Shopping Data Collection

What you’ll learn to do: Discuss how customer shopping data is collected

We will learn how retailers use technology to keep track of their customers. What is a Point-of-Sale system? What is Customer Relationship Management? What information do these systems collect and how can this benefit the retail business?

Point-of-Sale (POS) Systems

Point-of-Sale (POS) systems are critical tools in retail management, serving as the central hub for processing sales, managing transactions, and handling various operational tasks. In the retail environment, POS systems have evolved from simple cash registers to highly sophisticated software and hardware solutions that offer numerous benefits for retailers. Here’s a breakdown of their key functions and importance in retail management:

Sales and Transaction Management:  The most basic function of a POS system is to process customer purchases, including scanning barcodes, calculating prices, applying discounts, and handling payments (cash, credit, debit, or mobile payments). POS systems automatically record sales transactions, ensuring accuracy in financial reporting and making it easier to track revenue and expenses. The system also generates detailed receipts, helping both customers and retailers maintain accurate records of purchases.

Many POS systems now integrate with online retail platforms, allowing retailers to manage both in-store and online sales from a single system. This helps with inventory synchronization, customer management, and order fulfillment. Today, the most widely used platforms also systems support mobile POS devices, allowing staff to process transactions anywhere in the store or at pop-up events, improving customer service and sales opportunities.

Inventory Management: Many modern POS systems are integrated with inventory management software that tracks stock levels in real-time. As items are sold, inventory is automatically updated, reducing the risk of overselling or stockouts.

Employee Management: POS systems allow retailers to monitor employee performance by tracking the number of transactions and sales each employee handles, helping managers identify top performers and areas for improvement. Some systems also include functionality for managing employee schedules and tracking work hours, which can be useful for labor cost management and payroll.

Data Analytics and Reporting: A store’s POS system can generate reports on sales trends, peak selling times, and best-selling products. This data helps retailers make informed decisions on inventory, staffing, and marketing strategies. Importantly, retail managers can analyze sales data to determine profitability by product, category, or store location, enabling better decision-making for pricing, promotions, and product selection.

Understanding key retail metrics is crucial for both retail managers and staff because these numbers provide valuable insights into the health and performance of the business. Metrics like average basket size (or average transaction value) can guide upselling and cross-selling initiatives, improving revenue per customer, while also helping managers make informed decisions about pricing, inventory management, and sales strategies.

For staff, being aware of these metrics fosters a deeper connection to the business’s goals and their individual contributions. For example, understanding units per transaction (UPT) or conversion rate encourages staff to focus on engaging customers and boosting sales. When employees can see how their actions—like suggesting complementary products or improving customer service—affect the bottom line, they’re more motivated to align their efforts with the store’s objectives. In short, these metrics help both managers and staff work smarter, not harder, to drive growth and profitability.

Many point-of-sale systems are also fully integrated with built-in customer relationship management systems, which are discussed below.

Customer Relationship Management (CRM) Systems

CRM systems are powerful software systems that serve several essential functions for marketing and sales. Retail organizations use them to:

• Capture internal data about customers and customer interactions and house these data in a central location.
• Provide business users with access to customer data in order to inform a variety of customer touch points and interactions.
• Conduct data analysis and generate insights about how to better meet the needs of target segments and individual customers.
• Deliver a marketing mix tailored to the needs and interests of these target segments and individual customers.

Leading providers of CRM systems include Salesforce.com, Oracle NetSuite, and Microsoft, as well as smaller players such as Lightspeed and Springboard.  These large, many-faceted systems include several components. Databases provide information infrastructure for storing and accessing customer information. Contact management capabilities allow organizations to track a variety of customer interactions, including how each customer or prospective customer relationship is progressing over time.

CRM packages also include sophisticated analytical tools to help marketing and sales analysts examine data and find patterns and correlations that help them better anticipate and address customer needs (with the goal of strengthening each customer relationship).

Customer Database

One of the most powerful aspects of a CRM system is the analysis that can be generated leading to good business decisions. Having detailed information about individual customers and their activities is essential to being able to foster a deeper relationship with them. For retailers, CRM systems store three primary categories of information:

1. Customer profiles
2. Customer activities
3. Customer management

Since CRM systems evolved from contact information applications from the 1960s and 1970s, customer profile data would include customer’s names, contact information, birthdays, etc.

Customer activity would include purchase history data: what is being purchased, how much is being spent, and how frequently the customer is purchasing.

Customer management data allows the retailer to keep track of automated outreach programs, loyalty programs, and cross-marketing ties to other stores and sites.

CRM systems can also aggregate customers into groups based on location, spend amount, and other factors so that retailers can measure overall impact of marketing activities.

For example, in 2012 Mercedes Benz (MB) identified a major business objective to improve their overall customer experience. MB developed a CRM project aimed at customers in various stages of the relationship lifecycle. They created the “RFID Tap to Like” program for the Canadian auto show utilizing Facebook and RFID technology. At the auto show, attendees could interact with the exhibits by simply tapping to like selected vehicles. With this simple process, attendees would receive uploaded pictures and customized e-brochures of their favorites and MB would receive valuable customer information, including their preferences of the new auto models.

Collecting Identifying Information

Retailers have collected identifying information since the business of retail was born. Before modern technology, retail proprietors would rely on their memory to know their frequent customers by name and use basic technology such as pen and paper to keep track of their clientele.

With the advent of Point-of-Sale technology (POS), retailers could more easily keep track of customers and their purchases. We have progressed rapidly from hand-written sales drafts to credit card imprints to credit card swipes. Today POS information can be collected from the consumers’ use of smart phones to complete a transaction.

What’s next? It is easy to see how Biometrics will be used to take the process further. Fingerprints are currently being used to authorize smart phone payments in Apple Pay. In Europe, Mastercard is promoting fingerprint, iris and facial recognition to verify identity in its Identity Check services. In China, DNA and blood type samples are being taken in the province of Xinjiang.

Privacy Issues

Retailers, among other businesses, push for greater customer service and transaction security through better information about their customers. CRM systems are becoming more sophisticated in order to handle the increased amount of data and provide management with better decision-making analysis. We can see that as retailers and their partners move to make retail transactions quick and easy–providing even more personal data for CRM systems–privacy issues are growing.

For brick and mortar, online, and hybrid retailers, a major privacy issue is protecting all of their customer data from malicious third parties. Data breaches have become all too common. Target Stores, eBay and TJX have all experienced massive data theft from hackers over the past several years. As this paragraph is being written, Saks and Lord & Taylor are reporting a data breach affecting 5 million customers.

Our personal information being stolen due to lack of database security is one thing, but how about our personal data being shared legally without our knowledge?

Many of us who shop online have noticed this phenomenon: we query a product or service on Google Search and then see that exact item showing up in an ad on Facebook or some other site we frequent. There is increased speculation that smart home applications such as Alexa and Siri have the ability to listen to our conversations for keywords in order to suggest products and services for sale on connected devices. As technology continues to develop and advance, privacy concerns are growing.