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Understanding Customers Helps Retailers Provide the Best Services Possible. Data is Necessary for That.

NetChoice’s New Report on How Retailers Have Used Data, Then and Now

Have you ever wondered how your favorite store anticipates upcoming trends? Or how it knows when and where to restock your favorite products?

An essential component to that process for retailers is data analysis. While collection methods and tools have changed over time, the bottom line has remained consistent: retailers need to understand their customers to provide better products for them and compete effectively in their industries. 

NetChoice’s new report for our Retail is Everywhere project investigates this. Titled “Know Your Customer: How Retailers Have Used Data Throughout History,” we highlight several data collection and analysis methods retailers have used over the last century. 

This report is critical for policymakers considering regulations on data collection practices. Retailers have conducted data analysis for at least 100 years, and all retailers have used data to improve customer service, enhance operational efficiency and boost profit margins. Prior to mid-century advances in technology, retailers applied more intrusive methods to collect information on customer preferences. And while NetChoice supports a federal data privacy standard that preempts state laws, any proposal must be mindful of the beneficial uses of data, which consumers like and enjoy, and that most businesses, including retailers, use. 

Let’s go back to the early 1900s, when buggy cars were all the rage and the Ford Model A was introduced. Back then, retailers didn’t have the modern technology to study customer behavior that so many rely upon today. Instead, they engaged in “grocery diaries,” where “some customers were paid to keep track of what, when, and how much their households made grocery purchases.” Additionally, retailers would have employees follow customers around the store to monitor their behavior and conduct surveys to understand preferences and shopping patterns. These data collection techniques were labor intensive and could be unreliable, but they provided business owners with the information they needed to improve their services and strengthen their competitive advantage. 

For more on the early days of data collection, see page 6 in “Know Your Customer: How Retailers Have Used Data Throughout History.”

In the 1980s, innovations including UPC scanners and the rise of “Big-box” stores, such as Walmart, K-Mart and Target, revolutionized retail practices. Big-box retailers adopted emerging retail technologies early, and this enabled them to improve their businesses quickly and scale up better than their competitors. 

Consumers benefited greatly from this revolution. The advent of one-stop shopping at big-box retailers allowed them to reduce their time and mileage spent shopping, save money due to price competition between retailers, and may have even led “to a rise in consumers’ real wages,” according to one study.

For more on UPC Scanners and the Big-Box Era, see page 11 in “Know Your Customer: How Retailers Have Used Data Throughout History.”

The internet revolutionized the shopping experience, as it did many other aspects of our lives. With more competition than ever before from retailers across the globe, both in-store and online, businesses have new technologies to understand customer preferences where they are. 

There are more tools available to retailers than ever before to better understand customers. According to NetChoice’s new report, “These data sources can be categorized into three large groups: (1) traditional enterprise data capture; (2) customer characteristics and data capture from social media; and (3) customer location-based data.” Each of these can assist stores so they can better maintain inventory needs, competitive pricing, store staffing levels and more. 

Retailers are using these innovations to provide the best experiences possible for their customers and beat their competitors. This includes reducing the inconveniences of the shopping process by helping customers find what they need or like efficiently and at a lower cost. 

For more on the Modern Omnichannel Era, see page 15 in “Know Your Customer: How Retailers Have Used Data Throughout History.”

Modern, data-driven insights into diverse consumer preferences have allowed for the creation of niche products and private labels, improving consumer welfare and igniting competition. According to our report, 84% of publicly-traded retailers with a market cap of $1 billion or more (such as Costco, Home Depot, Amazon, Walmart, Albertsons, Ulta, Dollar General, etc.) use consumer data to improve the overall customer experience.

With data as an integral part of retailers’ business strategy, any legislation or rulemaking targeting these practices must take into account how they will be impacted. This will help ensure innovation and competition that greatly benefits consumers continues to thrive. 

Read NetChoice’s report, “Know Your Customer: How Retailers Have Used Data Throughout History,” here. Find a short summary of the report here and a case study on Walmart here