Photo: Gap Inc.
Gap CEO says retailers not turning in-store data into action
While measuring clicks and other online data is bringing more personalized experiences to customer’s online, Art Peck, Gap Inc.’s CEO, argues that retail is far from taking advantage of in-store data.
“Stores are the deepest form of customer engagement,” said Mr. Peck last month on Gap’s second-quarter conference call. “And one thing the industry is not talking about, which is super important to me, is that they are source of an immense amount of customer data.”
Mr. Peck said that across its banners (Gap, Old Navy, Banana Republic, Athleta), Gap attracts two billion customer visits annually, and its co-branded and private label credit card gives the company “great intimacy with those customers.”
Gap offers incentives in order to capture customer information in its stores. In a subset of its brands and stores, clienteling is available that provides another level of insight.
“The value of converting all of this data to insight and action is huge,” added Mr. Peck. “A simple example is that migrating just one percent of our single-visit customers to be multi-channel, multi-brand represents $200 million of top line on an annual basis.”
Toward that end, the company has seen a recent success with BRIGHT, a loyalty program that lets members earn points for shopping at any of its banners.
Gaining a “longitudinal 360 view” of customers helps Gap leverage both in-store and online data into personalization to create a more relevant digital experience. Said Peck, “The rollout of personalization features across our brands is being staggered as we continue to learn more and operationalize it, but we have already deployed personalized experiences to over 250 customer segments, which has resulted in a five percent improvement in conversion when compared to a non-personalized experience.”
Finally, Gap uses data to target its best customers as the majority of the company’s marketing spend has shifted to digital channels to drive a more “surgical” approach to acquisition, activation, retention and frequency. Said Mr. Peck, “It’s driving a growth in our customer file, growth in our traffic and growth in our business. And it’s improving the productivity of our marketing spend at the same time.”
Discussion Questions
DISCUSSION QUESTIONS: Do you agree that retail is “not talking about” the value and potential benefits of capturing in-store customer data? Has in-store data become accessible enough to support targeting and personalization efforts both in-store and online?
Poll
BrainTrust
Zel Bianco
President, founder and CEO Interactive Edge
Rich Kizer
Principal, KIZER & BENDER Speaking
A resounding and unequivocal YES. Retailers have spent a considerable amount of time, energy and money capturing vast amounts of every imaginable form of data, but having data and turning it into a meaningful or actionable insight is still substantially unrealized. Retailers need to realize that capturing data is the easier part; turning data into valuable/actionable insights is the harder, and more important work. Data accessibility and visualization has certainly improved, and some retailers are reaping the benefits, but in my experience this is still a large and substantially untapped opportunity for many retailers.
What I see from Gap’s marketing is at odds with what Mr. Peck describes. What I see is an organization that sends far too many emails, none of which are personalized and all of which simply push discounts and deals at the customer. I don’t doubt Gap does gather a lot of customer data, but I am not sure that it’s particularly good at leveraging it.
I have to equivocate here. I think retailers are already talking about it. They’ve been TALKING about it for years. But it’s not like you can just flip a switch and “start collecting in-store data.” It’s a lot more complicated than that.
I think the real problem with in-store data is that it costs a lot to get it, and get it reliably across the store estate. But even as retailers can talk about “$200 million yearly” in top-line benefit, there is little willingness to make the investments to capture that.
I’ve been asking this question at dinner discussions for many years, and have never heard a retailer answer “yes, we do a great job at using data from stores.” One reason is that nearly all communication is one-sided, from corporate to customer. We need to develop better protocols to capture what’s happening in the store, and monetize it.
Retailers have had loyalty program information for years and rarely turned it into anything but a two-tiered pricing program (thanks, Scott Langdoc!).
Whatever Gap does or doesn’t say it’s doing, personalization feels a lot like the weather … everybody talks about it and how important it is, and the number of them actually doing anything about it is — just about none.
And for what it’s worth, Amazon following up my browsing history with emails after I’ve looked at a product is borderline creepy, not personal. Personalization is complicated and subtle. I don’t know that we are capable of it en masse yet.
I’m with you, Paula! Those follow-up emails from Amazon are creepy.
Mr. Peck is most definitely right about one thing — stores are the deepest form of customer engagement. However I find it ironic that this post is not talking about all of the new technology related to customer tracking and flow analytics in store. With today’s sophisticated beacon technology it is possible to track customer movement in-store and even which products they touch. This creates real-time data on their paths, response to displays, what they view, interaction with mobile and a host of other conversion variables. Are retailers not talking about tracking in-store behavior because they fear customers will think they are spying on them?
There is no question that retailers are a long way from realizing the potential of their transactional data, much less the contextual data that makes it even more valuable (and powerful) to growing their business.
That said, our proprietary research reveals that retailers are making progress, as illustrated by Gap above, largely due to the pressure from Amazon to deliver a better customer experience.
The main reason for this has been that retailers have not been willing to share their data on a regular basis. Yes, there are areas where they can create value internally but when combined with the data that and expertise that their suppliers bring to the table, a great deal more can be gleaned to generate benefits for the retailer, the supplier and the consumer. This needs to change in order for real value to be created.
