The expanding commerce landscape has been shaking up the traditional competitive rules. On one hand, barriers to entry are collapsing and anyone can start a business online with limited resources. On the other hand, some large players are aggregating demand and capturing an ever-increasing share of e-commerce value, at scale.
Consumer behaviour in researching products, buying them and repeating purchases is also evolving, shaped by new ways of engaging with sellers. Seventy-nine per cent of consumers now say the experience a company provides is as important as its products and services.[i] More than one third of consumers shopping with Amazon, Tmall or JD.com declare they actually shop more frequently because they use Amazon, Tmall or JD.com.[ii] More than one out of five declare they won’t even look anywhere else if they see a product that looks suitable on Amazon.[iii]
These increasing levels of competition and consumer expectation are intensifying the pressure on legacy brands, not only to emerge in this crowded space, but also to deliver engaging and convenient experiences on par with the ones proposed by a new breed of influential players. Although e-commerce is one of the greatest opportunities for businesses in decades, it is also one of the most challenging.
As commerce growth is shifting to complex online environments, designing and executing a successful strategy can sometimes appear as an overwhelming conundrum for organisations. Various significant factors determine how a company is positioned to grow its commerce business in the digital economy: breadth of the international presence, product portfolio structure, existing notoriety of the brand, margin structure, supply chain efficiency, organisation structure, reporting lines, etc. Although they have a critical influence, moving the needle on these factors entails structural business decisions and requires time and resources to bear fruit.
iProspect’s Data-Driven Commerce report explores another powerful and critical lever in the hands of marketers to accelerate their commerce strategy: data. While some data management projects require infrastructure and organisational changes as demanding as the examples mentioned above (McDonald’s recently acquired Dynamic Yields, a leader in personalisation and decision logic technology, to create more relevant experiences for its 68 million customers [iv]), the report focuses on rapidly actionable data for insights and optimisations. Data can have a direct impact on brands’ bottom lines today, from engaging with the right platforms, to building upon competitive intelligence, to optimising content and managing consumer feedback. This is all the more important as two of the most valuable audiences of brands, investors and customers, are already using data in increasingly sophisticated ways.
Asset managers and hedge funds are increasingly hungry for alternative data sources to drive their strategy ahead of quarterly earnings reports, and by 2020, spending on alternative data is anticipated to reach $1 billion.[v] Web-scraped data, search trends, social media sentiment and web traffic – channels and tactics well-known from digital marketers – are among the most observed sources by investors. A few years ago, analysing pricing data crawled from large electronics retailers, Eagle Alpha, a provider of alternative data, was able to detect weak demand for GoPro’s products and weak rankings of the brand’s latest product.[vi] One week after they published their conclusions, GoPro released their Q3 earning report,[vii] which revealed the brand would miss its targets for the first time since its IPO. Investors don’t hesitate to tap into advanced data sets like satellite imagery to observe store parking lots’ daily occupancy rates. Counting cars may seem rudimental, but it is actually very effective for assessing business performance. Analysing seven years of satellite imagery, University of California Berkeley professors found that using observations of abnormal parking-lot traffic to inform a trading strategy before quarterly earnings reports could earn a return more than 4% higher than the performance of bottom portfolios, a huge ratio in investment.[viii]
Consumers are not to be left out of the data game. As they are better informed of the value of their personal information, they are more vigilant with what they share: 44% of people have been taking steps to reduce the amount of data they share online (e.g., opting out of geo-location services) over the last 12 months.[ix] They are also becoming well versed in using data from digital platforms for their purchases. This goes from relatively simple techniques such as using smartphones in stores to compare prices with Amazon (a behaviour adopted by more than 78 million people in the US[x]), to advanced tactics such as installing web browser extensions to automate discount codes research (Honey, one of these extensions, claim to have 10 million members[xi]) or leaving an item in the cart for a few days in the hope of receiving an email with a coupon from the brand. Some expert users are taking this ‘data empowerment’ even higher, for instance, buying ads to promote their referral codes (an Uber client in San Francisco reportedly amassed $30,000 in credits by spending $600 in advertisements on Google[xii]), or carefully observing flight data to ‘skiplag’ - a technique where consumers, when noticing a nonstop airfare to a specific destination is higher than a fare to another city that includes a layover in the city they really want to visit, buy the flight with the layover and skip the second part of their journey (this technique has been challenged on legal grounds by several airlines[xiii]).
As their most valuable audiences have unprecedented access to information and alternative choices with little friction, brands must leverage the right data to understand consumers’ intentions and harness the best platforms to engage and convert them. This is the place where iProspect has been leading the industry since 1996, converting consumer intent into action by executing data-driven experiences in media.
