The opinions expressed in this publication are those of the authors. They do not purport to reflect the opinions or views of the MITEF Pan Arab or its members.
The COVID-19 pandemic is testing the resilience of nearly every business to its limit. Many companies have suspended their operations completely, and even those who are allowed to continue trading are struggling. The challenge is not just coping with disrupted supply chains and volatile consumer behavior, but also preparing businesses for the new normal after this virus has been contained.
In previous pandemics, and up until only a few years ago, we would have depended much more on gut instinct and experience to guide us. However, would we have been able to spot in real-time the dramatic changes in customer behavior – and react to them in a way that keeps supply chains working and customers happy, despite the huge volatility?
If it was unclear before, retailers are now recognizing that data analytics is and will continue to be their most important tool for achieving business resilience and preparing for its recovery. At Majid Al Futtaim, we have identified four data priorities that will help retailers to operate as smoothly as possible during this crisis, better anticipate future customer behavior, and retain the trust of customers.
Priority One: Capture data in real-time
Reflecting on this pandemic, it feels as if data analytics has been less about spotting large waves of new consumer trends, but rather tracking rapidly shifting customer behavior. Whether it is stockpiling specific products, a sudden interest in exercising, or domestic pursuits like baking bread and cakes, these behaviors are all subject to constant and sudden change. For a retailer, this demands tremendous agility and requires real-time capturing and processing of data. Monday’s and Tuesday’s surge in demand for a certain product may already be petering out by Wednesday afternoon. A business that fails to understand this kind of volatility is likely to make critical errors in judgment when it comes to the procurement of stock.
Priority Two: Analyse data not once, but twice
The current global economic uncertainty has had a massive impact on consumer sentiment. However, there are distinct customer segments emerging – from people who reduce all their shopping to the essentials, to those who use comfort shopping as a coping mechanism.
At Majid Al Futtaim, we are capturing a large amount of behavioral data that is in line with global trends. People are buying more food, especially non-perishables like dried beans, fruit snacks, shelf-stable milk, and milk substitutes. In the United States, for example, measurement and data analytics company, Nielsen, reports a 300 percent increase for the sale of oat milk. Marketing agency Common Thread says that online sales of baby products have soared 600 percent. In contrast, several British fashion brands report a drop in search traffic and sales of up to 70 percent, while retailers specializing in home and hardware products are seeing huge increases.
Spotting these trends is important, but they must be analyzed not once, but twice. In our business, we have seen a 600 percent increase in sales of gym equipment; that is an important insight for today, but when we look at the data, we also have to think 18 months or more ahead. What does it mean for future sales? It is similar to hygiene products. Who would have predicted a 3,000 percent increase in sales of soaps and detergents, and when should we expect a return to normal?
In China and Europe, Nielsen’s researchers have highlighted the rediscovery of home cooking, while in other Asian markets there has been a shift to ordering take-out. Will these new routines become habits or are they temporary? If right now our data shows us that customers always buy certain items together, will that change during the next 6, 12, or 18 months?
Data will certainly tell us what customers will not need more of during the coming months, so we can incentivize them with personalized experiences based on what they are likely to need. As a matter of fact, we are already noticing changes in the different products that people buy together with three segments standing out. We have seen an increase of more than 1,000 percent in the number of transactions containing chocolate confectionery with carbonated drinks, biscuits, and chips, or carbonated drinks with chips and biscuits. We have recorded a 2,000 percent increase in transactions containing frozen vegetables with canned vegetables or cooking ingredients and we’ve also seen a 1,000 percent increase in transactions containing fresh juice or fresh milk with yogurts.
It is this kind of intelligent personalization at a scale that will be critical for business recovery in the post-lockdown marketplace. Data will also tell what customers will not need for quite a few months. Indeed, as they have stocked up on many non-perishable items, we can estimate when their next purchase cycle will be and adjust our stock levels accordingly.
Priority Three: Use data to scale e-commerce
Since the start of the lockdowns, some demographics (such as older people) and entire countries have suddenly discovered their love for online shopping. Take Italy, where according to analysts at Edgar Dunn online grocery shopping went from a 2 percent market share to 20 percent. In the United Arab Emirates, retailers have seen online shopping grow between 80 and 300 percent. This presents huge logistical challenges. Some US companies are talking about hiring tens of thousands of new staff to cope with the sudden growth of e-commerce. Once again, data will give us early signals to scale correctly – although I believe that some of this uplift is here to stay.
Priority Four: Business data have social value
In a crisis like this, companies must also discover the social value in their data. In our own stores, for example, we have seen an increase in average transaction values coupled with a decrease in transaction frequency. This suggests that people are following experts’ advice to minimize trips to stores by purchasing essentials to last for a number of days.
Outside of one’s business, data from retailers has immense potential for societal good, both during times of crises and normality. By tracking consumer behavior and anonymously cross-referencing it with Government data sets, we can not only identify trends but also support local government in putting in place behavior change programs to help support communities – from healthy lifestyle initiatives to improving consumption habits and minimizing food waste.
Our world is facing a challenge of uncertain duration. The retail sector will be instrumental in restarting the global economy once we have overcome this pandemic, and it is data that will help us to achieve that as smoothly and successfully as possible.