How to Become a Data-Driven Online Retailer

By Scott
TOPICSFeatured, Insights, Marketing Tips

For 20 years, most online retailers have relied on one digital storefront to sell their goods. They acquired customers through a single channel: Google. They depended on one distribution point, often supported by an array of drop-shippers. And they catered to shoppers who had relatively low expectations.

All of this is changing. As it does, data is becoming the new critical competency.

Ecommerce has become multi-channel

Three years ago, merchants typically acquired more than 85% of their new customers from search engines like Google. That’s in large part because shoppers began their product searches there 55% of the time, compared to Amazon at 38%[1].

Today, in a major reversal, shoppers start at Amazon 52% of the time, and at Search Engines 26% of the time. That helped Amazon absorb 53% of the year-over-year ecommerce growth in 2016[2], enabled by its large network of third-party sellers who were responsible for 50% of their sales[3].

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More than 33% of Internet Retailer’s ranking of the 1,000 largest merchants, in fact, are selling through marketplaces like Amazon, not just their own website[4]. The largest online sellers like Walmart, NewEgg, and Sears are responding by building their own marketplaces, while boutique marketplaces like Etsy and Houzz are gaining steam, too.

Further destabilizing the changing landscape of ecommerce, shoppers are finding new products to buy through social networks like Pinterest and Facebook. To wit, 93% of Pinterest users say they use the platform to plan new product purchases[5], and EXCLUSIVE now has clients generating nearly 30% of their sales from Facebook referrals.

Figure 1: Shoppers are more spread out than ever before, requiring retailers to manage many new channels

Figure 1: Shoppers are more spread out than ever before, requiring retailers to manage many new channels

New data-management challenges

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Figure 2: Managing data in a multi-channel world requires careful planning

As ecommerce’s multi-channel landscape evolves, many retailers are finding their data-management practices to be woefully out of date. This is particularly true in the areas of product data compliance, analytics, and product margin optimization.

Data compliance

Every place you list your products — whether it’s on Amazon, Google, your own website or elsewhere — requires you to adhere to strict criteria. The criteria aren’t standardized, meaning that you must conform to the unique guidelines of each channel.

Example: Selling on Amazon

  • Don’t list the same items for less on your other channels
  • Map products to Amazon’s proprietary product identifier (ASIN) and category structure
  • Structure item-level variants per its unique schema

Example: Marketing through Google Shopping

  • Provide GTIN information, like UPC, or risk suspension
  • Don’t include restricted items in your feed or risk suspension of your entire account
  • Structure attributes properly to improve visibility through browsing features

Many online retailers pull the data feeds they send to these channels from their primary website, but that is not a scalable way to adhere to the evolving guidelines of a wide array of channels. Every channel wants data in a unique way, and the needs will only grow more complex.

Takeaway: Centralize your product data and use a combination of algorithms and manual quality controls to enrich data to keep it compliant

Analytics

What comes to mind when you think of the word “analytics?” Many online retailers view analytics as a collection of data silos where greater insights go to die. Considering the increasing complexity of multi-channel selling, and the rising expectations of online shoppers, that’s a real problem.

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Figure 3: The “Lean Startup” teaches us that data should be actionable, accessible, and auditable

There are two bottlenecks that constrain many online retailers in particular:

  1. Data silos. When your data is decentralized, it’s nearly impossible for non-technical users to create meaningful, actionable reports.
  2. Workflow optimization. When your employees, vendors, and partners cannot get their hands on actionable reports, decision-making takes longer, and opportunities are missed.

The other thing many online retailers don’t realize is that a big part of Amazon’s secret sauce is its personalization features, like “customers who buy X also buy Y.” This feature — and others like it — influence more than 35% of Amazon’s revenue, which isn’t bad considering the features themselves are relatively easy to replicate.

What’s hard to replicate is the underlying analytics that make these features impactful. Amazon knows that customers who buy X” also buy “Y” because they store and mine years of data, and use collaborative filtering techniques.

Takeaway: Create actionable reports

Product margin optimization

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Figure 4: When you “set and forget” your prices, you’re probably leaving money on the table

As someone who has been practicing search engine optimization since before Google existed, I believe I am uniquely qualified to criticize all SEOs, myself included, for a major fallacy we have promoted for many years: Content is king.

Content is critical, and it may be the so-called “king” of SEO, or even marketing in general. Cash, however, is what matters more than anything else. Most online retailers, unfortunately, spend too much of their time burning their cash.

Here’s what burning your cash looks like: Setting and forgetting your prices

When you set and forget your prices, you end up doing one of two things:

  1. Burning gross profit by charging less than you need to;
  2. Missing opportunities to acquire profitable new customers by overcharging

Economics 101 tells us there is an equilibrium price for every product, where demand meets supply. You can find this equilibrium by:

  1. Regularly monitoring competitor pricing and product availability
  2. Using this data — combined with proprietary algorithms — to optimize your prices
  3. Monitoring the impact of price changes on marketing performance and gross margin

Takeaway: Develop and execute a pricing strategy that maximizes gross profit

 

Conclusion

Centralize your product data, create actionable reports, and develop a pricing strategy that maximizes your gross profit. That is what it takes to become a data-driven online retailer, and it’s why EXCLUSIVE has aligned itself so closely with GrowByData, a product data management and enrichment company.

Online retailers have reasons to be optimistic. Ecommerce sales are growing, and the rate of offline retail bankruptcy and store closures may hit a tipping point in 2017. However, a large share of this ecommerce growth will go to the online retailers who treat data as the critical competency they must own in their market.

[1] See Raymond James study covered by GeekWire

[2] See BusinessInsider coverage of Slice Intelligence analysis

[3] See Fortune quote from Jeff Bezos

[4] According to 2015 survey

[5] See Shopify infographic
Photo credit: KamiPhuc 
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