More than Ads: Data’s Role in the E-Commerce Boom

More than Ads: Data’s Role in the E-Commerce Boom

It’s hard to imagine the internet without e-commerce. Everywhere you look, there’s an ad with a convenient link to a nice pair of jeans, a promo code from a podcast, or an extension to guarantee you get the lowest price possible. So it’s no surprise that e-commerce is a fast-growing, trillion-dollar industry powered by data.

Targeted ads and customer experiences, powered by data, drive the e-commerce space — across all industries and across the world there are countless examples of this powerful pairing. But the nuanced mechanics of how that data is leveraged and how it benefits businesses beyond increasing revenue are vital to understanding where the industry is headed. Data provides insights that create new products, improve internal operations, and guide long-term strategic planning.

Customer insights everywhere

Data surrounding customer behaviors and preferences come from myriad sources.

“It’s all about collecting relevant data, which can include anything from searches to online locations, that respects consumers’ privacy preferences,” said Drew Kleppe, account director at Booyah Advertising, in an interview. “The data gives you such insight into who [users] are and what they’re thinking.” That information is used in just about every way possible to help businesses find and connect to customers.

“Not all ads point to products. Sometimes we’re pointing to blogs or podcasts,” said Kleppe. “It’s all about reaching the customer wherever they’re at in their journey and providing them the services and products to meet their needs.” Those needs are constantly evolving, too.

A simplistic analysis of the industry would imply that’s the extent of data’s influence: getting more traffic to e-commerce sites and driving revenue. But that view ignores the ways that businesses get value from the same sets of data applying them to an array of business functions. These insights into consumer preferences power product recommendations, dynamic pricing, and even the creation of new products. For Kleppe, these data represent much more than just targeted ads.

“When it comes down to the consumer, I believe they expect to be treated fairly and get the best customer experience,” he said. “As a consumer, I expect to see more of the things I want, better prices, and new products — and that’s what data offers us.”

Beyond the shopping cart

Those innovations aren’t just limited to the duality of sales and revenue, the seller and buyer. The ways in which data can drive holistic improvements for business aare immense and varied for each company and industry, powered by technological advancement. With advancements in machine learning and artificial intelligence, businesses are stepping forward to leverage this information into value-added solutions across business units.

“The future [of e-commerce] will see higher algorithmic accuracy using data, and with technology making tremendous strides through machine learning and artificial intelligence. We can already see that this is well underway,” said Raphaël Menesclou, chief marketing officer at DataHawk, in an e-mail interview. “Instead of providing businesses with descriptive analytics such as reporting capabilities, businesses will look for more action-based insights at their fingertips.”

That translates to data-driven solutions that improve a company’s ability to optimize operations, plan strategically, and identify growth markets over the long term. Menesclou provided the example of Fulfilled by Amazon aggregators. According to DataHawk and MarketPulse reporting, Fulfilled By Amazon aggregators raised over $12 billion, in 2021.

An Amazon aggregator is a business that acquires multiple Amazon brands for the sole purpose of consolidating them under one brand identity. Aggregators use data a multitude of data points to evaluate existing successful brands that may perform well together.

Menesclou said these aggregators grew to that $12 billion level by analyzing extensive data of existing Amazon brands, and “saw the potential for growth, bought them, perfected them to maximize value, and then went on to expand their portfolio of brands.” By having access to and analyzing the data on their marketplaces, these firms identified strategic acquisitions, entered growing markets, and executed a strategic plan to expand and diversify the business.

Data also offers an important lens through which companies can measure success. The industry has long since left the wild west of “launch it, and they will come.” The space is saturated with competition, all vying for the limited spaces available. Compounded with the fact that many marketplaces depend on black-box algorithms with opaque machinations, data plays an integral role in guiding companies through a hyper-competitive field.

“Without data, you lack visibility on your own performance, in addition to the inability to benchmark against your competition,” said Menesclou. “A company with no foresight into the data is just setting itself up for failure in the long term. Without data, you are essentially going in blind.”

The gift that keeps on giving

Data for an e-commerce firm is like getting a foot in the door. It starts as an easy means to improve the customer experience, but quickly blooms out into all aspects of the business, improving strategy, operations, and more. Though, it’s easy to get lost in the aspects of the industry that are most visible to consumers.

“It makes sense that the first thing that comes to mind when it comes to the use of data is the eerily accurate social media targeted ads,” Menesclou said, “but it is much more than that. Data is at the crux of development for any business, e-commerce or not.”

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