Through a special arrangement, what follows is an excerpt of a current article from Retail Paradox, RSR Research's weekly analysis on emerging issues facing retailers, presented here for discussion.
The amount of information available to retail about customers and products has been growing steadily (some would say explosively) over the last decade. But I think that 2013 will be the year when the remaining gaps in customer understanding will be closed by leading retailers, setting the bar for followers in years to come.
Will retailers be able to turn all of that information into useful insights? I see three main opportunities for retailers to transform their enterprises in 2013 based on new ways of measuring their operations:
Customer insights into merchandising via social media: Retailers can now look back at historical social media interactions with customers and trace correlations through to product purchase. That means that 2013 may well be the year that leading retailers turn to social media, not for its customer service or promotional opportunities, but for its predictive potential. How many product "likes" does it take to move the needle on customer demand? How do customer reviews — positive or negative — impact product sales over time? Can customer sentiment be used to predict store traffic, ad campaigns, or product assortment?
Hidden demand in the supply chain: Not only is flexible inventory fulfillment changing the game, it is demonstrating that the demand mismatch problem is costing retailers way more in lost sales than they suspect even in their wildest dreams. Some of the initial work that RSR did in estimating the value of lost sales — of capturing those lost sales through inventory flexibility — underscores that just leveraging store inventory to fill online out of stocks can generate massive sales numbers. Think about what retailers could do if they could capture the same kind of demand that is going unmet in stores where, for some retailers, more than 90 percent of transactions still occur.
No more store black box: What retailers really need is the store equivalent of online analytics, and some will get it in 2013 whether through video analytics or some kind of mobile phone tracking technology. Having this kind of information will be game-changing. Retailers have long-held assumptions about the role of store associates, about traffic, about conversion rates, and all of these assumptions will now be able to be questioned, examined, and proven right or wrong, thanks to store tracking technologies. At a time when the store is on the ropes, retailers are in a position where they might be far more open to examining their long-held assumptions about stores — a perfect storm of opportunity.
There are so many questions that should be asked and answered by these new data sources, far beyond "How many fans do I have on Facebook?", but if no one asks the right questions, no one will get the game-changing answers.
Do you expect retailers to make more progress capitalizing on customer data or inventory data in 2013?