A New Kind Of Data Need For A New Kind Of Retailer

Written by Evan Schuman
May 18th, 2006

As retailers find dollars in having certain stores specialize in various Ethnic or lifestyle segments, they are often neglecting to update their store data to match, so finds a new Forrester Research report.

This is a matter of frustration among some consumer goods manufacture suppliers who now need to know more about those customers. A product that appeals to only two percent of shoppers should be viewed very differently, for example, if it happens to be appealing to 85 percent of Hispanic shoppers or 86 percent of vegetarian shoppers or 89 percent of senior citizen shoppers.

Some of the nation’s most influential retailers?including Wal-Mart, Kroger, BestBuy and Safeway?have been leading the sub-specialty way, creating for manufacturers both segment salvations as well as niche nightmares.

Many major manufacturers are “very interested in getting a better view of what is going on in the store,” said Christine Spivey Overby, Forrester’s principal analyst for consumer products. “Syndicated data hasn’t been used in this way and the shipment information only gives a view of where the product it up until distribution. It doesn’t really give the last mile view.”

“To build relevance with today?s shoppers, brand manufacturers from Kraft Foods to Sony need a clear picture of what?s happening in the store,” the report said. “This requires manufacturers to tap new types of retail data ? such as more granular point-of-sale (POS) and loyalty data ? that provides store-level insights about product movement and shopper behavior.”

The report?based on a Forrester survey of 80 retailers and interviews with consumer goods manufacturers?found that 68 percent of manufacturers “believe that retailers don?t share enough data or the right types. It?s clear that the sharing of more granular store and shopper data is in its infancy. Few retailers release store-level POS data directly,” the report said. “Store-level POS data enables manufacturers to tailor replenishment tactics, resulting in higher in-stocks and the capability to handle local assortments and promotions. But only 19 percent of retailers release store-level POS data on a regular or extensive basis. More than half don?t share it at all.”

The report added that even fewer share market basket data, which would help manufacturers influence pricing in niche locations. “Nearly two out of three retailers keep market basket data to themselves,” the report said.

The report also found fault with retailers keeping private loyalty data, citing a mere 8 percent of responding retailers who said they shared loyalty data with partners on a regular or extensive basis. “Retailers hold back loyalty data. Many major retailers offer either loyalty programs, such as Staples Rewards and CVS ExtraCare, or private-label charge cards, such as those from Target and Home Depot. However, few share this data with their suppliers,” the report said. “When they do share loyalty data, it comes at a price ? from a few hundred thousand dollars to more than $1 million a year, depending on category scope.”

Overby referenced the H. E. Butt chain that has a store in South Texas that focuses overwhelmingly on an Hispanic assortment of products. “Those stores have very different product mixes. Let’s say you’re Proctor & Gamble. You want to get a much better sense of how that product is moving in that particular store as opposed to the region,” she said.

P&G has been leveraging RFID to gain such insights. The consumer giant recently experimented with its Braun Cruzer electric shaver, tracking its movement in association with some promotional displays, said Jamshed H. Dubash, P&G’s director of Electronic Product Code (EPC) technology. Its view into 19 test stores was turned into a 61 percent increase in sales when promotional materials were used. Often, the displays never made it out from the backroom.

Forrester has dubbed the specialty trend micro-segmentation and stresses that the trend itself is not especially new, having been deployed across the country for the last 2-3 years. But although manufacturers and retailers are used to handling such niche focuses in advertising and marketing, the ball has been dropped with IT updating everyone’s CRM databases.

“Syndicated POS data supports strategic marketing, not field execution. Traditional syndicated data has defined data hierarchies like account or channel that facilitate strategic planning and reporting,” the report said. “This data can take days or weeks to prepare, and manufacturers can?t easily use it to make ‘in-flight’ adjustments to trade promotion and replenishment activities.”

Manufacturers “haven’t gotten this information back from the retailers,” Overby said. Why? Ahhhhh, that’s where things get a wee bit political.

Some of the reasoning is indeed technical, with the expected difficulties in associating so much additional data with customers and products. But a more significant issue has been a political hesitation to share too much information with a supplier that is also sharing data with direct rivals. The retail-manufacturer relationship is not exactly overflowing with blind trust.

“What really has been holding back a lot of this data-sharing have been questions about ‘Who owns the customer?'” Overby said. “If a retailer shares a lot of information about store-level products, the supplier could use it to position them against private-level products.”

But it’s not just outsiders who need a better view of demographic data. Beyond SKU mix, demographics can also impact technology deployments, such as the acceptance?or likely resistance?for self-checkout, biometric authentication, contactless payment, kiosks and smartcarts.

Knowing the demographic background of customers and stores could be the difference between declaring that a technology experiment has failed and whether it simply needs to be limited to the following 3,900 locations instead of chain-wide.

“Segments really can help you decide, from a retail standpoint, where you are going to be rolling out various technologies. You could very easily determine where you are going to put your kiosks,” Overby said.


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