Instrumented Interconnecteds Intelligent

Michael Haydock, Vice President, IBM

Michael Haydock, Vice President, Customer Intelligence, IBM Global Services

By Michael Haydock 

Making a buck is becoming progressively more challenging for brick-and-mortar retailers. Nearly two decades after Amazon.com and others began to chop away at the underpinnings of the traditional retailing business model, the pervasiveness of smartphones, the emergence of the digitally-empowered consumer, and the prospect of one-day delivery make the future of physical retailing seem ever more tenuous.

I use the word “seem” advisedly, because I believe smart retailers will learn to thrive in the future through a combination of Big Data analytics, omni-channel strategies and continuous reinvention.

These high-stakes issues are top of mind this week as the National Retail Federation stages its annual convention in New York City. IBM’s CEO, Ginni Rometty, is delivering today’s keynote address. She’ll describe how Big Data and changing consumer expectations are intersecting with a confluence of cloud computing, analytics, social and mobile to fundamentally reshape commerce—with huge implications for retailers.

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Personally, I couldn’t be more excited about the future of retailing. Through the use of advanced technologies, retailers will understand customers better and give them what they want when they want it. At last, the industry is on the verge of delivering on the long-promised goal of being able to address consumers as individuals, not just lump them together in sometimes ill-fitting market segments.

As a data scientist, I’m pleased to see the impact that Big Data analytics is beginning to have on retailing. This technology is the key to unlocking the mysteries of human behavior and understanding why people buy what they do when they do it.

Today, in many cases, retailers have abundant opportunities to know who their customers are and interact with them as markets of one. Mobile computing apps make it possible for businesses to spot where their customers are at any given time—with their permission, of course. Loyalty programs enable them to view customer’s historic buying patterns. Put the two together, and you can engage with customers in the moment and approach them, either in stores or on line or via mobile apps, with offers they’re likely to appreciate.

Big Data analytics makes is possible to anticipate customers’ wishes. By studying the patterns of individual’s behavior and correlating those patterns with knowledge of what’s happening in the world around them, retailers can begin to predict how they may act in the future. Armed with those insights, retailers can better address customers’ changing needs and desires or even attempt to modify their behavior.

My team at IBM uses Big Data analytics to understand how weather affects the buying behavior of individual consumers. We correlate sales data with data from the U.S. national weather service. Using this kind of analysis, retailers can tap their loyalty program data to identify which customers react to weather in predictable ways. Armed with this information, they can offer them targeted, weather-triggered promotions.

Social media presents a great opportunity for retailers to understand customers better. Stores can analyze postings by individuals that indicate they’re shopping in their stores. By finding patterns matching the time of day with the demographic cohort that the consumers belong to, retailers can quickly shift their merchandizing strategies—perhaps by using large digital screens to display items and prices tailored for a particular type of customer.

These days, most large-scale retailers operate online stores in addition to their physical stores. But, all too often, they treat these two modes as separate entities. That’s a missed opportunity. These Big Data analytics techniques become even more powerful when you integrate the physical and virtual worlds through omni-channel marketing techniques. In order to deliver more consistent, convenient, personalized and relevant experiences to customers, it’s vital to coordinate all of the customer touch points—promotions, stores, Web sites, call centers, advertisements, mobile applications and social media interactions.

In fact, this approach is critical to addressing the challenges posed by the phenomenon of “showrooming.” Increasingly, consumers examine merchandise in a brick-and-mortar store but then use their mobile phones or tablets to shop online for a better price. I advise retailers to think of the customer’s smartphone or tablet not as the enemy but as an extension of their store. With buy-in from shoppers, they can become aware of the customer’s behavior in the store and engage them either through an app or by having a clerk approach them. In either case, they improve their chances of closing the deal rather than losing sales to an online discounter.

If you’re interested in learning more about omni-channel retailing, read a new study by IBM’s Institute of Business Value that reveals how consumers around the world want retailers to interact with them.

We’re in the early days of omni-channel marketing. I’m convinced that by harnessing Big Data analytics, mobile computing and social networking, retailers will find countless ways of engaging customers more successfully. It’s important to experiment aggressively. Try something; succeed or fail; learn; and try again.

Pundits never tire of declaring the demise of brick-and-mortar retailing, yet more than 90% of retailing transactions in the United States are still done the old fashioned way, and retailers keep reinventing themselves. Look at Best Buy. A year ago, analysts predicted that the one-two punch of Amazon.com and Walmart would floor the electronics retailer. Instead, under new management and armed with powerful new ideas (including data analytics), Best Buy is resurgent.

I feel privileged to work with some of the most creative retailers as they transform the shopping experience in the 21st century.  They understand that to remain relevant they will have to continuously reinvent themselves. The best retailers will thrive. And consumers will be the big winners. They will get what they want when they want it at competitive prices.

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