Tag Archives: Retail

e-Retail Innovations

e-Retail Innovations – How e-Retail is Changing?

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e-Retail Innovations and Growth

Over the last 15 years, the share of online retail (or e-retail) has increased steadily all over the world. The graph below shows the percentage of e-retail sales out of total sales for the US.

*Note: Data of first 2 quarters of 2020 is taken
Source: United States Census Bureau

In 2019, e-retail sales accounted for only 10.9% of total retail sales. This shows that e-retail has good potential to grow in the coming years.

A major reason for low e-retail sales is customer shopping behaviour. In fact, physical retail and e-retail KPIs are also different.

Notably, there is a basic difference between how customers shop offline and online. It is down to how customers interact with products while purchasing.

Why e-Retail is less than traditional retail?

According to KPMG, the top-three reasons people go to physical shops are to do with touching or trying the product. 56% of customers prefer shopping offline for the ability to see and touch the product. These are limitations of e-Retail.

Now, e-retail businesses like Amazon have grown with continuous innovations. In 2018 alone, Amazon spent 12.7% of their revenue on R&D. Over the years, many e-retail businesses have disrupted the retail industry with innovations like chatbot, voice search, and drone delivery, to name a few.

The e-retail innovations we discuss here expect to overcome the top-three limitations of e-retail. The aim is to improve the engagement of customers with the products they intend to purchase.

So, what are the most recent e-retail innovations?

Here are three of them:

  1. 3D Models (and videos of product)
  2. Livestreaming
  3. Augmented-reality (AR)

3D Models (and videos of product)

On 14th March 2020, Shopify announced that merchants could upload 3D models or videos directly to their product pages. Fashion merchants selling on Shopify were happy with this new technology. Results showed that the visitors who interacted with a 3D model were 44% more likely to add a product to their shopping cart and 27% more likely to place an order than visitors that did not. 

After implementing 3D models in their store, Bumbleride saw a conversion rate increase of 33% for strollers and increased time on page by up to 21%.

Advantage:

In traditional retail, customers can ‘see’ and ‘feel’ a product before buying. By using a 3D model of products in e-retail, customers can virtually ‘see’ a product interacting with their home or office environment. This feature increases the engagement rate and ultimately leads to more sales.

Livestreaming

Taobao Live is a live streaming service integrated into the Taobao App of Alibaba Group. On 1st June 2020, Taobao Live sold goods worth $280 million in the initial 90 minutes. Merchants can apply on Taobao app for free and start live streaming of their products. Customers can ask queries, buy, and pay on the same app.

Advantages:

  • It is similar to a traditional store being open for customers. But in this case, customers who are interested in the category will join the Livestream. This is a significant advantage as users are already lower down the sales funnel.

  • In digital media, brands have to hire celebrities and tap their brand equity to sell their products. However, in Livestream, anyone can display the products.

  • Users watching Livestream can ask queries related to product and host can answer them or display in real-time. For example, a user might ask ‘can you show how size 7 will fit me?’ The host can then try on size 7 shoe in real-time during Livestream. Subsequently, this increases the engagement of products with potential customers.

Augmented Reality (AR)

In May 2020, Kendra Scott, a jewelry brand, introduced virtual try-on. This feature implements augmented reality and allows users to preview products.

AR is also being used by furniture retailers like Wayfair and Ikea for displaying how furniture will look in their homes after purchase.

In December 2019, L’Oreal announced a virtual try-on that lets shoppers try on makeup virtually using their phone. Garnier (owned by L’Oreal) also launched a virtual try-on named “Garnier hair colour”. Using the Google Lens image-recognition mobile app made by Google Inc., shoppers can point their phone cameras at the hair-colour boxes to activate the virtual try-on service.

Advantage:

  • In e-retail, users can only visually see 2D product images. But with AR, users can virtually try-on products. They can also get some idea of how the products will look in their surroundings.

As e-commerce and e-retail industry matures, innovations are likely to continue in this space.

Author: Sumit Patil

Cover Photo courtesy: Vectary

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Online Business Growth

Online Business Growth – The Easy or The Right Way?

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Online business growth – the easy way or the right way?

Onine business growth is a topic concerning most retailers. How can retailers grow their business in these times? The key message is at the very end.

Consider this scenario.

You are the owner of a mid-sized retail business. You presently sell your product to your customers in physical stores. A typical sale goes like this: Customers show up at your store. They specify their needs, you give options. You counsel, they choose. You pack, they pay, and you complete the transaction.  

