Why Gartner’s got it wrong when it comes to digital retail analytics

SUMMARY:

Gartner says retailers will not be able to compete in the digitalised marketplace. Chris Middleton reckons that’s missing a trick or two.

That smart fridge
That smart fridge

Gartner has just published a new report – Retailers Find Success Using Self-Service and Advanced Analytics – arguing that having access to advanced analytics will be essential in retail, and without that capability:

retailers will not be able to compete in the digitalised [sic] marketplace.

Gartner defines ‘advanced analytics’ as the analysis of all kinds of data using sophisticated quantitative methods, producing insights that traditional BI is unlikely to discover. These advanced analytics tools will “challenge business assumptions,” says the company.

But is any of that true?

Gartner believes that the problems faced by the Retail sector are primarily technological, and can only be fixed by more technology. And as the Internet of Things (IoT) moves toward us, according to research director, Robert Hetu:

The effects on multichannel retailers will be more disruptive than anything seen to date and will require advanced analytics capabilities to cope with this disruption.

Gartner’s alleged proof of concept is the smart refrigerator that will order a new part for itself – which is at least a new spin on the ‘smart fridge ordering fresh milk’ story that has long been an IoT cliché.

According to Retu, the proverbial refrigerator, by seeking a replacement part on its own, will have

neither loyalty to the retailer nor concern about finding the item. As a result, the “thing” (in this case the refrigerator) will seek the best combination of price and availability.

Except it won’t – any more than an iPad will order a new lead from a company that isn’t Apple.

For ‘white goods’ manufacturers, replacement parts are a profitable stock-in trade. A smart fridge made by a smart manufacturer will order whatever part that the manufacturer wants it to, and probably at a premium. Just ask anyone who has ever had a fridge, washing machine, dryer, or boiler repaired.

And in the wake of the IoT will come a wave of anti-trust suits, the like of which we have never seen before – many, I suspect, alleging that the original part was designed to fail. Because when devices can order replacement parts at ‘will’, what incentive is there to build components to last? That will be the real disruption – along with new waves of fake and/or pirated goods, of course, and fake wholesale portals.

Exploitable

There’s more bad news for enthusiasts of the IoT’s promised generation of smart lightbulbs and toasters.

Recent IBM research on IoT security found that many smart device types can easily be hacked. Among the many ‘things’ researchers hacked in 2014 was a car’s telematics unit – via a modified MP3 file, which disabled the car’s brakes – a building’s HVAC and security controls; and smart lighting, which exposed an entire organisation’s wifi passwords.

All this suggests that large retailers’ real investments will be in attempting to secure a range of products that have been rushed to market with exploitable weaknesses, many of which will allow hackers into back-end enterprise systems. And the last hacker out may, indeed, turn off the lights.

So while it may be true that the IoT will create new income streams for analytics providers and innovative retailers, equally likely are waves of highly creative industrial espionage – not thanks to organised crime syndicates, but thanks to disorganised teens in Wisconsin and Idaho who won’t even know each other’s real names.

Retu is right about one thing, however. He says:

Consumers have taken control of the shopping process, and there is no sign that they plan to let go.

Digital retail
Digital retail

That’s certainly true: retailers have long assumed that would ecommerce enabled loyalty, but in fact it has enabled disloyalty on an epic scale.

Moreover, customers will increasingly be in control in ways that Gartner seemingly ignores.

At the NRF15 retail conference in New York earlier this year, I spoke to former Fox Business News Anchor, Alexis Glick. She said that millennials:

want to know where everything is sourced from. They want to know where the food is coming from, they want to know if it’s farmed to table, and if any antibiotics have been used [in its production]. They want to know who made that sweater.

For any retailers out there, for any corporations: if you don’t stand for something, if you’re not doing something that’s good and that provides a vehicle for giving something back to your community, then they [young people] won’t want your business.

So in Glick’s view, the emerging challenge in retail is not, as Gartner suggests, extracting more and more data from your customer, it’s about providing more and more data to your customer, from your supply chain and all those outsourced processes.

Will retailers be quite so enthusiastic about exposing the sweatshop behind the sweater, I wonder?

My take

Gartner is right that analytics and the coming wave of smart devices enabled under IPv6 go hand in hand. Clearly, smart things, spaces, and services that can find out who is using them, when, and why, will drive new, more targeted, and/or more efficient environments and services.

But again, its analysts have misread the runes that they themselves have cast. Retu claims:

Retailers without advanced analytic capabilities may be toppled by their inability to capitalise on IoT-driven revenue opportunities. In a world where customers are no longer humans, but ‘things’ that band together with other things to negotiate prices, the retailer must reconsider its role.

That is a facile, absurd, and superficial reading of what’s happening on the high street and online, because ‘things’ won’t write the rules and algorithms, cartels will.

And that’s not all. As a 2014 analysis by Neil Gibb explains, what’s really happening is a polarisation in retail that’s pulling apart anything in the middle that’s poorly targeted and poorly differentiated. In supermarket terms, it’s polar opposites Lidl and Waitrose succeeding, and middle-ground players Morrisons (and increasingly Tesco) failing. The digital part isn’t the most important: just ask Tesco.

Also missing from Gartner reports on how everything is becoming more digital is the fact that it simply isn’t true. Witness the powerful emergence of a revived analog world: a boom in high-end print publishing, in exclusive vinyl records, and in handmade goods – not just among middle-aged diehards, but among teenagers who are sick of a stream of digital noise.

Logically, any retailer positioned at the ‘exclusive, aficionado’ pole – as increasing numbers of companies are, because not everything in life is about speed and convenience – is facing a world in which customers actually want less technology and more human beings, not smart things, analytics, and robots.

The reason that many businesses are sleepwalking off a cliff is not that they can’t see Gartner’s gleaming digital future, it’s that they are so focused on that horizon that they lose their footing in the human world.

    Comments are closed.

    1. says:

      I’ve not read Robert’s report and can’t comment so much on that, but I would like to make a point relative to the connected refrigerator concept. Manufacturers set terms of trade to manage distribution channels, retail prices, levels of customer service, back office operations, and the like with their retail channels for mutual benefit and loyalty. They will do that for IoT sourcing of spares under which the order will be placed back to the retailer to re-enforce channel loyalty and to combine the replacement part order with a service appointment schedule with the retailer’s services provider (in-house or outsourced depending on the retailer’s business model.As for IoT decreasing white good’s reliability, that’s patently absurd. That would reverse a long-term trend toward greater product reliability that’s not likely to abate. Manufacturers won’t be able to do it. Any such strategy will fail under the transparency of product reliability from social ratings and reviews.As for Fox Business News reporter Glick’s comments, I’m afraid to say that she’s mistaken in attributing such purchase and brand loyalty criteria as she does to millennials. There certainly is a segment of consumers so inclined but to say that all millennials are so inclined (as she seems to be saying) simply isn’t true.