In the e-commerce new playing field, what worked for traditional retail isn’t guaranteed to work online. Therefore, iProspect developed the Commerce Success Framework (CSF) to help today’s marketers cut through the fluff and develop a winning strategy - across any consumer touchpoint, whether online, offline, or both, and in any country. The CSF maps the four key dimensions every marketer should address through their commerce strategy.
Availability: Meeting consumers where they really are, e.g.,How should I engage with marketplaces and third parties? How can I make the most of my inventory at scale? What should I do to combat illegitimate resellers?
Findability: Ensuring relevant visibility when it matters, e.g., What metrics will help me win? How can I automate competitive intelligence to inform my pricing strategy? How can I influence consumers earlier in their journey to increase my revenue?
Buyability: Differentiating products from the competition, e.g., How do I craft content to convert? Are virtual assistants really relevant for my brand and can they impact my bottom line? Can I use my online data to improve my offline experience?
Repeatability: Building a relationship with the consumer beyond the first sale, e.g., How can I maximise the lifetime value of my customers in a world where brand loyalty is non-existent? How can I leverage and manage consumer feedback to intensify the relationship and improve the proposition?
iProspect typically conducts a thorough audit of their clients’ strengths and challenges against each dimension of the CSF to establish pragmatic and workable commerce roadmaps, grounded in real-world digital experience. For the Data-Driven Commerce report [add link to the Download page], a simplified version of this audit was turned into a 12-point survey sent to 100 key clients across 28 markets between April and May 2019.[xiv] From the survey responses, an industry-level view of the current commerce maturity of brands was created through an intuitive scoring system on a 1 (least mature) to 5 (most mature) scale, and informs the recommendations presented in the report.
In the current State of Commerce Maturity, the newer skillsets Buyability and Repeatability score less well, while respondents feel they are doing better in Availability and Findability, two performance marketing strongholds. It is clear that newer skill areas demand more time to adapt culturally and require new systems and processes before they can be leveraged effectively.
Currently, the battleground is largely in the visibility part of the funnel. Although being excellent in the Availability and Findability dimensions is vital, a clear advantage will be given to those brands that leverage opportunities in the sale itself (Buyability) and managing the customer lifecycle effectively (Repeatability).
Asia-Pacific leads the world in every category, with a CSF score averaging 3.23, followed by EMEA with 2.72, and finally the Americas with 2.45. While in Western countries social commerce is struggling to take off, China’s Pinduoduo has been leveraging WeChat capabilities to amass 295 million active buyers in its first three years.[xv] With India currently counting about three times fewer digital buyers than China[xvi] (in proportion of the population), APAC e-commerce potential is immense. The rapid changes in technology in the region have groomed consumers to adopt new online commerce faster than their counterparts in the West, and Asia-Pacific marketers have no choice but to innovate to keep up with consumers, as reflected in our survey.
Although most respondents have imported the technologies they have been using in digital marketing into their commerce strategy (85% use Paid Campaign Management technology for commerce), less than half (46%) have invested in tools enabling a universal sharing of product information across the organisation (e.g., product information management or PIM). Only a few are using commerce-specific technology such as digital shelf analytics.
Access to data, both in volume and in value, is a key driver of maturity in the commerce world. Industries that traditionally have access to more data (e.g., Travel & Tourism, Technology & Telecommunications) obtained significantly higher scores than those whose performance has been tied to offline channels such as the Food & Beverage and Media industries. Although the former are seemingly able to reinvent legacy practices in new environments, the latter are struggling to grasp the new customer paradigm. In the recent years, many consumer-packaged goods (CPG) brands have multiplied direct-to-consumer initiatives to try regaining control over the customer experience, data and relationship.
Similar patterns across industries are observable. For instance, content is the weakest link for most categories. On the opposite, clear distinctive strengths are noticeable: Business Services and Luxury over index on engagement and retention, which can probably be attributed to the place of human relationship and the power of the brand, respectively, while Travel & Tourism over index on pricing, which is presumably attributable to yield management proficiency.
To access more industry-focused insights and explore iProspect recommendations for each dimension of the model, download the report Data-Driven Commerce now.
[viii] Katona, Zsolt and Painter, Marcus and Patatoukas, Panos N. and Zeng, Jean, On the Capital Market Consequences of Alternative Data: Evidence from Outer Space (July 30, 2018). 9th Miami Behavioral Finance Conference 2018.
[x] M1, DAN’s proprietary data platform, September 20, 2018
[xiv] iProspect 2019 Global Commerce Survey, May 2019