When brands and retailers talk about “data”, they’re really talking about the customer experience.

After all, it was CX that made data famous in the first place. Whilst brands have gone digital to slash costs and grow market size, consumers have usurped it as a route to better, more personalised experience for themselves.

This shift, in turn, threatens the once dominant position of the retailer in the brand-consumer relationship. Data-conscious, socially-active consumers are investing in direct relationships with their brands – and defecting from those that disappoint faster than you can say “Gen-Z just unsubscribed”.

So as the likes of BHS (British Home Store) crumble, and as ever more brands hire data specialists to sit on their boards, the message to brands is clear: start building your data infrastructure now, and prepare for an enhanced direct relationship with consumers. 

Big Data Will Kill the Retail Star

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 The Risk: Expectations of the Modern Consumer

 A recent report by marketing insights firm Trendera says that 63% of consumers want brands to treat them as “friends”. However, it is doubtful that it is possible to achieve this as a major retailer. The product offerings and target demographics of major retailers are so broad that they’re dealing with what may prove to be an unmanageable array of different buyer behaviours. And, especially in light of the BHS saga and Marks & Spencer’s tales of woes, it’s looking increasingly likely that this new demand will be met by brands going direct. To quote a recent Adweek article: “Whereas older generations of consumers pledged loyalty to one or two department store beauty counters, today’s young women are comfortable going on Sephora.com to purchase a product they only just learned about from a YouTube vlogger.”

Adweek goes on to list six other beauty brands who have already put a dent in the retail landscape by going direct. Market analyst Karen Grant of NPD Group says that the winning element here is the ability to personalise a product offering at scale. “It allows you to really get to know your consumer because you’re getting that direct feedback; you are able to cut down on inventory cost because you’re only building on demand, and you’re able to move really quickly and customise the line”.

The Reward: Streamlined, Social Selling

These days, the analytics provided by social media are a crucial element in the objectives that Grant describes. Most brands have now cottoned on to the critical importance of a direct customer relationship via social, but what they may not yet recognise is that social is one of the biggest drivers of the sales funnel, with up to 76% of people engaging with brands on social media before buying from a store.

The ability to monetize social media is being realised more and more and the rewards are plain to see. Cure & Simple and LDN Muscle are two newcomer UK brands renowned for making their fortunes predominantly from a strong social media presence. What is noteworthy is that they sell bacon and fitness products, both of which were already readily available (perhaps more affordably) in mainstream retailers.

Did more bacon start being consumed because people discovered Cure & Simple? It seems more likely that bacon rashers started disappearing from weekly supermarket orders. This throws a spanner into the works of one of the oldest adages of business: that you need to find a gap in the market in order to launch a brand. By going direct, you can steal a little slice of someone else’s market gap instead.

The Solution: Get Clever with Data

Data drives sales. This is why brands are now hiring data specialists, and why 70% of marketers predict a lift in brands hiring a Chief Marketing Technologist (or equivalent). This senior executive will be tasked with transposing data into a better customer experience – helping brands to protect their business from niche startups offering personalised digital experiences.

Going direct isn’t always easy for major FMCG brands – not least because they don’t want to harm their existing retailer relationships. But there are a host of ways such companies can embark on new direct customer relationships without threatening their retail partners. Whether it’s by hiring staff to support innovation in this space, or by partnering with a third party application like Adimo, the key to this process is to use the stash of accumulated data from website analytics and social media platforms, and start deploying it into real, direct-to-consumer retail strategy.

Beyond being mere token additions to a business’s marketing strategy, these efforts have the potential to quickly become a major slice of the revenue pie. To take one instance: Unilever took €53bn in UK revenue in 2015, and in that same year aimed to make 7% of that revenue from direct sales. 7% of £53bn. You do the maths.

The Warning: A Shifting Retail Economy

Just as the Internet left some of the more technophobic retailers behind, big data threatens to do the same to brands. Because whilst evidence from the US suggests that only 8% of retail sales are currently taking place online, this is part of a continuing trend towards an increasingly digital retail economy. The likes of Amazon will continue to thrive, but only for the sake of convenience. Consumers who prioritise a personal experience will increasingly find their needs met by brands themselves.

But that’s not the end of the story.

With entrepreneurial brands rewriting the economics of retail and the ongoing shift to online shopping continuing to place a downward pressure on pricing, newly-empowered brands will soon find they’re not competing with retailers solely on customer experience, but also on price.

Thanks to big data, better relationships – not only between consumers and brands – but also between brands and their investors, are not far away.