Five ways retailers will embrace the data economy in 2023
In an increasingly complex and competitive market, data offers substantial opportunities for retailers and CPG companies to diversify and grow.
Retailers have it tough. Not only have they weathered a pandemic that created once-in-a-generation supply chain disruption, but now, they’re gripped by an economic crisis that’s seen consumer demand drop to historic lows, meaning most are fighting even harder for market share.
Gone are the days when brands could stay competitive through innovative ecommerce and outstanding customer service. To stay relevant in 2023 and earn the custom of those reluctant to spend, retailers need the agility to manage macroeconomic trends. Failure to do so will only see more recognisable brands hit the headlines for the wrong reasons.
Here are five ways I predict retailers will embrace data as a key differentiator in 2023.
Immersive experiences will encourage new engagement
As macroeconomic factors continue to increase consumer uncertainty, it’s more important than ever for brands to collect, process, and analyse insightful customer data. But in return for their data, customers expect greater personalisation.
One innovative way to do this is through in-store immersive retail experiences. Think of it as blending the ecommerce and bricks and mortar worlds, where technology can create unique and differentiated shopping experiences that improve CX.
Moreover, these experiences create a significant opportunity for brands to capture critical first-party data on their customers’ habits and needs – funnelled through propensity and recommendation models to fuel unique insights.
It’s something I recently discussed with River Island CIO Adam Warne. By using radio frequency identification (RFID) tagging in its new “smart” changing rooms, River Island offers its customers ecommerce-style insights and gains invaluable product performance data in return.
Data monetisation will offer new diversification possibilities
Data monetisation isn’t a new concept. In fact, retailers have been monetising sales and stock data for decades. But there’s been little appetite to drive revenue from anonymised customer data due to security and compliance concerns – not to mention a false perception that customers will object to their data being resold.
As more brands move to the cloud and realise the sophisticated data governance and sharing capabilities it offers, 2023 looks like the year where data monetisation will dominate boardroom conversations.
By monetising their data correctly – as demonstrated by US retail data science company 84.51˚ – to make better business decisions, and streamlining how consumer packaged goods (CPG) companies can acquire this data, brands stand to benefit from a significant new revenue stream.
Only the top retail media networks will survive
According to a recent estimation by BCG, the retail media market – where third parties buy advertising space on a retailer’s platform – will grow by a quarter each year over the next five years. And it will account for 25% of digital media spend, or $100 billion, by 2026.
This shouldn’t come as a surprise. As costs are squeezed, and online growth slows, retailers are increasingly looking beyond traditional channels to launch or expand their retail media platforms.
But this also means that there will be substantial competition in the space. As more brands realise the opportunity to attract CPG buyers without needing to scale, it’s likely that only between the top 5 and 10 retail media networks will survive.
Those that thrive will offer maximum value through greater performance measurement standardisation, leading to a booming, albeit concentrated, advertising ecosystem.
Watch this space.
More brands will experiment with data tracking to measure sustainability
As shoppers become more ethically minded and demand detailed product sourcing information, retailers have made substantial efforts to highlight their environmental, social, and governance (ESG) goals to customers, investors, and the wider market.
While there’s no silver bullet solution for tackling sustainability, the ability to report, compare, benchmark, and analyse ESG performance against predefined goals will be critical this year.
This is because, despite economic headwinds, the most savvy retailers and CPG businesses will maintain and even increase their focus on sustainability, tying goals to consumer sentiment and even executive compensation.
For example, I predict we’ll see companies experiment with new tracking metrics – such as the percentage of empty space in ecommerce packaging and how to reduce returns. We’ll also see a significant rise in organisations looking to enhance how they use data platforms to measure and communicate their progress in meeting sustainability goals.
Open data sharing will bolster disrupted supply chains
As retailers strive for just-in-time and just-in-case fulfilment to combat shortages and oversupplies caused by supply chain disruption, brands and CPG companies will double down on open data sharing this year to help reduce and even avoid these extremes – building greater supply chain resilience and driving sales.
The ability to enable frictionless data collaboration without moving or copying data is transforming how data is used across retail – helping optimise stock levels and ensuring the right products are available when and where customers want them.
These data-sharing collaborations between retailers and CPG organisations are helping reduce oversupplying while offering more products to customers. It’s something grocery retailer Albertsons and food manufacturer Kraft Heinz have used to great success, sharing data between their organisations to reduce out-of-stock items by 20%.
A cloud data platform could be your best investment this year
While these five predictions hold significant growth and CX potential for retailers and CPG organisations, they also all have one thing in common: they rely on accurate and timely data.
One thing for certain is that maximising cloud data platform investment is an ideal way to tackle market fluctuations and deliver enhanced, personalised, and more immersive customer experiences in 2023 – and beyond.
To find out more about Snowflake and the services they provide to the retail industry, click here.
This article was also published in The Retailer, our quarterly online magazine providing thought-leading insights from BRC experts and Associate Members.