The power of data and the value of trust
- Written by Andrew Fraser, Managing Director, APAC at Lightspeed
It could be argued that not since the inception of the internet itself has anything had a greater impact on business success and strategy than data. Businesses of all sizes in every industry are using it in a myriad of ways, to improve both internal operations and customer experience. The use of data in retail, an industry that contributes 4.1% of Australia’s total GDP, is a perfect example of its potential - but an important reminder of key considerations.
From Australia-wide retail chains to rural, family-run independent businesses, retailers are tapping into data. Whether it's to segment customers and analyse inventory demand and forecast sales, or review marketing channels or tie together their in-store and online activity, data is crucial. Here’s how, but why trust must underpin the whole approach.
The power of data
There are few - or arguably any - departments and processes within a retail business that cannot be enhanced with data. These can largely be placed into two buckets; internal data to improve operational efficiencies, and shopper data to improve customer experience. Let’s focus on the latter.
Data enables retailers of all sizes to develop detailed pictures of their shoppers, and their key habits and preferences. This can include anything from what they purchase, how often they purchase, and how much they spend, to whether they shop online or in-store, whether they refer a brand to their friends and even where they discovered a retailer in the first place.
With all that data, retailers can understand what that particular shopper wants, so they can give them more of it. For example, if Shopper A purchases infrequently, but buys many items when they do, a retailer might want to promote the launch of their new autumn and winter collection. Or if a Shopper B shops regularly, but spends considerably less, that same retailer could promote discounts to shift their end-of-season summer stock.
When retailers have that level of intel on their shoppers as a collective, it helps them do things like manage their inventory, create sales forecasts, devise marketing campaigns and more. It also enables them to improve customer experience in less direct ways, too. For example, if a retailer has high levels of cart abandonment - which their data can reveal - it might be a sign that they need to streamline the payment process and reduce the number of form fields.
As retailers contend with the impact of economic pressures and the well-publicised cost-of-living crunch, data’s ability to drive incremental revenue and improve business performance is crucial. By combining approved customer data with the sales data that flows through a POS system like Lightspeed, they can create those deep insights into their customers, which can turn into deep benefits for both them and their business.
However, as businesses strive to enhance operations and revenue through data collection, a critical question arises: how can they do so safely and considerately at a time when scrutiny - from both consumers and policymakers - is increasing?
The value of trust
Picture this. The Australian Cyber Security Centre (ACSC) received one cyber crime report every six minutes in the 2022-23 financial year. The 94,000 reports it received represented a 23.7% increase from the previous financial year. After high-profile incidents such as Optus and Medibank, scrutiny in Australia is at an all-time high.
So much so, in fact, that the government is extending the jurisdiction of The Privacy Act 1988, which will see many previously exempt retail businesses liable for heavy fines and penalties for non-compliance. Retailers should speak to a legal advisor to understand their requirements. They should also prioritise trust with their customers.
As data breaches become commonplace, consumers are starting to question why data collection is necessary in the first place. According to data from McKinsey, 71% of consumers expect companies to deliver personalised interactions and 76% get frustrated when this doesn’t happen. Evidently, they understand the benefits, but it must be built on a bedrock of trust and transparency.
Not all trust-related issues arise due to ill-intention; often it is just oversight or complacency. There are some simple best practices that retailers can adopt. For example, to boost transparency, communicate openly and honestly about what data they collect, why, how they use it, and how they store it. And when they store it, do so in accordance with all local regulations.
Retailers should also be very cautious about sharing data with third parties, without following relevant local laws and seeking customer consent first. Customers value communication, and when retailers are upfront about what they’re doing and why, customers will be more inclined to consider the benefits for them, and then opt in.
If they can see the value that sharing their data has for them, and the retailer is taking appropriate measures when it comes to regulation, communication and security, data can be used for good on a foundation of trust. Collectively, data and trust’s ability to drive customer acquisition and, crucially today, customer retention is very valuable for businesses looking to start, scale and succeed in 2024.
