Retail is one of many industries jumping on the big data bandwagon. The move seems only a natural extension of what already takes place in stores: thousands of loyal customers purchasing millions of products annually. Retailers can learn a tremendous amount about customers including buying tendencies, age, race and address (store membership records). Since the advent of sophisticated computer systems, some retail chains have taken big data into stride, and the results eerily show just how much retailers know about customers. Some retailers have impressively harnessed customer data to improve quality of service. Others, unfortunately, have hilariously bumbled through the opportunity. Here are a few examples.
Oh, How We Love Costco
The Huffington Post recently touched on one of America’s most beloved retailers, Costco. Costco needs no introduction as the big-box retailer with free food samples, to-die-for food court and excessively large toilet paper packages. Most people know this. However, most people don’t realize just how active Costco is in the big data game. Every purchase by every customer is tracked and meticulously recorded by the giant retailer. Costco uses this information for a variety of purposes. One practical use is to contact customers in the event of product recalls or other safety concerns about purchased items. For Costco, it was a recent fruit recall by a California-based packaging company.
What Went Right
Following the recall Costco immediately went to its records to determine which customers had purchased the tainted fruit. Within 24 hours Costco knew which customers were potentially affected by the recall. Phone calls and emails began to be issued to customers, and what normally is a retail nightmare turned into another opportunity to strengthen customer loyalty. Customers praised Costco’s response to the situation and expressed appreciation for the effort. Maybe big data is a miracle, turning a product recall into a point of praise. Whether or not this is considered creepy, you can sleep well at night knowing Costco has your back with the help of big data.
For all the good examples, there seems to be just as many bad ones. Retailers overreach using big data platforms, to the point of violating privacy or coming across as, well, creepy. It is even more common to hear of data breaches and loss of customer information to nefarious hacking groups. In these instances some wonder if the benefit of big data is really worth the potential risk.
Take Away From Target
Take Target for example. Target is known lovingly as the ‘upscale’ version of Walmart. Target is one of several companies to recently succumb to a massive data breach that left customers seething. Any data breach is a worst-case-scenario for retailers. For Target, the breach left millions of customers and their credit card information exposed.
Perhaps it wasn’t just the data breach itself that ruffled customer feathers, but the slow and somewhat calloused response. Affected customers received what would later be referred to as “the letter”. Target belatedly sent a letter to inform potentially affected customers. Addressed from the CEO, it read “I am truly sorry this incident occurred and sincerely regret any inconvenience it may cause you.”
The Misuse of Big Data
Target misused big data in two ways. First, it failed to protect the massive stores of customer data in the company server. If a large retailer thinks it has the ability to utilize customer data to provide a better buying experience, great. But there needs to be an assurance that data breaches are avoided at all costs and minimized when they do eventually come. Second, Target used its customer information to send notification of the breach, but the notification was at best lacking sincerity. What is the point of big data if it is executed poorly?
Let me refer to my first question: Can big data save retail? The answer, begrudgingly, is that it depends. It depends on how savvy companies are that use big data. All-in-all big data has the potential to revolutionize retail and reinvent how companies interact with consumers. The result can be a more personalized and enjoyable experience for buyers.
However, big data isn’t a shoe-in by any means. Recent examples like Blockbuster and Albertsons have proven that corporate giants can struggle in a digital age. Several other companies are floundering. Radio Shack doesn’t have enough capital to close the stores it needs to close. Sears is spiralling downward uncontrollably with an executive team riding down with it. Companies will do well to follow the example of Costco and incorporate customer information to create more loyalty and trust. Avoid common pitfalls like assuming big data by itself is the answer. Target tried and showed that is not the case. Couple big data with common sense and a sincere desire to please the customer, and the results will come.