearly critical. And I think they are responding in many cases very, very well. So I think those retailers that can offer a real inspiring offer online, and create a motion about what they're doing online, as well, can fight back.
So again, Charlotte Tilbury, Boohoo.com, the likes of those types of retailers doing very, very well in 2017 by having that inspiring type offer. I think service is also really important, as well. I think the likes of John Lewis, and Dixons Carphone again, they do very well because for some purchases, we want that human interaction. We want to trust the expert, as well, that we're getting the right type of advice either online or in store, as well.
Yeah, there are certain products that you do need to go into store--
-- and actually touch and feel. Is that still important?
Exactly. Absolutely, it is. And obviously, John Lewis, being never knowingly undersold, as well, has that price reassurance, as well. And I think from a convenience perspective again, Amazon don't need to win out there, other retailers are, or have responded very, very well. So if you take the example of Argos, they have the High Street and Retail Park presence. They offer Click & Collect, same-day delivery, as well as their great online presence. And the British consumer again, based on Hitwise data, loves that. And certainly, Argos continue to hold their own online, as well.
It's convenience all the way.
Well, Nigel, thank you so much for your time today. It's been fascinating. I really have learned so much about the industry. And I know there's more to come.