Thus far, you have been successful in your current brick-and-mortar model. Your business has a loyal customer base. The net profit margin is in the range of 15%-20%. And, the cash flow is good too.

So, you decide to take your business to the next level.

How would you do it?

The answer is ‘you go omnichannel’.

The internet penetration of above 90% in most developed countries makes it a no-brainer. Among the developing countries, the internet has grown by over 5000% since year 2000 to around 59%. Moreover, customers now prefer to buy in an omnichannel environment.

In omnichannel retail, the focus is on providing seamless shopping experience to the customer across multiple channels. Omnichannel strategy helps you integrate physical store, online store, mobile app, and social media.

In-short, your business growth strategy now revolves around selling online.

To sell online, there are two main options:

  1. Create your ‘own online channel’
  2. Sell through existing ‘online marketplaces’

This decision determines the future course of your business.

Let us dissect each option.

Option-1: Create your own online channel

Creating your own online channel includes two things: first, setting up an e-store – an e-commerce website – to display products and receive customer orders. Second, you need to have an efficient and trustworthy logistics system to fulfil the customer orders. The entire order-to-fulfilment process must run smoothly to give customers a seamless shopping experience.

Having your own online channel has several benefits.

Top three benefits are:

  • You can create bespoke personalised experience for your customers. It allows you to ensure stronger connection and engagement with them.
  • You have total control over your business throughout the customer buying process. So, you decide how customers interact with your brand while being on your website. Also, you can create relevant content around your offerings to engage with target customers.
  • Most importantly, you gain direct access to your customers and their data. You can leverage advanced analytical techniques to analyse this data. This analysis can give you crucial insights about the type of visitors, their visiting trends, and their buying patterns. These insights help you decode the online customer behaviour. Using that, you can make appropriate changes to the way you sell online. This data-driven online selling strategy promises to help you grow your online sales.

What do top-brands do?

While it is not a surprise that top brands like Apple, Starbucks, Disney, and Under Armour have their own online channels, most mid-size businesses have also launched their own online stores. It helps them create unique customer experience. The successful ones have implemented advanced analytics to reveal insights about their customer buying behaviour.

Online Business Growth
How top brands ensure unique and enjoyable customer experience through their e-stores

However, a common perception among small retailers is that there are a few disadvantages with this option, viz. higher upfront investment, additional analysis and marketing costs, and higher lead-time for online business growth. Perhaps, that is why, almost one-third of small businesses in the US do not have a website of their own.

That brings us to the second option.

Option-2: Sell through existing ‘online marketplaces’

Online marketplaces allow you to sell products without you having to set up your own online store. The marketplaces host many sellers on their website. Marketplaces are popular among buyers because they allow to buy different products across categories without having to leave the site.

The marketplace owns everything on their website. They take care of the marketing too. In return, you pay them product listing fees and a commission on every product sold.

There are many online marketplaces around. A few are global, some are regional, and many of them are national. The popular ones are Amazon, eBay, Flipkart, AliExpress, Rakuten, Etsy, and Target, amongst many others.

Many retailers tend to choose this second option over the first. It seems easier to them. Ostensibly, they see the following ‘advantages’ in this option – no upfront set-up cost, reduced marketing costs, and no waiting for online business growth.

Except, these advantages hide the real disadvantages.

Let us explain by listing out six key disadvantages of ‘selling through marketplaces’ option:

No Upfront cost = Lose control over sales

You don’t incur upfront cost if you don’t invest in your own e-commerce set-up. Instead, you use the marketplace’s infrastructure to sell. You use their e-commerce applications, their algorithms, and their processes. You depend on them for the sales.

Sure, the sales can increase, but you may not know why. [GE executives recall how Mr. Jack Welch would get angry when the sales went high and they couldn’t explain why.]

In a way, you lose control over your sales process and data to the marketplace.

Why is it a big problem?

Because, if the sales go down, you would be clueless about it. And so, would not know how to fix the problem.

Let us see an example of what it means by not having control.

When you are selling on marketplaces, you cannot control what products are being sold beside yours. Worse, what if the other product looks identical to yours but is from your competitor. Worse still, what if the other product being sold has the same brand-name as yours, but in altogether different category.

It DOES happen!

Here is a real example* of a brand selling at one of the top marketplaces:

The organic soft-cotton baby onesie, is selling alongside

woman’s cocktail dress of the ‘same’ brand-name (but from a competitor); selling alongside

motor flush oil of the ‘same brand-name; selling alongside

a music label of the ‘sam-e brand-name

– all of them in the same window.

