Curing the epidemic of retail bankruptcy: X-data
By Mike Maughan, head of global insights, Qualtrics
Drastic changes have occurred in retail this year. In just six months, over 300 retailers have filed for bankruptcy, including Gymboree, Gander Mountain, Radioshack, rue21, Payless and Gordman Stores. And the future appears uncertain for a number of others.
While it's easy to call online shopping the culprit, the numbers aren't all grim which indicates there is more to the story. In a recent study the National Retail Foundation conducted on Gen Z, 98 percent of young consumers reported they shop at brick and mortar locations. They do so for many reasons, ranging from convenience to preference. Brands like Amazon, Warby Parker and Bonobos are all experimenting with bricks-and-mortar locations and, according to the Bureau of Labor Statistics, there were 577,000 retail job openings in April 2017.
What's the difference between success and failure in retail? X-data is a major piece of the puzzle.
O-data: An outdated measure of success
Traditionally retailers have measured their success primarily by observing operational data, or O-data. This is the data collected in day-to-day operations such as finance or sales data. The problem with retailers focusing on O-data is that it speaks to what happened in the past, not what is going to happen in the future. It's not enough to know how many shirts are being sold annually by a retailer. In this ever shifting environment of consumerism, retailers need data that will speak to their future. O-data is essential, but it's no longer a competitive advantage. There's been a wake-up call that organizations won't thrive by operational data alone, and that's where X-data comes in.
A new, better way: X-data
X-data is the human factor data that indicates the beliefs, emotions, and intentions people have, allowing an organization to know why it's succeeding. There's a need for businesses to make unique and meaningful experiences for the customer. Stitch Fix, the online styling and personal shopping service, is doing just that by providing its customers with an experience that fuels its overall culture. Stitch Fix acts as the "personal" stylist and delivers merchandise designed to meet the customer's own style. The retailer is creating value for its customers far beyond just supplying them with quality merchandise.
While businesses like Stitch Fix are likely using X-data effectively, many organizations are not. A study from Bain & Company reveals 80 percent of CEOs believe they are delivering a superior experience to customers. In reality only eight percent of their customers agree. This is what's called the "experience gap," the gap between perception and reality. Failing to leverage X-data is one of the primary reasons that companies lose employees, clients and revenue.
The way forward: Xs and Os
To close the experience gap, retailers need to get good at experience management. As retailers hone in on their X-data, they'll be better able to understand not just what is happening, but why it's happening. And that means they'll be able to take meaningful action to close experience gaps.
Retailers will rid themselves of the bankruptcy plague as they prioritize experience management programs and their overall culture. O-data is an important first step, but it isn't going to give organizations a competitive advantage on its own.
Retailers have to incorporate and focus on X-data to track the vital signs of their business so they know exactly what experiences consumers are having and why they are having them. The future is bright with X-data leading the way.
Companies: Stitch Fix