Whether they liked it or not, the pandemic forced many SMEs and scale ups into becoming ecommerce businesses.
With non-essential bricks and mortar closed down for months and the fight for market share on existing online retail channels intensifying, many businesses had to build their own online sales platform fast, simply to keep trading – the much talked about ‘Covid pivot’.
Fran Quilty – CEO and Co-Founder, Conjura explains growing business that’s recently ventured into building its own ecommerce capability, has to master a whole new area; collecting, understanding and acting upon customer data. For possibly the first time, data analytics has to be built into the organisation.
Even businesses that were born as DTCs have found themselves having to re-evaluate their ecommerce and data strategies in the face of rapidly changing customer behaviour caused by the pandemic. The type of behaviour they were used to seeing at the start of the year and the decisions they made based on that data need to be reassessed.
A business that has its own online sales channel is in a powerful position. It has much more information about its customers than it does when selling via a third party. It can use that information to inform its growth and future direction, even down to long-term strategic decisions such as which overseas markets to expand to, what products and services to focus on and those to abandon.
Even though trading conditions continue to be difficult, SMEs who started out on their own ecommerce journey as a response to the pandemic, now need to get to grips with how they use this new source of data to drive future growth. So too do some of the more established ecommerce scale ups who may still have data management on their ‘to-do’ list. And brands such as Cath Kidston and T.M. Lewin have been given a second chance, reinventing themselves as data-driven, online only businesses.
Securing funding demands getting a firm grip on data. Investors will base their lending decisions on ecommerce data as it’s a powerful indicator of longer-term viability and growth potential. Think of it as turning on the headlights in this new online world. Revenue-based financing based on available data around future sales, is one means open to ecommerce start-ups to turbo-charge growth.
And while it might be tempting to kick the building of robust data processes into the long grass or only to focus on them once discussions with investors start, that’s much too late. You’ll find those conversations come to a grinding halt until you can formalise a reporting structure that gives them the key business indicators they need to reach a decision. By that point your senior team might have spent several months on making it happen, taking their eye off the day-to-day running of the business, only to find that potential investors have gone cold.
Yet, it doesn’t need to be like that. The business indicators required by investors, what they call unit economics, are no more than the data any well-run business should be collecting and analysing daily or at most weekly. It will include the cost of acquiring customers across different marketing channels; the lifetime value of customer cohorts over time, by channel, by geography; the products they bought, using which device; re-order rates; the rate of churn and many other kinds of purchase behaviour you can glean.
Access to the data is one thing, acting on it is another. Good data management will allow you to be far more responsive to changes in the business and to competitor activity. Anomalous trends in the daily reporting will alert you to sudden customer churn, allowing the business to explore the root cause rapidly before it becomes a major issue. It means that marketing budgets can be reallocated daily if the data is telling you that a higher value customer can be secured via a different channel, thus driving profitability. It will also mean that you’re not wasting your online marketing spend driving customers to buy items that are out of stock.
Putting the right structures in place shouldn’t be an overwhelming task for most SMEs and scale ups who are taking their data-driven future seriously. There are a variety of options depending on in-house skills and budget available; an in-house data team, an outsourced function, or a combination of the two can all work equally well. However, the key is getting internal buy-in; this means making sure the senior team understands the value of data to drive profitable and strategic growth, and to secure investment as required.
The landscape is evolving faster than anyone could have predicted as we went into 2020. In this increasingly digital-first market, understanding what data is relevant for your business and organising your strategy around that will make the difference between success or failure. The latter cannot be put down to market uncertainties, or a lack of vision, as data-driven strategies negate both. Rather, failure will come down either to a lack of data, or a lack of analytics skills.