PBS ran a documentary in the late 1990’s entitled “The First Measured Century”, where it described the phenomenal effort the United States undertook in the early 1900’s to begin measuring all kinds of things about Americans (I highly recommend it). Some of the statistics they gathered had revolutionary impacts on long-held beliefs — for example, measurements of immigrants and their American-born children debunked ridiculous notions of racism based on cranial measurements. Infant mortality, longevity, overall health rates — these were all benefits impacted by America’s efforts to measure what was going on among its population.

When I think about the trends that stand poised to shape retail in 2013, I can’t help but draw a parallel to The First Measured Century. Retail is able to measure more about its customers — and its products — than ever before. The amount of information available has been growing steadily (some would say explosively) over the last decade, but I think that 2013 will be the year where the remaining gaps in customer understanding will be closed by leading retailers — setting the bar for followers in years to come. The only question that remains is will retailers be able to turn all of that information into useful insights?

I see three main opportunities for retailers to transform their enterprises in 2013 based on new ways of measuring their operations:

Customer Insights into Merchandising via Social Media

Retailers have been mucking around in social media long enough now that they not only have the raw information they’ve collected, they have trends and history. Some retailers are already using explicit social interactions to determine demand — using solutions like First Insight to determine the best initial price of a product, or connecting with a virtual panel of customers regularly to judge the potential effectiveness of ad campaigns or new products. The next opportunity is more general, and more forward-looking. Retailers can now look back at historical social media interactions with customers and trace correlations through to product purchase.

That means that 2013 may well be the year that leading retailers turn to social media not for its customer service or promotional opportunities, but for its predictive potential. How many product Likes does it take to move the needle on customer demand? How do customer reviews — positive or negative — impact product sales over time? Can customer sentiment be used to predict store traffic? How about to predict needed changes in search strategies? Ad campaigns? Product assortment? While all of these questions offer the potential to exponentially increase the value of social media investments, that value can only be realized if retailers have the flexibility to act on the insights they’ve gained. For example, if social media sentiment about products can be used to predict demand for those products, it’s only worth something to the retailer if they can make the order adjustments — up or down — to accommodate.

Hidden Demand in the Supply Chain

In RSR’s supply chain research, we consistently hear two challenges from retailers, and they are as old as retailing itself: too much slow-moving inventory and not enough fast-moving inventory. The degree to which a retailer is impacted by each of these differs among Retail Winners and laggards — Winners tend to do better in managing their slow-moving inventory. But the plain truth is that retailers everywhere know that they do not do nearly as good a job of matching inventory to demand as they would like Ironically, this problem has been around so long that many retailers seem to have a cultural block about it — this mismatch is as intractable a problem as, say, employee turnover — it will always be there and we all just have to live with it.

Cross-channel is proving those naysayers completely wrong. Not only is flexible inventory fulfillment changing the game, it is demonstrating that the demand mismatch problem is costing retailers way more in lost sales than they suspect even in their wildest dreams. I am aching to share some of the results I’ve heard from retailers that are experimenting with store shipment of online orders, but alas I cannot. All I can say is that some of the initial work that RSR did in estimating the value of lost sales — of capturing those lost sales through inventory flexibility – significantly understated the case. It is amazing to me that just leveraging store inventory to fill online out of stocks is generating massive sales numbers. Think about what retailers could do if they could capture the same kind of demand that is going unmet in stores — where for some retailers, 90%+ of transactions still occur. As retailers get better at capturing — and meeting — this hidden demand, it will only become a further separation between Winners and laggards. And there are definitely retailers in 2013 that will be reaping the benefits of these kinds of investments.

No More Store Black Box

The last frontier of customer insights is in the store. Sure, retailers can gain certain irregular insights into customer behavior — following select shoppers around, intercepting shoppers as they leave the store. But these aren’t necessarily the most accurate reflectors of shopper behavior and they certainly aren’t cheap and easily repeatable. What retailers really need is the store equivalent of online analytics — aggregated data about a massive number if individual shopper trips over time, especially if they can be segmented either by specific behaviors or by demographics. While not every retailer will have that capability in 2013, some few will, whether through video analytics or some kind of mobile phone tracking technology. And I propose that when retailers do have this kind of information, they will possess something game-changing.

Retailers have long-held assumptions about the role of store associates, about traffic, about conversion rates — and all of these assumptions will now be able to be questioned, examined, and proven right or wrong, thanks to store tracking technologies. At a time when the store is on the ropes, retailers are in a position where they might even be far more open to examining their long-held assumptions about stores than ever before — a perfect storm of opportunity.

Lame Questions Lead to Lame Insights

It took a long time before retailers were comfortable with using online purchase information alongside store transactions to gauge demand and how retailers should respond to that demand – and there are still retailers that do not leverage this information to the extent that they could. There are a lot of stumbling blocks on the road to greater insights in 2013, but the one I’m most wary of is lack of imagination. There are so many questions that should be asked and answered by these new data sources — far beyond “How many fans do I have on Facebook?” but if no one asks the right questions, no one will get the game-changing answers.

Here’s to asking the right questions in 2013. And to some of the most inspiring ways to answer them.