Well he’s right about that, but isn’t that the primary job of a store associate? I.e., Understanding their customers and finding out what they like/want/need/don’t like? Are we suggesting that said associate then runs to a computer and enters all that?
I think it’s less about “capturing” all the data in stores as it is about capturing some better people on the sales floor. Or more executive store visits. For your first clue, go to an Apple store or Sephora — then go to the Gap. That’s the delta that needs to be solved. That and, of course, the perennial merchandise dilemma — although I must say that seems to have up-ticked for them as of late. Still, I’d recommend all executives spend more time in the stores talking to associates and customers, then take that data back with them to every decisive meeting in SF.
The whole premise that we can build relationships by regarding the object of that relationship as “data” is really suspect in my opinion. It’s kind of like using a medical school anatomy text book as a guide to improving a sexual relationship. You simply cannot build a personal relationship by de-personalizing people. Just maybe some retailers know that intuitively and thus they collect data (because they’re supposed to) but don’t use it because they know there’s a deeper and better path to human connection. All they have to do is find it.
Mr. Peck may be correct about a shortcoming he sees in his own company, but he is painting the entire industry with a broad brush. There are clearly some ways to communicate (and to promote) being used by retailers with the data science resources to turn POS information into targeted action.
Retail does talk a lot about the value and potential of in-store customer data, but what it doesn’t do is use it. At least not with me.
Independent retailers do not have access to the sort of data that’s available to the big guys, yet they use their anecdotal data to personalize customer offerings. I see relevant indie offers all the time.
I am a frequent customer in many chain stores that track data, but I have yet to receive a personalized email offer from any of them, The Gap included. Throwing a “Hey Bender!” at the beginning of the email is about as personalized as it gets.
All the data in the world doesn’t seem to be helping the Gap divisions comps. They seem to have retreated into VERY safe product and color. Applying a little instinct and intuition to 5 percent to 10 percent of their assortments would lift the whole store substantially. Risk avoidance to the point of boring is not a solution in today’s market.
Jeff, I could not be more reaffirmed to see your comment about “Applying a little instinct and intuition to 5 percent to 10 percent of their assortments would lift the whole store substantially.” Rather than discussing why retailers don’t use data, perhaps we should be discussing why retailers don’t use their God-given instinct and intuition!
Thanks Ian. Customers don’t shop for data. They shop for product. Until data turns into learning and learning turns into new and improved assortments, not much is going to happen on the sales line. The Gap needs to remain true to their brand promise, but a little fun and a touch of the unexpected would be welcome.
Right, Gap is lecturing retailers on what it takes to be successful. BRIGHT is not the tent pole to right the brand, shopper engagement at the store level is with fashions that don’t look like Target or Walmart.
It is one thing is to talk about being a consumer insights-driven organization and another thing for Gap and other retail organizations is to actually operationalize and capitalize these valuable pieces of data. Merchandising for most of these retail organizations continues to rely on traditional historical data and not the advanced analytics such as attributes and multidimensional data points, etc. that are out there.
The value of in-store data is extremely important, however, the path to purchase is not so linear in nature with the advent of BOPIS, showrooming and all the various physical and digital customer journey paths. We’ve heard that retailers are taking a serious stance about leveraging in-store data yet, in reality, it’s very much a cultural and change management change that has to originate from the top of these organizations. There isn’t an easy button to start to operationalize things.
Retailers struggle with in-store data but are challenged to take action on the data — and herein lies the rub. It’s clear there is value — even more than online data capture, but:
Walmart, for instance, collects and overlays data about local weather conditions, local events, social media, economic events, Nielsen ratings and more. The company still can’t apply that data to meet the relevance needs of individuals. Retailers have limited data for deep personalization. Knowing four or five data points about an individual gives little to work on to determine what they plan on purchasing next. The retailers must turn to tech companies and potentially AI to help manage, collect, and gain insights from their data. It will be an interesting market shift to those who can master this trend.
Retailers and brands alike need to look at the challenge in a completely different way. Identifying and understanding what problem you want to resolve needs to be the first phase. Once the problem is understood, then you need to identify the data you need to resolve the problem. Just collecting data quickly becomes an expensive and meaningless exercise. Identify and define the experiments and then leverage the appropriate data to resolve and/or support the resolution. Often times this leads to redesigning the workflow and status quo. The answer is often solved by “small data” supporting a new workflow.
The types of in-store data points discussed in the chatter mentioned — yes, we’re talking about it, incessantly, but resulting in few implementations because of terrible tech — there is a diverse ocean of data that could be collected in-store, but I’d argue that some of the most valuable pieces of data you can gather have nothing to do with personalization and individual customer activity. (Though that is important.)
For instance, capturing those lowest 10 percent of stores to close at the end of your FY, not based on sales alone but also staffing efficiency, foot traffic drawn by marketing and the ability of staff to convert traffic to customers. If retailers can’t start out tracking those metrics, they’re going to have a helluva time trying to get any deeper insights on a customer-to-customer basis, because they don’t know which stores to invest in and which to close!
