Here's what retailers need to know about 'programmatic' commerce if they want to survive Amazon's arrival in Australia

Photo: Kevork Djansezian/ Getty Images.

With the impending launch of international value retail powerhouses Amazon and TK Maxx in Australia, the question du-jour is undoubtedly one of the impact on the domestic consumer retail market. Predictions vary wildly, with some experts suggesting the giant will take time to get any serious momentum to Amazon themselves internally declaring war on local multi-sku retailers. Local department store Myer has already felt some degree of impact, shedding 9% off its share price in a single day in May this year after Credit Suisse decided on a more conservative view of its potential performance in light of the changing landscape.

At any rate, (almost) no one is fooling themselves. The times they are a-changin’. At its best, it’s foolish to rely on results from years gone by as any indicator of what will bring success in the years to come. At its worst, complacency bred from a place of ‘industry experience’ is outright negligent in today’s market. Or, as Adrian Turner from CSIRO’s Data61 recently suggested, such failure to innovate should be considered a breach of fiduciary duty.

The upside is that this new world order brings with it a host of lucrative opportunities to leapfrog the competition and disrupt established business models. Key to many of these is the undeniable currency for the digital economy – data. And if you’re an established incumbent, you’re likely holding a winning lottery ticket.

At its most simplified, programmatic is the use of technology and real-time actionable data to find specific audiences at scale across channels and devices. Whilst it’s now arguably par for the course in terms of media buying, the core thinking and approach developed and refined as this field has matured is more relevant than ever. Enter programmatic commerce (also known as programmatic retail).

Programmatic commerce is the ability to set pricing based on both the potential and actual value of a customer, rather than what now seems like a rather archaic ‘one-size-fits-all’ approach. It’s the grown-up, modern day version of membership pricing, loyalty discounts and loss-leader strategies all rolled into one highly nuanced, automated and dynamic system, operating in a competitive environment.

Revenue management is not a new model in-and-of-itself. Hospitality, airlines and travel companies have long leveraged data to modify pricing, sometimes even by the minute, based on supply and demand trends. Just as Uber brought demand-based pricing to the transportation industry, so too is programmatic on the verge of overhauling the way retailers leverage data and insights in their approach to pricing high versus low buying propensity audiences. And with the data available not only growing but becoming better connected, advertisers can deliver dynamic creative and personalised messaging at scale in the moments that matter as consumer behaviours change.

As of this moment it would be fair to characterise programmatic commerce as fledgling, but the potential should be very clear. And capitalising on that potential needn’t be particularly costly or complex, but does need to be considered. In other words, failure to lay good groundwork now will unquestionably lead to undesirable (read: expensive, if not unsurmountable) outcomes which will only be amplified over time.

If data allows us to build a detailed view of both potential and existing customers and the market increasingly values personalised experiences, the application of programmatic thinking to bridge the two is obvious. Whilst we’ve been saying for some time now that experiences differentiate, to be compelling, those experiences must be at least personalised if not bespoke, and its data, analysed and applied in real time that makes this possible.

Critical to the success of a programmatic commerce initiative then, will be an extraordinarily clear understanding of the lifetime value of a customer, ideally segmented on demographic information but preferably incorporating behavioural data too. Technology, like a Data Management Platform, exists today that can ingest and connect on- and offline data and identity, building rich profiles that can be segmented based on the customer journey, and provide insights to influence better people-based marketing.

So if you’ve been wondering what to do with the commodity The Economist recently declared more valuable than oil which your organisation likely has more of than any other asset, setting the scene for your programmatic commerce assault might just be a good place to start.

Sam Sterling is the executive strategy director at Isobar, and Indy Khabra is the managing director at Amnet.

NOW WATCH: Briefing videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.