Is this the online retailer of the future?

11th Aug 2014

How many online retailers out there can claim to be truly data-driven? While undoubtedly the ecommerce industry is becoming increasingly data-savvy - using customer data to measure, segment and personalise - there is clearly still a long way to go.

In theory, retail is incredibly simple: it’s down to selling the right thing to the right person at the right time - and turning a profit, of course. The reality, however, is a great deal harder. It’s not easy to know the right thing to sell, or how to find the right person to sell it to. And determining the magic formula for combining all of this together into repeated profitable transactions can seem like somewhat of a dark art.

In ten years’ time, ecommerce will undoubtedly still be underpinned by these same principles. But data has the power to obliterate the challenges associated with selling the right things to the right people. Becoming a data-driven business has the potential to completely revolutionise the relationships online retailers have with their customers. 

One company leading the way in data-driven ecommerce is Stitch Fix. Founded just three years ago, and with a current annualised run rate of $150m, the premise of Stitch Fix’s business model is simple and, judging by the company’s impressive growth, very effective: use data to build a detailed picture of each customer and their style preferences, send them five items based on this analysis and wait to see whether any of these items get returned.

They don’t.   

This is a clear example of data-driven ecommerce in action. After all, people love to shop but the shopping experience is only pleasurable if they find what they’re looking for. The better you know your customers, the easier it is to meet this need.

Stitch Fix don't leave anything to chance. The company uses the data it collects on customers to ensure that each and every product they present to them is something that they’ll want. Moreover, 70% of all its customers repurchase within three months - a figure that most online stores can only dream of.

Becoming data-driven

So how do other retailers compete? Does this mean that existing retail operations are destined to fail, leaving a brand new generation of data-focused ecommerce businesses to take over the market?

Certainly not, and email marketing provides a good case in point as to why this is unlikely to happen.

When businesses first realised that email was a powerful channel for marketing to customers, no doubt a lot of time was spent manually sending newsletters and other marketing collateral out, probably using an email client like Outlook. While we might find this a pretty amusing prospect these days, back then it was all they had in the battle to stay competitive.

But then in step ESPs like MailChimp and suddenly the complexity and time spent on email vanishes. Ecommerce marketers are free to work on what they’re good at again - the creative work and messaging - rather than endlessly clicking the ‘send’ button.

Without doubt, retailers are starting to wake up to the need to be data-driven. But they are still (metaphorically at least) using Outlook. They’re relying on non-ecommerce-specific technology like Google Analytics and Excel to handle their data. What they need is something that delegates out all of the complexity - the aggregating, accuracy-checking and prioritisation - and leaves them to focus only on the actions that require their attention - those that will have the biggest positive effect on their business.

This is what the future of online retail will look like. Technology will enable retailers - both new and old - to become data-driven. Online retailers will be able to know for sure they’re selling the right products to the right people. And ultimately, that’s what ecommerce is all about.

Ivan Mazour is CEO and Founder of Ometria.


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