SAP's Creepy New Retail Software Uses Big Data To Make You Buy More Stuff

Not so long ago, the most advanced piece of technology present at the intersection of consumer and retailer was the cash register. Today, buyers are bringing their own technology on their shopping trips - and trailing a very revealing online data footprint. One big enterprise software company is promising retailers new technology that will let retailers leverage that information to market to those consumers in real-time.

For retailers and tech companies that serve them, billions of dollars are up for grabs. If there were any doubts that there was real money to be made leveraging big data to create custom marketing pitches in real time, those doubts should be shattered by Tuesday's entrance of mega-software corporation SAP into the retail tech frenzy. The move is the equivalent of an elephant walking into a room of working mice and telling everyone, "I've got this."

SAP's product is a new implementation of its upcoming NetWeaver Cloud called SAP Precision Retailing that uses the consumer's location, social profile, needs and the time at which they are conducting their business to generate relevant content (including discounts and special deals) designed to get that particular consumer to make the purchases the retailer desires. Technology, then, as virtual salesperson.

On the surface, this is nothing new. Social media profiles have been used as a marketing tool for quite a while now, as have location-based services that suggest a business or product to you when you're nearby. SAP's product, though, is a major effort to combine a lot of different inputs and process them in real-time. SAP's pragmatic approach to this new market runs right up to the point of being just a bit creepy.

Real-Time Analysis In Aisle 14

All of this real-time processing promises a very personalized level of interaction between the retailer and consumer, according to Herve Pluche, Vice President, Retail Consumer Mobile Initiative, SAP Lab, enabling the retailer to "influence behavior."

That retailers are in the business of influencing customers is not new either - visit most any U.S. grocery store and you'll have to schlep back to the rear of the store just to get your milk. The store is trying to make sure you see lots of other items to tempt you along the way. But SAP's determination to extol the processing benefits of its new system seems destined to raise eyebrows among privacy advocates.

The profile aspect of the new Precision Retailing product could be a red flag, since it mines past transaction history (online and in-store) and social media profiles to help figure out what it is you need and want. Customers using this service will likely have given permission to the retailer to perform such actions when they click "Accept" for the Terms of Service, so there's no technical breach of privacy, but such real-time analysis could tip consumers into the creeped-out zone when they see it in action?

Of course, SAP is not exactly trying to ease customer's minds here: it wants to sell this system to the businesses that can use the capabilities. And it may not be a hard sell. The product is already in use, and doing pretty well.

Pluche related that one European grocery retailer with 12,000 stores in seven countries is using the Precision Retailing system to deliver discount information into customers' hands via smart devices and in-store kiosks. The promotions were often the same ones that were email- and direct mail-blasted to customers, but Pluche explained that identical promotions see a conversion rate eight times higher when delivered directly as opposed to mass-distributed. That's a piece of data sure to attract the attention of retailers.

The Numbers Behind SAP's Product

Retailers are very motivated to get technology like this in place. A recent Retail Systems Research study noted the "top 3 technologies reported by survey respondents were customer purchase analytics, CRM, and marketing operations planning" - right where SAP's new product lives. And despite few problems collecting customer data, only 56% of the retailer respondents now believe they know who their best shoppers are, a big drop from last year's 73% figure.

There's also a little Inside Baseball action happening here. Precision Retailing's core technology, NetWeaver Cloud, is a Platform-as-a-Service (PaaS) cloud computing product that has not yet been generally released. NetWeaver Cloud relies on SAP's HANA in-memory database, which competes directly with Oracle's Exadata X3 database announced at OracleWorld this weekend. SAP's launch of Precision Retailing is no doubt going to be used as an early showcase of what NetWeaver Cloud can do.

So ready or not, consumers are going to see a lot more use of their shopping and social data driving future transactions, because retailers are increasingly shifting in that direction. SAP may be one of the largest players in this rapidly evolving space, but it won't be the last.

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