The Year of E-commerce Big Data: Leveraging Tips and Avoiding Pitfalls
The new year is here, and along with it, online businesses are preparing their 2015 ventures, investments and strategies. One of these new initiatives is commonly big data and analytics. Entrepreneur Magazine put it best when it reported that e-commerce retailers – and SMBs in general – need to invest into collecting site data and purchasing third-party information. This year, more so than ever, will the cream be separated from the crop as those that embrace new technologies and strategies become clear leaders in their respective industries and markets.
The good news is that many SMBs are planning to sell their products and services online if they already haven't created a website. However, to truly harness the full capabilities that the Internet has to offer, e-commerce retailers will have to turn to managed hosting providers. Obviously, this is a great way to get an online store up and running on Magento without an IT team, but businesses can utilize that same relationship to acquire and leverage cloud computing for big data storage and analytics tools.
"Thirty-four percent of businesses use cloud-based data warehousing."
According to InformationWeek's survey on the popularity of analytics and business intelligence, 2015 is the time to tackle big data with a managed hosting and cloud computing provider. In fact, the percentage of businesses working with other organizations offering cloud-based data warehousing improved by 10 percent to reach 34 percent.
So, to keep up with the market, e-commerce retailers will need to adopt this technological trend. The only problem is that many online stores work with managed hosting providers because they are unfamiliar with the space – and they want to save money, but that's a different discussion. For those not acquainted with big data analytics, here are some great uses large collections of data and how they can eventually impact the bottom line.
Determining site improvements
If a website needs to be updated, how can a business determine the optimal improvement to make? First, they should consult their managed hosting provider. This will provide an accurate perspective on the pros and cons of certain design choices as well as highlight the most common online store features.
However, some e-commerce retailers can take those tips and apply them to an A/B testing scenario. This means that one group of customers will be exposed to website enhancements, while other shoppers still visit the old Web page. TechTarget reported on Etsy and its use of A/B testing, stating that this technique is a great way to gain insight into consumer behaviors. The results of such testing will only be improved with big data analytics, and there are other benefits as well.
"Part of the phenomenon about big data is that it's much less expensive to run experiments to analyze big data," Mike Gualtieri, analyst at Forrester Research Inc., explained to the source. "And, because of that, you can run more experiments and you can use more data. That's a key use case."
Predicting peaks and troughs
One of the most difficult parts of working in retail is dealing with the sudden influx of shoppers around certain holidays and the slow periods that follow. ComputerWeekly cited a YouGov study that determined peaks and troughs in website visitors hurt e-commerce retailers this past season, as almost a third of British consumers experienced a problem with online orders around the end of 2014.
Big data can drastically improve e-commerce retailers' knowledge of impending increases and decreases in website traffic. By analyzing third-party data of shoppers' habits and combining that with internally gathered information, online stores will have a very accurate portrayal of the holiday rush and its impact on revenue, but also shipping, inventory management and customer service.
Supply chain management
E-commerce retailers can take those peaks and troughs and compare them with inventory, analyze that data and determine how to better manage the supply chain. This is a critical part of any retail business, which means that those online stores utilizing such techniques can have a huge leg up on the competition and maybe even gain the foresight to acquire the last batch of a certain product.
Additionally, Retention Science reported that big data can help e-commerce retailers avoid disruptions in the shipping process. This is possible by analyzing historical data with, say, weather patterns to determine that ordering or sending products sooner rather than later could prevent any potential issues. The source also suggested using big data analytics to gain warehousing updates in real-time, which can impact product pricing and help predict shortages or overstock.
When running an online store, a key goal is to get visitors. TechTarget also reported on L.L. Bean, an organization that has been around for over a century, and it is using analytics tools to provide "as personalized a service as possible." Collecting a variety of information, L.L. Bean plans to tailor visitor experiences on site and customer support to consumers. For example, different products can be offered based on past purchases and their behavior while browsing the online store.
"Using first-party data, online stores can discover where, when and who traffic is coming from and then cater their marketing to that demographic."
However, there is another way that e-commerce retailers can personalize market. Using first-party data, online stores can discover where, when and who traffic is coming from. Armed with that information, businesses can then target specific social media channels, websites and geographical locations, essentially preventing any wasted spending on marketing.
Avoiding failed attempts
Obviously, there are plenty of ways to leverage a managed hosting relationship and big data to improve all aspects of an online retailer. Businesses still need to exercise caution when deciding how and where to apply insights. Robert Morison, lead faculty member for the International Institute for Analytics, explained to TechTarget three ways in which failure is possible when utilizing big data:
- Sticking to the past: Morison suggested that SMBs approach analytics differently than traditional IT projects. Instead, retailers should think in terms of research and development.
- Too big: If an online store shoots for the stars, the fall will be much further. Rather than thinking big, they should start small.
- Adoption: Instead of using another company's technique, businesses need to address their own problems and try to improve those.
There are so many use cases for big data. Working with site metrics and a managed hosting provider, any e-commerce retailer can craft the best analytics strategies for its needs.