Data is no longer a differentiator for retail giants. Here’s why
Positive growth valuations are occurring as companies recognise the power of data in every single aspect of their business models.
“Those who rule data will rule the entire world” — Masayoshi Son, founder and chief executive of SoftBank.
Our avid followers of history, who understand the journey of the major great industrial revolutions each footnoting their respective centuries, would be very aware of our movement into the fourth great industrial revolution.
This revolution is the transformation of society through technology, or more directly, the power to accelerate all modes of communication and knowledge and in turn, create an integrated human existence, with smart machinery.
As the artificial intelligence revolution accelerates and the internet of everything changes society irretrievably, the emergence of data — or more precisely the predictive nature of its powers — becomes the great omnipotent force of this fourth industrial revolution.
No company can better exemplify the speed of this change than a rather insignificant small online bookshop opening in Seattle 25 years ago. That same bookshop is soon to be a $US2 trillion ($2.59 trillion) market cap company that we know as Amazon.
It’s here where we see how these large market cap companies such as Facebook, Apple and Amazon fundamentally derive their value and that it is predicated upon data.
Although somewhat paradoxically, the real value of data becomes most powerful when it is linked to the human condition — that is, we are fundamentally habitual in our behaviours as consumers. This is none more evident than in our purchase routines in grocery buying. In fact, up to 45% of our consumption in this sector is habitual consumption, according to Retail Doctor Group insights.
By way of example, do you recall the last time you changed your favourite brand of toothpaste or cereal? The supermarkets do, and that’s why we see the likes of Coles and Woolworths investing heavily into data. These companies are using data as a driver for building predictive modelling for everything from shop layouts, sales by product, location and of course, the next stage in online fulfilment through to predictive subscription modelling.
Recently, Woolworths increased its investment into data analytics by lifting its stake in Quantium, from 47% to 75%, in a $223 million transaction. According to the Australian Financial Review, the transaction values Quantium at close to $800 million, which is 20 times the value when Woolworths acquired its initial stake in the business in 2013.
The transaction is expected to be completed before the end of next month, at which time Quantium will become part of Woolworths and a new business unit called Q-Retail will be formed to harness the analytics and retail capabilities of both businesses.
It’s no surprise to see these types of transactions and the positive growth valuations as Woolworths recognises the power of data in every single aspect of its business model.
Not to be outdone, but rival Coles has also recently secured a deal with Finnish tech company Relex Solutions to use its cloud-based technology to replace manual ordering systems for fruit and vegetables.
Coles’ executive general manager of central operations and transformation, Kevin Gunn, said the automated systems, which use artificial intelligence to more accurately forecast demand, will allow Coles to “provide increased efficiency in one of our most complex supply chains and improve the customer experience through more targeted ranges, improved availability, fresher products and simpler processes for our team members and our suppliers”.
This may not be quite as lofty in its ambitions as its rivals, but it nevertheless signals that for all retailers, data is no longer a differentiator. It is a fact of business as usual.
