Data as weaponry in the Supermarket Wars

Malcolm X once famously said, “Anytime you find someone more successful than you, especially when you’re both in the same business, you know they are doing something that you aren’t.” While this may seem to be stating the obvious, Germann, Lilien and Rangaswamy set out to apply this theory to marketing analytics with the hypotheses that “the more intense the level of competition among industry participants, the greater the positive impact of marketing analytics deployment on firm performance.”

To explore this theory in the Australian context I set out to look into one of Australia’s most intensely competitive industries, that of FMCG grocery industry and specifically, the ongoing tussle between Coles and Woolworths. Some background for the uninitiated – both Coles and Woolworths are part of a larger group of businesses which include hardware outlets, clothing department stores and liquor stores; they also both operate loyalty cards namely Flybys (Coles) and Woolworths Rewards; and they both offer online shopping and home delivery for their grocery outlets.

flybuys rewards graph

Coles and Woolworths use data analytics from your online purchase history to save lists and streamline your weekly shop, they prompt you at checkout to consider products you usually buy and they promote specials on items you have previously ordered. In an interview with itnews.com.au last year, Coles digital chief Roger Sniezek insists that the use of data collected from online purchases and loyalty cards is about improved customer service, not about upselling. “If you go back 100 years to George Coles, I’m sure at the end of unpacking a cart he might have said ‘I think you may have forgotten the milk this week’,” Sniezek explains, “Now, when you come to check out on Coles online, using a few computers in the background we will also suggest a few things that we think you may have forgotten.”

Germann et al assert that the successful use of marketing analytics is only possible with buy-in from the Top Management Team, it appears this is no issue with Coles and Woolworths who are well aware of the power of data. In fact, The Australian report that Woolworths recently purchased a 50 % interest in data analytics company Quantium which enables them to use the firm’s data, analytical, media and software services to boost their existing customer analytics. Yet this is where the waters get a little muddied, in return for use of their data software services Quantium gain access to Woolworths’ de-identified customer data, taken from its loyalty, debit and credit cards, which may be processed and sold to Quantium clients including eBay, Telstra and Qantas.

In fact, independent consumer group Choice, point out that the loyalty cards promoted by these large conglomerates are not about rewarding customers after all – shock, horror! Their evaluation of a range of rewards programs found that most offered ‘such poor rewards that you generally save less than a dollar per $100 spent’ and in return consumers are imparting invaluable information such as whether they are a smoker, purchase a lot of junk food or perhaps maternity-specific products. Why is this a big deal? If, as the ABC’s 7:30 Report suggested, Coles and Woolworths are engaged in high-level discussions about establishing banks and offering home loans, then an individual’s financial situation, purchase history and lifestyle will provide them with invaluable tools for lending risk assessment.

So, while Germann et al profess the importance of getting top-level management buy-in and appreciating what marketing analytics can do for a firm in competitive environment, we can also observe what intense competition can do to an industry and their key players. We can appreciate not only the ‘positive impact’ that market analytics can have on a ‘firm’s performance’ but also the risk that placing data at the core of competition can hold for consumers.


7 thoughts on “Data as weaponry in the Supermarket Wars

  1. Hi Kelly. Great example you gave with Coles / Woolworths on the use of data. I just came out of a webinar where the discussion was the use of data by Target and they used an example which started with a customer complaint about why his teenage daughter kept getting text messages from Target trying to sell her pregnancy related products. It prompted an internal investigation where it transpired that she had purchased a number of products and had used the checkout counter in Target from the mother and baby section. Based on her purchasing behavior, the data had predicted that the customer was 80% likely to pregnant, and hence the targeted marketing to pregnancy related products. The father was pretty pissed and said it was outrageous that Target would be irresponsibly targeting teenagers with pregnancy related products when they clearly were not and this had caused some major issues in the family. He demanded an apology and asked for the texts to stop. The footnote to the story was he called back about three weeks later, rather sheepishly and apologized, apparently the data was correct after all. His daughter was pregnant after all.

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    1. Oh no! Such an invasion of privacy! The knowledge of purchasing maternity products is also a massive concern if Coles / Woolies are moving into home loan lending (for example) as most lending agreements are dependent on a stable ongoing income.

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  2. Hi Kelly,
    Cool post. As a consumer, I’m pretty skeptical about the use of these ‘rewards’ cards, I haven’t signed up for any specifically due to privacy concerns (Yet I have 4 different social media accounts … woops). However, I don’t think I’m alone in this bracket. There seems to be a growing realisation that these sort of rewards cards have a primary purpose which is for anything but. What I’m trying to get at is that perhaps there are other ways for the big supermarket retailers to collect and analyse consumer data, in a less ‘obvious’ way. I wonder what sort of innovations in data collection we’ll see in our lifetime?

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  3. Hi @thesocialmediasymposium, thanks for reading my blog & taking the time to comment 🙂
    I do have a Woolworths Rewards card and do my weekly shopping online, one of the features I like most about it is that it saves my previous orders, prompts me at checkout with items I usually buy but have left off the order and provides a tab for ‘my specials’ where I can check if any of the products I have previously bought are on special. So I don’t really mind them tracking my behaviour on that front as it saves me a LOT of time.

    However, I would expect that this functionality would still be available without my Woolworths Rewards Card and if there is a risk that they may share my data and contact details with other Quantium clients then I don’t think the occasional $10 credit from Woolworths Rewards would compensate for this invasion of privacy.

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  4. Hi Kelly, I personally think the blog nicely posed the question of whether one should compromise privacy for convenience, and to what level? I have both Flybys and Woolworths Rewards but mainly for the sake of saving points and not so much interest in promotions or specials. I have never thought about it in terms of the so-called ‘invasion of privacy’, but from what you pointed out, I have now become quite concerned to know that our information is also shared with other third-parties. What’s more frightening is that those information could also be stolen or hijacked and used for illicit purposes. Who wasn’t thrilled when the ABS’s website got hacked on the recent Census night? There is a blurred boundary between what is private and what could be shared, especially when it comes to online shopping as the more details you provide about your preferences or lifestyle, the more specific and related those recommended products are to you. However, what needs to be transparently clear is how your information is protected and processed by the subscribed businesses; there should also be policies and regulations regarding these, because there are some whose priority is to profit, not to protect their customers. The question is whether our legal system, all the laws and regulations, could catch up with the ever-growing information technology, let alone to govern it?!?

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  5. Hi Kelly, very interesting example illustrates that retailers utilize data analytics and sort of breaking their business ethical principals. I don’t live in Australia so I actually don’t know much about these two companies. But I definitely agree that while data analytics can bring benefits to business for sure, they can also do harm and intrude customers’ privacy. Enjoy reading your post!

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    1. Hi Melanie,

      Thank you for taking the time to read and comment on my blog, I see you mentioned you don’t live in Australia, it would be interesting to consider how data analytics are applied in different cultures.

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