Amazon.com Inc. (NASDAQ:AMZN) has developed a system premised on the idea the corporation knows customers better than it knows itself. In the patent filing, Amazon calls it “anticipatory shipping,” a scheme, which is simply the latest development in retailers using compiled data to gain insight to the mind’s of shoppers. The Amazon patent uses an algorithm to determine what a consumer is likely to buy. This item is then sent in the general direction of the customer, so when it is ordered, the delivery time is minimized.
At the first glance, Amazon, or any company, guessing what someone will want to purchase appears one Orwellian step above what other companies are doing. However, is it really all that different from a company sending advertisements to customers based on past buying habits, or using an third-party to analyze customer behavior?
On its website, dunnhumby labels itself the world’s leading customer science company. Using data, the company provides consumer insights to a number of diverse retailers. Clients include grocery giant The Kroger Co. (NYSE:KR) , beverage maker The Coca-Cola Company (NYSE:KO), and Johnson & Johnson (NYSE:JNJ).
In the U.S., dunnhumby says it started in 2002 when Kroger gave the company a mission. “Tell us what we don’t know about our customers,” Kroger directed. Using the grocer’s loyalty card, dunnhumby parsed the data to tell Kroger how to target its clients.
In a testimonial, Kroger’s Chair and CEO, David B. Dillon, stated that, “Dunnhumby has helped me reset my understanding of what the customer is after, and it helps replace intuition with actual data and actual facts. And it’s those facts that are driving our decision-making.”
Like Amazon, Kroger wants to know its customer through their purchases. David A. Steinberg, the founder of digital marketing firm XL Marketing, explained to DealNews how Amazon in particular uses purchasing trends. ”Amazon is employing behavioral targeting and recommendation engines to help create a transaction with the consumer,” Steinberg said. “The mega-retailer wants to drive the most meaningful offers to its users, so the more information it compiles, the more accurate Amazon’s recommendations based on psychographics, demographics, or spending habits are.”
Steinberg thinks this is to the benefit of the buyer. It can help find them deals, and buying online is always an option. If a buyer does not want ads targeted to their search histories, they can clear cookies online to prevent the ads from being too personal.
The ability to escape the data crunch will likely become more difficult. Frost & Sullivan, a consultancy, made fourteen innovation predictions for 2014, one of which was that “big data will grow bigger” this year. “Virtualization of data and analytics will become imperative to businesses,” Frost & Sullivan’s Visionary Innovation Team Leader and Senior Research Analyst, Archana Vidyasekar, said in a press release.
It has lucrative potential for the Krogers and Amazons of the world, and for the companies which interpret the customer data. International Business Machines Corporation (NYSE:IBM) has an operation devoted to big data in retail.
“With a wealth of information readily available online, consumers are now better able to compare products, services and prices — even as they shop in physical stores,” IBM states. “If retailers succeed in addressing the challenges of “big data,” they can use this data to generate valuable insights for personalizing marketing and improving the effectiveness of marketing campaigns, optimizing assortment and merchandising decisions, and removing inefficiencies in distribution and operations.”
As retailers cash in on customers and companies like IBM capitalize on the needs of retailers, Frost & Sullivan’s prediction of growth in big data will most likely be delivered. Just like that package you haven’t ordered yet.