Insights / A data first approach is key to retailer digital transformation

A data first approach is key to retailer digital transformation

Executive Summary:

Forward thinking grocery retailers are adopting a data-centric approach to managing their businesses in turbulent economic times. That is according to a new white paper commissioned by retail data specialists rascal systems, who are launching a Master Data Management platform, proven in the US, into the UK market.

In the current disruptive climate, decisions about future business direction and strategy are being taken and implemented in days and weeks versus months or years, as retailers pivot their business models and adapt their processes to the ‘new norm’.

While many are harnessing new technologies on their digital transformation journeys, it is essential that those interfaces and tools are backed by a bedrock of accurate data in order to inform the best decision-making processes. Master Data Management (MDM) enables that process and provides data integrity. It is a data-driven approach that delivers on customer needs.

State of the market

UK grocery retailing is undergoing seismic change, magnified by the COVID-19 pandemic. Even prior to lock-down, the sector was under intense competitive pressure with new forces at play. The rise of the discount retailers, the trend to online retailing and emergence of new digital disruptors like Amazon were combining to reconfigure the market. Those trends are escalating in the wake of COVID-19 with marked changes in consumer behaviour.

While stockpiling and panic buying spiked prior to the lockdown1, the week commencing 23 March saw a sharp drop in shopping trips2. The impact on physical stores has been stark with significantly fewer interactions. Capgemini3 found 59% of consumers worldwide said they had high levels of interaction with physical stores before COVID-19, but today less than a quarter (24%) see themselves in that high-interaction category. In the meantime, online interaction is accelerating. Capgemini reports 30% of consumers say that they had high levels of interaction with online channels before the crisis, but 37% would characterise themselves in that light today. Further those behaviours are likely habit-forming with 39% of consumers expecting a high level of interaction with physical stores in the next six to nine months, well below the pre-COVID-19 levels; while the online channel is tipped to win further traction4.

At the same time, new delivery partnerships, subscription-based services, online hubs, Direct to Consumer (D2C) enterprises5 and drive-through operations have been created literally overnight and with new technologies behind them. These channels create new touch points for retailers and their suppliers, adding to business complexity. It is a hybrid state where only the agile and responsive can survive.

Jonty Edwards rascal quote

Urgency

The quality of product data and its management is integral to UK retail success, especially in times of unprecedented consumer behaviour. That’s why rascal systems, the retail data specialists, who already work with leading grocery retailers, are introducing their Master Data Management platform in the UK, along with complementary applications; invoice reconciliation and digital data capture. rascal systems recognise that successful retailers can harness the power of shared data by deploying Master Data Management (MDM) solutions or platforms.

MDM matters because without one shared version of the truth, retailers and their suppliers are reliant on multiple sources of product and pricing data from all parties, which creates inaccuracies.

Without MDM, manual processes that are used to update and share information, such as spreadsheets and emails, are prone to human error. An astonishing 78% of companies said they mostly use spreadsheets and emails to manage and share product data with their customers, according to GS1, the non-profit organisation responsible for developing and overseeing global standards for business communication6. It is a labour-intensive process that is almost certain to impact on operational efficiency and costs. Without organisation-wide processes to manage products, retailers can struggle to track costs. Similarly, a lack of centrally managed, rule-based decisions to manage pricing can leave margins unprotected and exposed. For example, GS1 found that using incorrect product information can increase labour costs by up to 25%7.

Inaccurate data is also proven to have a direct impact on the bottom line, with Experian reporting that the average company loses 12% of its revenue as a result; and GS1 finding that data-driven inventory inaccuracy can result in an approximate 9% loss in sales. Mis-aligned product and pricing data can result in unintentional understocks of high-selling lines and conversely overstocks of slow-movers in key categories, creating availability or cashflow issues, further impacting the commercial position.

Managing operational risk is also compounded by poor data quality. Without clean underlying data, the risk profile of a business is magnified. According to the Retail Crime Costs in the UK 2019 report by the Centre for Retail Research, 25% of retail shrink or £1.2bn is data-driven8. Companies increasingly accept that a significant part of their losses is caused by incorrect information in the central system, the report shows. Accurate data, however, provides a clear future vision and can help to shape an optimal risk balance.

