What a couple of years it’s been for retail! Firstly, the pandemic drove everyone online and changed consumer spending behaviours massively. Then, just as the sector was beginning to return to a level of pre-pandemic normality, the cost of living has struck in full force. Now, new figures from the Centre for Retail Research have brought to light the effect all of this has truly had, seeing that some 15,000 stores are expected to close this year.
Suddenly, household budgets are stretched even more thinly and retailers have seen a drop in customer spending on non-essential items. With the cost of living crisis showing no sign of easing in the short-term, consumers are understandably more cautious with their spending.
Of course, these new pressures are impacting all retailers of all types which makes competition high within the sector as the battle for customers continues. This means retailers are all searching for the edge which will differentiate them from the rest; one key way to do this is tap into the huge amounts of data they hold, helping them make more informed commercial decisions and better target their customers.
To gain insight into how retailers are using their data, Cynozure decided to take a closer look in our latest Data Strategy Benchmark Report. This study surveyed people from not just retail, but also leaders in other industries including financial services, leisure and entertainment and the charity sector, to help identify some of the factors preventing organisations from fully embracing data.
One of the main findings from the report was that improving data usage is one of the best steps an organisation can take to boost its competitiveness and commercial decision-making. Acknowledgment of the benefits of utilising data is becoming increasingly widespread within organisations as 60% of all UK organisations want to improve their usage of data.
However, there’s a long way to go yet. Despite the majority of organisations aiming to improve data usage, there’s been a concerning decline in confidence in their data strategies – particularly in retail. Having a clearly defined data strategy can provide insights that help guide more accurate, faster decisions, allow for the streamlining of operations, improve productivity, and enhance customer service. All of which are vital to business growth.
In the first edition of our report, the retail sector was the best performing in almost every area of data management and implementation; however, this time round, the retail sector had the most scope for improvement. Overall, retail saw a huge drop in confidence in data amongst its leaders.
Looking at some of the factors that combine to provide the overall score highlights more specific findings around data management and usage in retail.
The scorecard asked leaders to evaluate whether a retailer’s data initiatives were aligned with business outcomes to provide greater clarity. This is vital if a retailer is going to meet its goals and targets by implementing improved data-based decisions. The retail sectors lower performance here is likely a result of the larger industry-wide struggles retailers have faced over the last 12 months. Given the hugely competitive market and reduced consumer spending, it may be that focus has been diverted away from implementing a data strategy and towards more immediate, everyday operational concerns.
Another major focus of the study is identifying whether organisations have the correct people and skills in place to leverage its data. The cost of living and reduced consumer spending has impacted retail’s ability to maintain its previous strong work in this area and again, retail had the most opportunity for improvement. Given the challenges of lower spending added to supply chain issues and costs, it’s likely that retailers have held off hiring in areas such as data as it has been viewed as a lower priority. This has led to a shortage of key skills and expertise in the sector at the exact time when retailers need to be utilising the data insights they possess to gain a competitive edge.
Retail is not alone though. The fast-moving consumer goods (FMCG) sector – which wasn’t included in the 2021 report – has entered the data confidence table right at the bottom, so has plenty of scope to benefit from a focus in this area, especially given reduced consumer spending. Like retail, the FMCG sector has faced its fair share of challenges over the last few years, from supply chain issues to reduced consumer spending, and these ongoing factors as well as the pace of change is likely to be hitting industry confidence in data.
The report also highlights the opportunities retailers and other organisations have to build trust in their data strategy and make improved commercial decisions driven by accurate use of their own data. Retailers have access to a wealth of data and – used correctly – it can help improve customer acquisition, understand changing consumer behaviour, improve the delivery proposition by better managing the supply chain, or even improve the product mix to better suit current spending patterns with people shopping little and often.
For retailers, data is one of the most powerful assets at their disposal. But retailers are at risk of failing to maximise the opportunity data presents without an effective data strategy in place to extrapolate the insights needed to inform commercial decision-making. Also, without a robust strategy, far from presenting an opportunity, data can become a burden and difficult to store, maintain or utilise.
With major retailers set to close in the latest blow to highstreets across the UK, and the cost-of-living crisis showing no signs of slowing, 2023 is going to continue to present big challenges for the retail sector. I believe the retailers who fully leverage the assets and insights they possess will be the ones to succeed and truly set themselves apart from their competition.
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