The social dilemma comes to retail: Tips for maintaining trust in a data bonanza

Last month, a new feature in Apple’s latest operating system made news around the world.

Apple’s App Tracking Transparency APIs will enable us to opt out of having our online behaviour tracked by the apps we use. The function is a privacy option that allows device users to deny any app permission to collect certain data. It will also help us stay on top of who’s tracking us by centralising information about which permissions we’ve granted to which apps. 

Some companies, especially those with a strong interest in tracking our online behaviour, have objected because the largest chunks of their profits is generated from advertising revenue. But many people who champion data privacy feel that this is a step in the right direction. The new App Tracking Transparency feature, which forces device apps to ask users for permission to obtain unique identifier data for advertisers, is known as the IDFA. The IDFA is what companies use to target mobile ads, as well as to gauge the effectiveness of their mobile campaigns.

The question is, why now? And, most pertinently to the industry I work in, what do consumers’ changing attitudes around data privacy mean for retailers?

Data is exploding – and so are our worries about it

For a few weeks in late 2020, Jeff Orlowski’s The Social Dilemma was all anyone could talk about. While the Netflix documentary explored many aspects of our changing relationship with technology, one question it raised struck a particular chord with viewers: where is our data going?

 With 82 per cent of Australian households shopping online in 2020, and many of us planning to continue this behaviour post-pandemic, we are living through a golden age of e-commerce. And as e-commerce expands, so too do the avenues for collecting customer data.

 As well as transactional details and information about where customers live, retailers who have pivoted online can now see what a shopper has viewed but decided not to purchase. They can find out how long an individual spends looking at a particular item. They can even pinpoint the exact moment at which someone abandons their shopping cart.

 When fed into artificial intelligence (AI) algorithms, these sorts of insights enable retailers to personalise shopping journeys, pre-empt customer demands and streamline back-end operations. But they also present a challenge. Because while retailers have more customer data than ever before, they’re also under increasing pressure to treat it responsibly.

 With 70 per cent of Australians expressing concern about the security of their personal information, more of us are asking questions of the businesses we share it with. Will you use my contact details to target me in ways I don’t consent to? Will you enlist my personal data to advance causes I don’t believe in? Most importantly, will you give me an honest answer when I ask these questions?

What can we learn from the retailers getting it right? 

In my role at Microsoft, I’m fortunate enough to work with some of Australia’s best loved retailers. And one thing I’ve noticed is that, while many of these businesses lead the pack in terms of data analytics and AI, none of them do so at the expense of their customers.

 They understand that data-led innovation is impossible without customer trust. So, they work hard to build this trust and as a result, they often end up with richer and deeper data than their competitors.

 Here’s how they do it.

 1.    Use customer data for the customer’s benefit

If this sounds simple, that’s because it is. When you agree to a loyalty program at your local coffee shop, the value exchange is clear. The store gets your name and email address, which enables them to send you marketing materials. In return, you get the occasional free coffee.

 The cafe might be offering a modest reward, but they’re also asking for a modest amount of data. As the ask increases, the reward must follow suit. To deliver tailored shopping experiences, for instance, retailers need more than a name and email address. But customers won’t provide more unless they can see it’s worth it.

 Consider Woolworths, which needs granular, localised customer insights to decide, among other things, which 20,000 of its 35,000 products to stock in any given supermarket. One way it gets these insights is through the Everyday Rewards loyalty program. Woolies wins because it can see what 12.5 million Everyday Rewards cardholders buy, where they buy it, how much they spend and how often they shop.

 Woolies localisation engine then feeds that information – along with data from many other sources – into machine learning systems, to provide insights that help store managers decide which ranges to stock and promote.

 But more importantly, Everyday Rewards members feel like they’ve won too. Some information about their shopping habits in exchange for frictionless shopping, exclusive offers and regular discounts? The value to Woolies customers is clear.

 2.    Choose your partners with care

While last year’s lockdowns were a logistical challenge for many retailers, they were particularly difficult for those without existing logistics capabilities.

 With the overnight shift to e-commerce, these retailers needed to work out how to deliver their products to customers’ homes in the timeliest way possible. Often, this meant partnering with third-party logistics specialists.

 Partnerships like these have many benefits. But they can also have unintended consequences.

 In some cases, logistics providers will actually redirect shoppers to their own platform to complete the purchase. With their platform hosting the sale, these third-party providers can see who the retailer’s customer is, where they live, what their preferences are, and generally learn about their intent and shopping behaviours.

 Food delivery providers, for instance, will often take restaurant orders through their own apps, capturing customer information that the restaurant itself has no access to.

 Providers can then use this data to train their own model, benefiting their business as well as other users of their platform – including the retailers’ direct competitors. Meanwhile, the actual retailer – who is now simply the supplier – has no access to valuable insights about its customers.

 Aside from losing useful data, retailers can inadvertently alienate their customers through these sorts of partnerships.

 The strength of many third-party logistics platforms is the ease with which they integrate into the purchasing journey on a retailer’s website or app. But because of this seamlessness, customers don’t always realise that they’re sharing their data with a third party – a third party who may use their data in ways they don’t consent to.

 The news isn’t all grim, of course. There are many logistics platforms out there that keep the end-to-end shopping experience, and all the customer data that comes with it, in the retailers’ hands. The trick is for retailers to keep in the value of customer data in mind when considering new partners.

 3.    Maintain the human touch

When it comes to taking recommendations, we tend to be more receptive to the store employee standing in front of us than the bot sending out marketing emails.

 That’s partly because it feels like a conversation. And it’s a conversation that works both ways: we’re often happy to share information about our lifestyles and preferences with sales assistants in exchange for personalised suggestions. What we don’t want is the creepiness that arises when the human element is absent.

 This is why personalisation works so well when retailers put data insights into the hands of storefront employees.

  When a real person is available to answer customers’ more complex questions, those customers are more willing to accept the automation of simpler communications, such as alerts. This is especially true if those answers contain a degree of personalisation and tailoring. By putting customer data and AI into their employees’ hands, businesses are getting the best of both worlds. 

It’s time to get smarter with customer data

Already, customer data is crucial for retail success. But with AI and machine learning technologies opening up new possibilities for pre-emptive and personalised retail experiences, its value is growing every day.

And as shoppers get wise to the worth of their information, they will only become more reluctant to give it up for free. Which is why the retailers investing in customer trust today will be the ones who succeed tomorrow.