German Retail Failing to Exploit Big Data

Many retailers and brand suppliers in Germany are gathering valuable information about their customers, but so far few of them are exploiting the data for profit.
A Marc O'Polo store in Berlin.

 

German retailers are hunter-gatherers. They hunt for customers and gather the consumers’ data. But many of them have little idea how to exploit the potential of all the customer information, according to a survey of 1,500 managers by the University of Potsdam and the SAS Institute.

The results of the study are sobering.

“Most of the commercial companies simply lack the know-how to make proper use of big data,” said Wolf Lichtenstein, managing director of software company SAS.

How long can German companies afford to let the treasure slumber on the servers in their data centers?

“There is the danger of leaving the market to the U.S. players,” said Marc Hergenröther of the Munich-based digital performance marketing agency Catbird Seat.

“Data is the new oil,” said Kevin Plank, chief executive and founder of Under Armour, a U.S. manufacturer of sports apparel and footwear.

Mr. Plank is convinced that those who are able to read and evaluate data will be the ones who will be the winners. Under Armour is considerably smaller than rival Adidas, but the triumphant advance in Germany of the U.S. online retailer Amazon has demonstrated how aggressive, data-driven competition from the United States can quickly turn a whole industry upside down.

Many German companies apparently haven’t recognized the threat. Nine in 10 of those polled by the University of Potsdam and SAS said they lacked resources to analyze customer data. Almost exactly as many admitted they lacked the technical knowledge to do it. Two-thirds were additionally afraid of legal hurdles.

All of this is happening while the competition is getting tougher.

“Companies today no longer have hours of time to make an offer that is perfect for the customer; the customer expects it in a couple of seconds,” said Mr. Lichtenstein of SAS.

And that isn’t just in online selling. According to a study by the corporate consultant PricewaterhouseCoopers, almost a fifth of consumers wish for “a personalized offer in real time,” even at the mall.

Companies today no longer have hours of time to make an offer that is perfect for the customer; the customer expects it in a couple of seconds. Wolf Lichtenstein, Managing director, SAS Germany

“With increasing digitalization, there is increasing expectations,” said Tom Wallmann, marketing director of the Bavarian fashion label Marc O’Polo.

Nevertheless, the company is cautious. Only the data “that customers give us voluntarily [is used] and then only with extreme care," Mr. Wallmann said. "After all, we aren’t any secret service.”

Marc O’Polo is representative of many brands in Germany that are hesitantly following the data trend.  The medium-sized company introduced a customer relationship management system only a year ago.

“Now we can reach out to our customers, simultaneously and concertedly, in our own shops, in the franchise stores, and in our online shop,” Mr. Wallmann said, adding that he plans to use the software primarily for personalizing the sales approach.

“We used to send many customers a uniform advertisement about four times a year. Now we can vary our approach to customers and the rhythm,” said Mr. Wallmann, who also warned about overtaxing the consumer. “When a customer has bought shoes from us, we can’t shower him with shoe ads in the following weeks. Maybe he needs something completely different.”

Mr. Lichtenstein is also convinced it isn’t enough simply to exploit the technological possibilities. There is an obligation to be sensitive to the customer.

“When a customer is getting the creeps, the issue of data protection doesn’t really matter,” he said.

There is a middle course. The perfume chain Douglas, for example, has equipped its sales staff with tablet computers. With them, the staffers can check which creams, shower gels and scented fragrances are in stock at the moment.

The employees are also able to access the data of 17 million Douglas cardholders. When a customer identifies himself or herself as a cardholder, the salesperson can immediately see the consumer’s preferences, purchases and other personalized data. In this way, the sales person can give much more specific advice.

But that’s just the beginning.

“We are far from exhausting the potential in this area,” said Henning Kreke, who until recently was the chief executive of Douglas and is now chairman of the company’s supervisory board.

The goal is to more closely link the online business, social media and brick and mortar business and thus tailor the offerings even more individually to the customer’s needs.

Sometimes, it isn’t even that difficult to attain valuable customer data. Dieter Münch, the chief financial officer of the luxury Munich department store, Ludwig Beck, who is also responsible for information technology, used a simple method before Christmas.

Anyone who submitted an email address was given a one-time purchase discount of 10 percent.

“We collected 10,000 email addresses that way, and 90 percent of them were valid,” Mr. Münch said. But more importantly, he said, the participants in the campaign spent significantly more than customers who didn’t get the discount.

Retailers aside, the flood of data is benefiting service providers.

“We are experiencing a golden age for IT,” said Michael Guschlbauer, a member of the board of management of the Germany-based IT provider Bechtle.

The company once sold computers, marketed printers, installed software and configured servers. The publicly listed company based in the southwest state of Baden-Württemberg still offers those products, but now does much more. It is increasingly working as a consultant, advising clients on how they can keep pace with the rapidly advancing digitalization.

“The companies are collecting so much data that networks completely different than before are needed,” Mr. Guschlbauer said.

Bechtle’s sales rose last year by almost 10 percent to around €2.8 billion ($3.1 billion). Profits shot up by more than a fifth to €93 million. What is manifested in Bechtle’s balance sheet is what is on the mind of German industry.

A survey conducted recently by Germany’s digital association, Bitkom, revealed that the digital revolution is the top issue for three-fourths of all companies, even ahead of the struggle over staffing.

Bitkom thinks the ones to profit most this year will be the software providers, who can anticipate a sales increase of over 6 percent. The IT service providers will grow by just under 3 percent.

 

Florian Kolf leads a team of reporters covering the retail, consumer goods, luxury and fashion markets. Georg Weishaupt covers the luxury and fashion industry for Handelsblatt. Joachim Hofer covers the high-tech industry and IT sector for Handelsblatt. To contact the authors: [email protected], [email protected] and [email protected]