How does the Facebook inquiry relate to retail?

ZucksIn the latest example of the United States Democratic political machine’s inability to accept losing the ‘un-losable election’, Facebook has become the next scapegoat for failure.

The spectacle of one small geeky guy being bullied by 20 senators and the might of the ‘political inquisition’ is absurd theatre that may provide some people with an avenue to exorcise their frustration but will change little.

Why? For three very good reasons.

Firstly, the very foundations of e-commerce rely on monetising data collection. Without it the model does not work and the world leader in e-commerce technology and its monetisation is the United States.

Secondly the intelligence community is so intertwined in this web that it will defend it at all costs.

And thirdly, while when confronted with direct questions about personal data consumers may offer negative opinions, their behaviour betrays that they care more about what they can get than they do about what information is collected as a result of their actions.

If there are any traditional retailers expecting e-commerce to be derailed as a result of the Facebook inquiry they will be sadly disappointed. The media angle taken on e-commerce data portrays the lemming-like thinking that sees e-commerce (which produces less than 10 per cent of retail sales dollars and a fraction of the gross margin) given a halo of power that magnifies its influence beyond its natural impact.

Data collection and its manipulative use online creates the virtual equivalent of a product stalker following a shopper around a centre and shouting in their ear every five minutes that they should buy their product for a discounted price until the customer either capitulates or runs away.

Most shoppers (read more than 90 per cent by dollar value) would prefer to buy at physical stores for a multitude of reasons. However what data allows online outlets to do is destroy competitors by starving their profitability – not by providing a better alternative.

E-commerce outlets do not build brands. They generate transactions. They do not build experiences. They provide transactional convenience. And they use data to do it. Make no mistake, they can decimate traditional retailers who either put their head in the sand and ignore them or react the wrong way.

Unless the retail industry starts to think strategically, rather than tactically, e-commerce may end up with the majority share of retail purely by outlasting bricks and mortar retailers economically by starving them of profitability.

So regardless of any meaningful legislative changes that are unlikely to emerge from the Facebook inquiry, the e-commerce game will roll on and the technologically enabled, globally connected marketplace will continue to evolve beyond the ability of legislator’s attempts to curb it.

It is not new (we’ve been collecting data on consumers in one form or another since commerce began) but it is technologically turbo-charged.

However, as any true merchant will tell you, there is a big difference between data points and really knowing what turns on a customer and how to charm them. That is where the real opportunity will always live for real retailers and brands as distinct from product and price catalogue sellers.

Peter James Ryan is chief executive navigator at Red Communication Australia, and has 25 years of marketing and business experience.

This story first appeared on sister site Inside Retail Australia.

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