And you cannot do anything about it.

Reduced analysis and marketing costs = Risking business survival

Generally, marketplaces own the data on your product sales. The minute a retailer signs up to a seller’s account on a marketplace, they give permission to the marketplace to use their sales data however they choose. Most marketplaces don’t share that data back with the sellers.

So, in reality, when you choose to sell through a marketplace, you don’t just pay listing fees and a commission per transaction. You also pay with your sales data, and future sales.

[I would re-read that last sentence to let it sink in.]

Marketplaces can use your sales data to gather your customer intelligence. They can leverage it to offer your customers better deals through their in-house labels.

Sellers have shared stories about how this has impacted their business.

In short, you risk losing your loyal customers to your competitors if you do not leverage your sales data yourself.

No waiting for sales-success = Less opportunity to build your brand

Online marketplaces try to make the seller onboarding process easy to bring more offline sellers on their e-commerce platform. They try to make it smooth and quick. You can start selling in a few days [and you may stop selling in fewer days if you violate their policies].

Not just that, you may also start realising sales quickly on marketplaces. However, the presence of many other products makes it difficult for consumer to register your brand among so many others in their minds.

You are successful quickly = Threat of getting undercut on prices

If you start doing really well, someone will notice and one of the two things may happen – they may offer to buy you out or they may undercut you on price and terms, eventually killing you.

Online Business Growth

Remember Zappos? Zappos was extremely customer-centric, very successful. It was the first company that sold shoes online, at scale. They put a lot of importance on understanding shoes, their culture and customer centricity.

When Amazon wasn’t going anywhere with its own online shoe store, Endless.com, they made their first attempt to acquire Zappos in 2005. Zappos declined. What happened later is not up in public domain. However, Amazon eventually acquired Zappos in July-2009.

Hyper-competitiveness – Forced to sell on price, not differentiation

Conservative estimates put the number of active sellers on Amazon at 2.3 million as of 2019. Chances are, many of them are selling the same products as you do. This makes it difficult for you to compete, if you do not have aggressive [read: less] pricing, that helps the algorithm pick your product ahead of the competitors’.

Diapers.com may be the case in point. They built a $100 million business selling diapers online. They offered free delivery of diapers and other products to parents. But they couldn’t sustain the competitive pressures and ceased to exist in 2017.

Restrictive TnC on how you can communicate with customers = Limits brand building

There may be marketplace limitations on how your business can brand and communicate itself on the marketplace. Moreover, any slightest hint of violating the strict policies will earn you the dreaded ‘seller suspension’ message.

Does that mean marketplaces are bad?

NO! Not at all.

In fact, they have disrupted some aspects of retail for the better.

For example, online shoppers love Amazon. Amazon is allowing them to have wider selection, shop-anytime-anywhere convenience, and enjoyable shopping experience, all at a cheaper price. They have developed a world-class e-commerce platform over the years.

Marketplaces can be good for small retailers, that do not have resources to have their own e-store. Also, marketplaces may be useful for those businesses not aiming to create an enduring brand.

But they may not be for everyone.

You need to figure out whether marketplaces are right for you.

Then, what is the way forward to online business growth?

Companies are waking up to the risk of increasing their dependency on marketplaces. More and more mid- and large-sized companies are embracing “direct-to-consumer” sales model.

Almost all large businesses and brands have their own e-commerce stores. Some of them were tempted initially but then recovered themselves from increasing their dependency on the marketplaces.

Nike – just doing it without a marketplace!

Nike is one such example. Recently, Nike confirmed to CNBC that it will stop selling merchandise directly to Amazon, as part of its push to sell more directly to consumers.

To quote CNBC, “Prior to 2017, Nike had resisted such a deal with Amazon, focusing its attention on its own online marketplace and stores. The fear for many brands has always been that, by partnering with Amazon, a company loses control over how its brand is represented on the site.”

This Veracle makes a point that mid-sized businesses should strive to have their own e-commerce set-up. They should attempt to leverage their sales data using analytics. This could be the right way for their online business growth.

What do you think? Have you seen a mid-sized business struggle with this dilemma?

*name withheld on request.

Cover Photo courtesy: Pradnya Design Consultants

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customer shopping behaviour in e-retail

Know customer shopping behaviour KPIs in e-retail?

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Customer shopping behaviour is an important concept in retail.

This is why.

How do you grow your retail business? You sell what customers want. How do you know what customers want? Well, you observe how they buy.

