GDPR provides retailers an opportunity to improve data governance

29 August 2017

In May 2018 the General Data Protection Regulation (GDPR) will come into effect – the new European privacy regulation, which replaces the existing data protection framework under the EU Data Protection Directive, will impact the data governance of organisations across the UK. While GDPR contains several obligations, forcing organisations to make changes in the way they operate, preparing for compliance can at the same time bring rise to new data opportunities, write Brian Kalms and Oli Freestone, a partner and principal at Elixirr.

In today’s market, data-driven retail is essential. A better shopping experience delivers higher sales, more frequent visits and greater likelihood of brand advocacy. Delivering “better” means understanding who your customers are, what they are looking for and why your proposition works for them. Gone are the days when this could be achieved just through gut feel.

Until recently collection, storage and analysis of personal data has largely been left to retailers to govern and control. But hacks and leaks have shown that this hasn’t worked well enough and so next May the biggest change in data protection laws for over two decades comes into force when the General Data Protection Regulation (GDPR) replaces the existing rules.

There is no shortage of depressing articles highlighting the challenges of compliance and the severity of fines (up to 4% of global revenue). Few, if any, are highlighting the real opportunity this change presents as a catalyst for unlocking the value of data. Much like cleaning out the spare room, the new ruling gives retailers a mandate to do something many have been putting off for years.

GDPR provides retailers an opportunity to improve data governance

Four areas that provide opportunity for improvement in data governance:

Getting fit for the digital age

The digital-savvy retailer stores accept the importance of being data-driven and are transforming themselves to stay relevant. Understanding your customer, developing relevant offers and experiences and engaging them when and where they choose can’t be done without data. That means understanding what personal data you have, being clear on how you want to use it, and being rigorous in how you process and govern it. GDPR means giving your customers the right to opt in to the data they share. Consumers will have a choice on when, how and what to engage on, strengthening their relationships with retailers that develop the right proposition and safeguard their details, and punishing those who don’t.

Understanding what you hold, what you use and what’s redundant

Currently we find ourselves in a latter-day oil rush, with companies prospecting, mining and storing whatever personal data they can find. Those days are numbered. GDPR requires data holders to regularly review and delete data that’s not required, forcing retailers to think strategically about what data is truly important, how they use it to add real value, where to invest and what to erase to protect themselves. Data that does not exist cannot be stolen.

Improving ways of working

Mapping data structures and process flows may not sound strategic or even interesting, but it is one of the fundamental principles underpinning successful data-driven companies. Without it the propositions you want to build to serve your customers will remain just dreams. GDPR requires companies to re-evaluate how they process data, presenting a business opportunity to re-imagine the value data could bring.

Addressing technical debt

Legacy system failures hurt customers, tarnish brands and cost money. GDPR emphasises the importance of grasping the legacy nettle of “do later”. Any retail transformation is going to involve updating processes and systems not fit for purpose. This is not remediation – it’s a key platform for growth initiative.

Modern retail is reliant on data. The faster retailers embrace GDPR regulation as a catalyst for change, rather than an annoying compliance programme, the better.


Consumer goods start-ups grow interest from venture capital

23 April 2019

Funding the latest consumer goods start-up has been a real money-spinner for venture capitalist firms, with a number of $1 billion companies – or unicorns – having emerged in the space in recent years. New analysis has explored the resulting corporate consumer products activity in the acquisitions space.

Consumer products have enjoyed years of strong growth as new markets opened in developing Asia. China in particular has enjoyed strong growth across a range of consumer good types as the country’s middle class expanded. Private equity firms have been keen to pick up targets in the space as they expand their portfolios to include additional local capacity as well as customers in new markets.

As a result, a study from Bain & Company has found that interest from PE firms in the consumer product space grew sharply in 2018, hitting 6.1% of all invested capital for the year, and making it the third most sought-after category. It is now only behind financial services (23.9%) and advanced manufacturing and services (13.9%).

Corporate venture capital investment

The ‘M&A in Disruption: 2018 in Review’ research found that growth in the segment reflects key changes in the segment as a whole. This is particularly true of insurgent brands, which often leverage local expertise in order to take on international giants in domestic markets.

Short change

The market changes have led to shifts in motivations for consumer goods company investments from PE firms. The number of strategic investments stood at 50% in 2015 compared to deals that increased scope. This has shifted significantly, with 34% of deals focused on strategic outcomes in 2018 compared to 66% for scope. The move towards scope reflects companies seeking out fast-growing products that enable stronger revenue growth streams.

Acceleration in scope-oriented M&A in consumer products

However, there were other motivations for deal activity in the space. Activist investors have put pressure on companies to expand their portfolios in recent years, with the trend expanding from just US targets to Europe.

Further trends

The other key shift in the space regards outbound deal activity. The study found that outbound deal activity has increased significantly in the Americas (up 363%) with total deal volume up only slightly (15%). Key deals included Coca-Cola and Costa, Procter & Gamble and Merck’s consumer health unit, and PepsiCo and SodaStream. In the Asia-Pacific region, outbound deal activity rose 195% while total deal activity fell sharply, by -36%. The EMEA region saw both a sharp decline in outbound deal activity, at -68%, as well as lower overall deal activity, which fell by 32%.

Cross-regional deal making

Deal-making in the current environment is increasingly fraught with uncertainties, as business models change on the back of new technologies, new consumer sentiments and wider market changes from new entrants. As such, acquisitions are increasingly useful as possible hedges on changes in market direction. As such, companies are increasingly pressed to take a future-back position, making sure to incorporate a vision of how the company needs to look in five years into acquisition strategy.

The firm notes that certain acquisitions which enhance a remembrance of a nobler mission, revive a sense of entrepreneurialism and engage directly with consumers may be necessary qualities in acquisitions that transform a company to fit market expectations in the coming decade. While going forward, focus on innovation, partnering with retail winners, reducing cost base and constantly reallocating scare resources will be necessary to protect market share in areas where insurgent local and strategic competitors are active.

Related: Private equity asset growth top priority for 2018.