Sainsbury’s recently announced its purchase of the Nectar loyalty scheme business from Aimia for £60m. This acquisition will allow the retailer to run the Nectar programme independently in the UK, which could have significant repercussions for the grocery retail sector.
In 2018, the world’s most valuable asset is no longer oil, but data. For the price equivalent to two million barrels of oil, Sainsbury’s has taken control of the assets, staff, systems and licences required for the operation of the Nectar loyalty programme in the UK.
Loyalty cards, first pioneered by Tesco Clubcard more than 20 years ago, are now commonplace across the sector as store operators compete to gather vital data from customers. For consumers, the opportunity to be rewarded with special offers and cashback is seen as a worthwhile price to pay.
Sainsbury’s purchase demonstrates significant support for such schemes, which have been losing popularity as UK consumers become less loyal to a single supermarket and more aware of the data. The fact that shoppers have become more aware of data, such as information about demographics or purchasing history, has certainly played a part. This has been reiterated by recent research from Retail Dive’s Consumer Survey, which revealed that 57% of consumers are now unwilling to share data in return for discounts and benefits.
However, in an economy where algorithms make billion dollar stock market punts and can predict elections better than most seasoned analysts; it’s becoming increasingly hard to ignore the power of data. In the last one hundred years, the companies and nations in control of oil dominated, the next century, will see those holding the data become all-powerful. You don’t need to look further than Amazon who – using their overflowing stockpiles – drive consumer prices down to pull the strings on retail.
You cannot do business today without data. The good news for retailers is that data, in its pure form, is available in abundance and, as with oil, the challenge for those looking to monetise this raw material will be looking how to refine and use it effectively.
Sainsbury’s now has full, uncompromising control over Nectar’s data and, most importantly, the supporting infrastructure to refine it solely for their benefit. This will allow them to prioritise the Nectar initiatives, incentives and insight gathering to perfectly align with their own strategy.
For its customers, I would expect little to change in the short term. However, over time, Sainsbury’s will leverage Nectar data to significantly enhance customer personalisation. This is critical for retail brands to drive customer loyalty. It is only through offering a hyper-personalised consumer experience that Sainsbury’s will see a return on the investment in its reward scheme which is ultimately increased customer retention. This will take the form of more targeted product offers and recommendations as Sainsbury’s becomes more adept at combining the Nectar data with artificial intelligence.
However, a major challenge is that large sources, like Nectar, can risk overwhelming teams with all the data it collates. Sainsbury’s must ensure that it maintains its focus by accurately defining the business problems it is looking to solve. For example, if the ultimate aim is to increase the penetration of its own brand products the retailer must create robust tests to measure the success of this aim, by ranking its own label products higher in online grocery searches, for instance. In order to avoid becoming bogged down in the masses of data generated by the Nectar scheme, Sainsbury’s must remain focused on the specific goals of the campaign.
This acquisition has put Sainsbury’s in the same camp as Tesco, Walmart, Boots and, of course, Amazon. Competitors outside of this group must be looking to invest in the ability to refine their data to the point of making it actionable. Those without this infrastructure will either have to pay consultant fees to refine results or buy consumable ‘insights’ instead. Whichever option they choose pushes up the cost of operations and, in turn, product prices, pushing away price sensitive shoppers.
Retail ‘knowledge workers’ – the modern buyer, product developer or technical manager – can be tasked with working through a dozen systems, hundreds of spreadsheets and thousands of emails to assess the risk and competency of a product or supplier. The sheer volume of information means that even the most competent professional cannot get beyond the tip of the iceberg.
The biggest opportunity for retailers lies in the consolidation of all of these sources of data into a single ‘view’. Combining this streamlined approach with artificial intelligence can automate tasks, removing the need for individual planning and organisation to drive ‘knowledge worker’ productivity and focus their expertise, experience and creativity elsewhere.
It is not only through loyalty schemes that retailers can make good use of the abundance of data available to them. I’m particularly excited about blockchain technology combining traceability, accounting and marketing into a single solution.
Six international companies and banks, as well as four fintech startups, are involved in a University of Cambridge Institute for Sustainability Leadership trial to design a system that will reward sustainable farming practices. The blockchain system will record price, produce and production information from suppliers, which could incentivise farmers with preferential terms or access to credit for farms implementing sustainable practices. If successful, this could benefit 1.5 billion families dependent on small-scale farms across the globe.
Sainsbury’s is just one retailer, alongside giants such as Walmart, Nestle and Unilever, exploring how blockchain technology can revolutionise the retail supply chain and this is reflective of the overall trend towards the rising power of data. The investment of Sainsbury’s into its own loyalty scheme clearly shows this. As retailers learn how to use customer data more effectively, in turn, they can offer a much more personalised experience. In theory, better and more tailored rewards will make consumers increasingly willing to part with their data.
While it can be seen as a gamble given the rising concern of how consumers’ data is used, Sainsbury’s acquisition of the Nectar scheme has widened the gap between the other grocery retail giants divided between the haves and have-nots of data.
