Advanced analytics is key to helping retailers survive online
The global retail industry is facing acute challenges in the wake of COVID-19. With many shops closed worldwide and consumers grappling with uncertainties regarding their health and wealth, footfall to stores is at an unprecedented low. However, this moment of critical change contains a kernel of opportunity that could enable businesses to emerge from these choppy waters with a stronger model.
Inevitably, mass hunkering down at home will hit retail hard. Forrester’s retail scenario planner predicts that in 2020, global retail sales will contract by 9.6%, while e-commerce sales remain flat. Of course, the nature, horizon and scale of the crisis’ impact on the retail industry will depend on the type of goods or services offered. With economic uncertainty running high, luxury goods will be first on the chopping block, but retail sectors covering fast-moving consumer goods (FMCG) essentials are expected to grow during the crisis.
The next few months will be critical, and retailers will have to leverage every tool and opportunity available if they wish to be resilient to what will likely be a highly disruptive period. Data will be key to realising those opportunities for recovery by providing valuable insight into customers’ behaviour and intentions as they also look for ways to be resilient in the ‘new normal’.
Leveraging digital for long-term growth
As consumers spend less time in public, COVID-19 is fast-tracking the shift in the retail market to online sales. Online retail was already booming before the crisis, and massive gains are now also anticipated for e-commerce delivery services for grocers and restaurants.
Past epidemics have already proven the opportunities that global crises can present to retailers. The SARS pandemic of 2002-2004 catalysed the meteoric growth of a then-small e-commerce company called Alibaba, and actively aided its rise to the very forefront of retail in Asia. It was an underlying anxiety about travelling and human contact that drove the retailer’s rapid growth by spurring the widespread movement from store-based to online shopping, and therefore expanding the customer base exponentially.
Now is a similarly prudent opportunity for retailers to fortify their digital on-boarding and machine learning (ML) practices, whilst investing in their online capabilities for the future. The fast deployment and enhancement of the digital customer acquisition and diversified distribution channels will be vital, as will having access to reliable data and models in particular for strengthening retailers’ online growth strategies.
Knowledge of your customers has never been more fundamental to business performance, and retailers wanting to stay two steps ahead will need to analyse transactional and alternative data on a daily basis to track and understand customers’ behaviours and buying habits as they happen.
Mitigating the risks of shopping online
In addition to facilitating powerful customer insights, the transition to digital will bring about a rapid growth in the demand for fraud detection and risk assessment solutions – and retailers will be expected to come prepared. Advanced analytics is a sensible first stop for retailers seeking to dramatically improve the effectiveness and efficiency of their fraud management as their customers flock online.
With online shoppers increasingly looking for self-service purchase options, several advanced analytics techniques exist to help retailers better-evaluate credit and fraud risks. These include drawing on transactional and alternative data sources – such as social media, phone usage data, user location, and purchasing history – to authenticate transactions and verify identities in real time.
Investing in a host of capabilities including early warning systems and triggers, digital collections, as well as co-operation with debt collection agencies, are also set to be extended. However, with revenue losses and increased levels of operational risk predicted, the retail sector will be selecting its investments wisely.
Most retailers regard the development of in-house analytics capabilities as an expensive option, and many would benefit from outsourcing strategies to help provide the right mix of internal and external capabilities. By near-shoring their advanced analytics activities and turning to cloud-based platforms to model risks and strategies, retailers will be best-placed to maintain the profitability of customer acquisition, whilst driving their own operational efficiencies.
Rising to customers’ growing expectations
With mobile technology playing an ever-more fundamental role in our lives, customer expectations and behaviours are constantly evolving. As the pandemic wreaks havoc with stock availability, customers are now shopping around more than ever, meaning the retailers that succeed will be the ones that can adapt the fastest to best serve a changing market.
Historic data will not cut it in unprecedented times. Instead, integrating forward-looking, customer-centric data can empower retailers to make better-informed planning decisions, and adjust stock quantities as needed. With actionable insights and a greater awareness of customer expectations, retail businesses will also stand a better chance of cracking the right product vs right price formula.
Of course, as payment collections are likely to be hardest hit during a downturn, the million-dollar question for retailers will be how to strike a balance between customer flexibility and commercial viability. In response, digital collections as well as co-operation with debt collection agencies (DCA) will require greater investments.
Measures could range from the adoption of digital late payment and collection options to allowing extended repayment periods, and instituting proactive instalment holidays. It is also worth exploring the support governments around the world are offering retailers by slashing lending rates, and introducing payment holidays for those most impacted.
How Experian can help
Visit our COVID-19 Resource and Support page for the latest white papers and other information relevant to the business resilience of you and your customers.
Online retail is already booming, and is likely to grow even more as consumers spend less time in public, and more time shopping online. Retailers who adapt to, and prepare for, this transition will better weather the short-term climate, and can make sizeable gains in the long-term.
While the effects of the pandemic continue to shape the way we navigate the future, Experian is committed to bringing you powerful insights to help retail businesses cultivate the resilience needed to emerge stronger from these unprecedented times. If you’d like to discuss any aspect of this report or find out more about how Experian can support you through this crisis, please get in touch with your account manager today or contact us here.