By Tim Bridges, Global Sector Lead, Consumer Products, Retail and Distribution at Capgemini
The pandemic has supercharged the e-commerce boom, and consumer product and retail (CPR) organizations are flush with data. However, having data and utilizing it effectively are two very different things and, as our research shows, only a small minority of CPR businesses are effectively translating this newly acquired data into a competitive advantage.
Just 16% of consumer products organizations and 6% of retail organizations qualify as ‘data masters’ – companies that are using data to get closer to consumers, optimize operations, launch new products and services and quickly respond to disruptions. The results are visible – 73% of these organizations are deriving quantifiable business value from their data and achieving up to 30% higher operating profit margins.
However, ‘data masters’ aren’t solely achieving higher profitability. They’ve got the edge in customer engagement, are demonstrating greater agility when reacting to market shifts, and are furthering their important sustainability projects. On the other hand, their competitors, who might be termed data-laggards, are unable to achieve these benefits. These data laggards demonstrate less maturity in both data behaviors (people processes, skills and culture) and data foundations (tech and tools). So how then can those lagging behind hope to close the gap?
Real-time data for real-time decisions
While many CPR organizations struggled to rise up to the challenges posed by the pandemic, the ‘data masters’ thrived. They already had strong data foundations in place. Proactively creating, processing, and leveraging data to achieve their business objectives and fuel innovation was already part of their process. They had a robust understanding of changing consumer preferences and their own operations, which helped them to adapt rapidly.
A prime example is major retailer, Walmart. In response to the pandemic, Walmart launched a two-hour delivery service and, by December 2020, its market share in online groceries surpassed Amazon’s. They were able to do this thanks to sophisticated algorithms, by using machine learning to analyze thousands of variables – like staffing, number of items in an order, delivery vehicles available, and even the weather. Data collected was then processed by the Walmart algorithms to create even more accurate timing estimates. All of this was done in just over two weeks, creating an almost immediate market-shift.
Thinking beyond customer data
However, this only scratches the surface of how CPR data is being utilized. If anything, it’s the non-customer data, and the operational efficiencies that can be gleaned from it, where some of the greatest opportunities to create value lie. At Capgemini, we’ve previously seen in our research that 79% of consumers are pivoting toward more sustainable products and services. A majority of organizations say that sustainability initiatives increase consumer loyalty, and that they lead to a revenue uptick – meaning they’re both good for the planet and for business. Consequently, sustainability initiatives are top priority for all CPR organizations.
Data analytics can act as key sustainability enablers, and data masters are using IoT device data to power AI-driven sustainability initiatives and products. For example, IKEA uses AI to optimize waste management for reverse logistics, reducing the amount of returned merchandise that ends up in landfill. It maps its entire store, fulfilment, and distribution network, then uses AI and data analytics to identify the next-best possible location for returned items so that they can be recycled or sold.
Similarly, LG designed TurboWash 360 washers and dryers to not only detect the volume and weight of each laundry load, but also to identify fabric types using AI and advanced sensors. The washer compares this information, using AI against more than 20,000 data points to program the optimal wash cycle setting, improving cleaning performance and extending garment life by 15%.
How can other CPR businesses catch-up?
There’s clear evidence that in today’s fast-changing environment, being data-powered is fundamental to success. As competition increases both from within and outside the sector, there are four steps that CPR businesses can take to compete with the ‘data masters’:
- Fostering a data-powered culture and empowering teams with data at the point of need
- Modernizing the data platform for faster implementation of insights
- Strengthening trust in data with the right data governance and ethics practices
- Plugging into external data ecosystems to enable new business models and better understand consumers and operations
These aren’t changes that happen overnight. They require investment in cloud-based technologies, AI and automation, as well as internal initiatives to create cross-functional teams that tackle-specific, business critical issues.
‘Data masters’ turn data into growth engines. They rely on data to make critical decisions, have full visibility of their entire organization, and can quickly identify and respond to challenges and market shifts. As time goes on, and stores of data increase, the distance between ‘data masters’ and their less data-enabled competitors will only widen. The time to do more with CPR data is now.