Customer experience has become a key priority for retailers, who are turning to data in order to inform and improve their customer engagement and win actionable insights. But, while data can provide opportunities for better customer engagement, it is not without risk. Experian9 reports 69% of organisations agree that inaccurate data itself undermines their ability to provide an excellent customer experience.

“A customer-centric approach should be regarded as a basic principle of retailing done well – putting customers at the core of retail strategy in order to maximise service and product offerings as well as build better relationships,” states Edwards. “However, it is equally important to recognise that data-integrity informs customer-centricity, allowing retailers to anticipate and respond to customer needs in a confident, agile manner,” Edwards says.

Harnessed correctly, achieving data integrity can help inform the process of setting company direction and strategic planning. 83% of organisations see data as an integral part of forming a business strategy. However, those same organisations believe that on average 30% of their data is inaccurate10. Retailers need fast, accurate data and actionable insights. It seems unfathomable that any business would take decisions about future strategy when almost one third of the data that informs them is inaccurate and therefore fundamentally flawed.

Opportunities

Master Data Management (MDM) puts retailers at the forefront of data-driven decision making.

It ensures data integrity i.e. accurate data and provides one version of the truth with a shared data source between retailer and supplier. MDM platforms typically provide a cloud-based shared data point so that there are no issues with legacy IT systems and solutions are easily configurable. For retailers to realise the benefits of MDM at speed, MDM solutions should have the ability to complement and enhance existing systems, working on the premise of ‘wrap and renew’ not ‘rip and replace’.

With a single shared view of product and pricing data, there is far less room for error. Retailers and suppliers can collaborate better, which is critical in current times when they are competing with other sectors for the consumers’ money.

With accurate data at the core of an organisation, exposure to operational risk is also significantly reduced, at the same time as delivering a boost to profitability.

MDM both simplifies and automates business process, saving the retailer both time and money, benefiting the bottom line.

According to GS1, it has been estimated that suppliers using accurate and consistent data-sharing services were able to increase their sales figures by 1%-3%. Their cost of sales decreased by 5%. A total financial benefit across the grocery market equivalent to over £3bn was achieved by those participating.

GS1 goes on to state that given the size of the UK’s economy and population, this could represent a benefit of between £17bn and £21bn if the retail grocery industry works together to create a common platform for sharing high-quality data across the supply chain11.

Crucially, from the retailer’s perspective, their suppliers are responsible for maintaining accurate pricing and product data on MDM, which saves both labour and process, eliminating duplication of effort.

MDM ensures confidence in the product and pricing data and provides better visibility and control, so retailers are better able to manage costs and retail pricing. It connects data, systems, processes, and departments across an organisation and automates much of the activity around pricing, product and promotional changes, removing labour intensive processes, cost and risk of human error.

“Many businesses state they are going through digital transformation, but I would question to what extent,” says Edwards. “They may be investing in new interfaces and emerging technologies, but it is worth considering that those tools are only as good as the information, i.e. the data, that feeds them.”

MDM also provides potential for improved retailer and supplier collaboration and an opportunity to delight shoppers. As an analytics-based platform, MDM can help to inform the conversations retailers have with their suppliers. It enables suppliers to work with their retailer partners on category and joint business planning.

Outcomes

Retailers who adopt MDM as the cornerstone to managing their businesses and decision-making will be transformed. Their operations will be cleaner and more streamlined, with fewer duplicated processes. Automation will connect departments, manage product and pricing information, cutting labour costs and the risk of manual errors.

Retailers and suppliers will have access to shared accurate product and pricing data sets. Retailers will be confident in their data integrity and will have the ability to make informed decisions regarding the future direction of their business. Collaboration with suppliers will be enhanced and with fast, accurate data at their fingertips, they will uncover new business opportunities to drive sales growth.

Critically, MDM provides retailers with the tools to protect margins, which is particularly pertinent during the COVID-19 crisis when discounting may not benefit sales or the bottom line but adjustments to a pricing model to reflect demand may enhance performance. Put simply, intelligent pricing protects margins in a downturn and drives profitability12.

Those retailers adopting a data-centric approach will create a platform from which they can work on continually enhancing the customer experience. Their reputation means that they will attract and retain the top talent among Gen Zers and Digital Natives.

Ultimately their peers will regard them as both innovative and leading edge.

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