A peek behind the curtain of said tech — I work with Dor, which is a peel-and-stick people counter that installs in about three minutes. It doesn’t have to be difficult! The tech for gathering in-store data does exist, it’s just been very clunky and expensive until recently. Any retailers who got discouraged by a horrifyingly huge quote from some beacon tech or camera analytics provider a few years ago should try looking around again. Might be surprised what you find!
I couldn’t agree more with the sentiment. I think there are three legs to this stool. First the retailer must collect, enhance and improve their customer data to generate insight. In other words, they need to create a sustainable pipeline of insight. The second leg is they have to fix their inventory problem. To take advantage of the data from the store they have to have in-store inventory accuracy that is approaching 100 percent and real-time or near real-time. Then they have to make that inventory visible at digital/internet speeds. The third leg of the stool is to put the customer and inventory insight in the hands of both customers and associates through digital means. The result, mid-single digit same-store comps and a five point improvement in NPS.
I don’t see Gap as some shining example of a brand that’s turning in-store data into action so his comments are interesting. However I feel retail has certainly been talking about the value and benefits of capturing in-store customer data. A lot of brands do capture that at some level. There’s always a lot of talk about what could be done with it. When it comes to action we either don’t see it, or if Gap is the example of it in action then clearly there’s still a long way to go. I suppose the third option is that there are some brands implementing it in such a seamless and intuitive way that we don’t notice it, but I’m not convinced of that. I do think he’s onto something where he talks about stores and deep customer engagement though, but again a lot of retailers just pay lip service to this idea.
Physical retail is difficult. It requires the training and maintenance of human beings to drive what Peck refers to as “the deepest customer engagement channel.” A store on its own is not a deep customer engagement channel. Systems, process and people make that happen. Many retailers are taking the path of least resistance on several forms of in-store initiatives — data capture being a deadly one.
I remember what one woman said in our focus group at Global Shop: “I want to date social media, not marry it!” True personalization offers are great. But when invasion occurs on a computer screen based on characteristics, preferences and so on, it becomes creepy. Great and sincere personalization is accepted. We must practice good taste.
Retailers are “talking” about customer identification and personalization, but few are doing it well today. If retailers have properly integrated their data across all channels in real-time, in-store data is available and integrated with all other channels. The other key requirement is customer identification in the store. One of the best ways to encourage customer identification is through a reward-rich loyalty program that is integrated with a mobile app and mobile payments.
Retailers that identify customers when they enter the store and equip their associates with the proper mobile tools can personalize the shopping experience based on customer context. Customer context is the interrelated factors of customer insights and environmental conditions the make the shopping experience relevant. It enables retailers to personalize the shopping experience based on customer preferences, purchase history, their closet, their most recent online browsing history, time of day, weather and their physical location – all based on real-time information and personalized to create a bond with these valuable customers.
This customer data is critical beyond just the in-store experience. It ripples through the entire supply chain. Inventory optimization requires customer and inventory context. Demand should be determined by the products a particular customer chooses based upon what product selection surrounds the purchased item. This concept really changes how we buy online and ship from store, buy online and pick up in-store, how we plan merchandise, how we allocate it and replenish it. We need to leverage new math, real-time customer and inventory information to create actionable, next generation retail solutions.
Retailers large and small are certainly talking about potential benefits of capturing in-store data, but very few are doing much with it. There have been some great test cases like the Fabletics stores that require you to create an account and log in and have that in-store experience (what you try on, what fits, etc.) connected to retargeting, emails and future site experiences. The Amazon Go stores have cameras and sensors everywhere so I imagine they are capturing and most like analyzing that data to the millionth degree. But overall, he is right and it is most likely a factor of prioritization, technology and lack of resources to asses whatever data you can capture.
For Gap specifically, I almost had to chuckle at his statement on an earning call no less, that they are trying a more “surgical” approach to acquisition, activation, retention and frequency.” My emails, my site experience and the rare times I walk into a Gap store are still nothing but messaging around 40% or “sale, sale, sale.”
I find Mr. Peck’s comments odd when compared to what I hear from other retailers and, frankly, what I see Gap doing in their marketing. In fact, I’d suggest he’s guilty of what he accuses the industry of — retailers are always talking about personalization and using data to better serve customers. However, few are successfully implementing this and even fewer are realizing measured benefits. Why? Not for the lack of systems and solutions available to retailers, but more so because of a lack of people employed at retailers with the knowledge to interpret and act on the data! More employees with the right background in data analytics are needed for retailers to leverage their large volumes of customer data.
I find it interesting that Mr. Peck focuses so much on the transactional data generated by their customers with no mention of the in-store analytics technology available today to map the customer journey in the store. This information can be just as valuable, especially for apparel retailers. Knowing the dwell time in front of certain displays, understanding the flow in and out of fitting rooms and analyzing abandonment rates, and the list goes on and on. This data, when combined with purchase history, could be used to build more meaningful loyalty programs and offer better experiences in-store for customers. Yet he fails to mention this. All of these areas need to be covered by retailers who wish to leverage their customer data to improve their revenues and customer satisfaction.