The Future of Location in Retail: Beyond Ad Targeting
This post is the latest in our “Targeting Location” series. It’s our editorial focus for the month of March, including topics like location-based ad targeting, attribution, and privacy. See the rest of the series here.
When global fashion retailers like H&M want insights into reducing unsold inventory and more accurately stocking shelves on a regional level, they turn to location data. When restaurant chains like Domino’s Pizza are looking for new opportunities to expand their business models, they turn to location data as well.
Much of the conversation surrounding location targeting trends and expectations focuses on successful marketing and advertising initiatives. (And we’ve covered those practices plenty here at Street Fight.) But behind the scenes, there’s a growing interest among major brands in using location data for its broader, strategic business power.
Location data is serving as the conduit to connect consumer-facing marketing initiatives with behind-the-scenes merchandising and logistics. According to a survey by Blis, WBR Insights, and Future Stores, the majority of retail marketers (71%) have some type of location strategy in place, with the primary goal being to drive foot traffic and trigger location-based mobile advertising. That’s not a particular surprise, given how popular the latest location-based marketing tactics have become. More surprising, however, is how common it has become for retailers to use location data for local product and inventory search (60%) and localized online customer service (51%).
That same survey found that 79% of retailers partner with third-party data, with the goal of collecting geolocation data (56%) and supporting geographical data visualization (45%).
These sorts of findings don’t surprise Jeff White, founder and CEO of the location intelligence firm Gravy Analytics. White is seeing insights from location data being used to power predictive analytics, behavioral modeling, sophisticated targeting right now.
“Understanding the events people attend and the places they visit give perhaps the single greatest insight into what truly makes consumers tick,” White says. “This information can also reveal blind spots and untapped opportunities — such as new merchandise, services and engagement experiences — that will appeal to customers.”
In the case of H&M, the global fashion retailer with a footprint in more than 60 countries, big data—including location—is being used to customize the merchandising mix at specific store locations. So, for example, executives are using algorithms to analyze which patterns or product categories are selling best at certain store locations. Do crop tops sell better at one store than another? Are customers in Chicago more likely to buy flannel scarves than customers in New York City? Accessing this information allows the company to make more strategic merchandising decisions on a store level, leading to a reduction in unsold inventory and markdowns.
Still, it’s clear that retail brands as a whole are not utilizing location data to its full capabilities, even when they already have access to the information they need through their existing marketing initiatives. In a January 2019 survey on the operational challenges facing retailers around the implementation of location data analytics, the biggest challenge cited was existing corporate networks being constrained by speed and bandwidth. Analytics engines that can’t handle non-transactional data and IT organizations that don’t have the expertise to design around these issues were also cited as top concerns.
White believes that one of the clearest opportunities for brands to use location data is in identifying new locations or markets for expansion. If data shows that a large percentage of a brand’s customers live in a certain neighborhood or region, then that’s important information for a brand to know as it considers its next store locations. Data can also inform how far people generally travel to certain locations, and subsequently how foot traffic compares at nearby businesses and amenities.
“For example, if you’re thinking of opening a sporting goods store, it’d be wise to know first if the folks spending the most time in that area are golf enthusiasts or avid campers,” White says. “Layer on top of that behavioral insights about your target customers and you’ll see whether the location makes business sense, before you make any final decisions.”
Stephanie Miles is a senior editor at Street Fight.