Retail sales of any products, whether chainsaws or cable modems or cable-knit sweaters, are increasingly using big data to tweak design, inventory, marketing, and sales. Big data is the collection of information about consumer habits and choices that can be tailored to aid companies’ decisions about all aspects of their business including buying trends, moving stock, staffing, and more.
Use of public records searches can also be a source of big data: census information that tracks education levels, ages, family size, and population growth can aid businesses looking for places to expand or to find new consumers. Metropolitan areas such as New York City may make data on public documents available, allowing anyone to cull information on public employee salaries, permit requests, city-issued licenses, and locations of services like public housing, subways, and hospitals. Other cities may not be ready to sell resident data – a concern for those trying to meet requirements while maintaining privacy.
In the United States the trend toward protecting consumer data has political implications and is therefore slow to evolve at the highest levels. However, California has implemented its own Consumer Privacy Act set to take effect in 2020, which could become a model for other states. The California law mirrors the European General Data Protection Regulation law that went into effect in early 2018 and requires transparency in data collection, along with allowing consumers to erase their own data profiles. Companies that collect consumer data are also required to employ compliance officers under the European law.
A Forbes Technology Council survey of opinions on the topic found many companies already preparing for more states to follow California’s lead. Without a national law, the patchwork of state regulations will likely be challenging for most retailers and data collection firms, warned a council member.
Why is it important?
By 2020, data analytics is projected to be a $200 billion industry. Forecasts predict the creation of “chief data officer” positions in companies who will oversee the buying and selling of data, which by 2030 is expected to generate 180 trillion gigabytes of information. Over time, the collection and analysis of data will drive retail locations, customer relations, inventory, and platform.
What comprises big data?
When an individual visits a web page looking for information on buying clothing, or a car, or supplies for a cat, cookies on those pages collect information, or data, about that person’s browsing. Likewise, if that person makes a purchase, the information about that person and that purchase is gathered and added to a database. That database can be queried to return information on purchases and on consumers in a variety of ways that retailers can use to tailor their marketing to their target audience.
What is collected?
- Demographic information such as a consumer’s age, sex, household size, income, education, previous purchases, and interests;
- Tracking cookies on an individual’s computer provide a profile of the person and his or her browsing and online purchasing habits;
- Health habits can be derived from many connected devices and apps including wearable devices and tracking apps as well as prescription information sold by pharmaceutical retailers;
- Credit card companies sell data about customer’s usage and spending habits;
- Consumer credit agencies, including Experian and Transunion, sell data on consumers’ financial health, demographics, outstanding mortgages, credit scores, and more;
- Location data collected from cell phone companies (and sold to data aggregators).
How is big data used by retailers?
Basic uses of consumer data can segment customers into categories and target information to them. For instance, a new customer can receive a follow-up thank you with a coupon for their next purchase and more information about guarantees and customer service pledges. A different message may be sent to a customer who hasn’t ordered or shopped in a while, and a die-hard fan of the store or brand may be elevated to “ambassador” status with invitations to special sales or in-store events.
More sophisticated uses of consumer data include Target’s determining which customers may be pregnant according to their purchasing history; Costco’s warning specific consumers about products they purchased that have been recalled; and stores target-marketing hair products according to the weather forecast.
Location data sold to retailers by cell service companies allow shopping centers and individual retailers to push text messages to individuals nearby. Advertisements for stores and sales may be quickly inserted into an individual’s browser when searching or using a cell phone’s internet capability for other purposes.
Where Big Data is Going
Retailers that currently use big data to anticipate demand and set prices will increasingly tailor marketing pitches to narrow market segments in the future. Artificial Intelligence (AI) is continuously developed to anticipate and market to consumers according to assumptions made about the person’s needs based on their demographics, spending habits, and even medical history. One report says consumer data is being sold to hedge funds that make investments and collect huge revenues based on customer behavior.