When customers buy a product or service, they do certain things. First, they search for the product online or in stores. Next, they try to seek more information and compare prices. Then, they check product ratings and seek feedback from friends. Over time, they engage with brands through social media.

All the actions mentioned above describe customer shopping behaviour.

Customer shopping behaviour in e-retail refers to how customers interact with your website. It involves understanding the actions a customer performs between landing on your website and leaving.

So, how exactly do we “observe customers”?

We do this using the various Key Performance Indicators (KPIs). KPIs help us get a sense of real-situation quantitatively.

Previously, we saw that e-retail and physical retail have different KPIs.

Now, we can measure the customer shopping behaviour in e-retail using the following KPIs:

  • Total visits
  • Bounce rate
  • Shopping cart abandonment rate
  • Shopping cart conversion rate
  • Sales conversion rate
  • Average duration on page

The flowchart in the figure below illustrates these actions. The little boxes on the right of each process show the corresponding KPI.

customer shopping behaviour flowchart
Flowchart depicting customer shopping behaviour in e-retail

Customer Shopping Behaviour KPIs in e-retail

Here is a brief explanation of each KPI.

Total Customer Visits

Total visits KPI is the total number of visitor landings on a website.

According to Google, 63% of all shopping begins online. That makes ‘Total Visits’ the vital first KPI for an e-retail sale. E-retailers try to increase this KPI to increase sales.

Bounce Rate

Bounce rate is the proportion of visitors landing on your website and leaving without taking any action.

If the website is engaging for customers, they interact with it. More the interaction, lower is the bounce rate, and better are the prospects of making a sale.

There are various reasons for a high bounce rate. Moreover, a high bounce rate doesn’t tell the entire story. Also, there are ways to improve it.

Shopping cart abandonment rate

This KPI means a customer added products in their e-retail shopping cart but later abandoned the order.

According to Statista, 63% carts were abandoned because shipping cost was too high. While these customers have not yet purchased, they are most easy to convert to a sale.

Shopping cart conversion rate

Similarly, this metric helps e-retailers measure the number of completed orders compared to the total number of shopping carts initiated by potential customers.

It is calculated as a ratio of number of visitors who placed an order, to the total number of visitors who started a shopping cart. It is expressed as a percentage.

Sales conversion rate

Google defines sales conversion rate as the ratio of transactions to sessions, expressed as a percentage.

The recent Adobe Digital Index 2020 report pegs average global conversion rate in retail at 3% of the total visits. The sales conversion rate varies across various retail categories. Conversion of consumer electronics is only half at 1.4%. Gifts, and Health & Pharmacy generate the highest conversion rates at around 4.9%.

Average duration per page

One e-retail KPI to measure is the time spent on each webpage. This is tracked as ‘average duration per page’.

This KPIs is based on similar one in traditional retail. In physical retail store, more the time a customer spends inside a shop, higher are the chances of purchase.

So, what do you think? Do you track these metrics? If yes, which ones do you think are the most important for your business?

Author: Sumit Patil

If you liked reading this article, then please subscribe to our blog – Veracles. That way, you can receive such interesting insights in email.

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Cover Photo courtesy: Luke Chesser on unsplash

E-Retail KPIs

How E-Retail KPIs different from traditional Retail KPIs?

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How are E-Retail KPIs different from traditional Retail KPIs?

E-retail is online website of a retail store. Let’s call their KPIs, e-retail KPIs.

Traditional retail is physical brick-and-mortar retail store. Let’s call their KPIs, traditional retail KPIs.

E-retail and traditional retail by their nature are different. The difference exists from both perspectives: customer perspective and the retailer perspective.

The customer perspective drives their shopping preferences and buying behaviour. Customers who value convenience, price comparison, time-saving, and ability to shop 24×7 prefer to shop online. Whereas, customers who want to touch, feel, and try the product first tend to shop in physical stores. Increasingly, customers are buying in Omnichannel environment. That is, they discover a product in one channel, check it out in another one, and buy through a third (see Figure).

E-Retail KPIs
Omnichannel shopping is becoming the norm

The retailer perspective influences their business operating behaviour. Traditional retailers focus on maximising in-store experience for their customers while optimising store space. While e-retailers focus on online shopping experience and user personalisation.

Therefore, this influences their KPIs, or Key Performance Indicators.

E-Retail KPIs

Many e-retail KPIs are common with traditional KPIs. Some of these are the various financial ratios, customer retention, and conversion rate. However, e-retail KPIs are different from traditional retail KPIs in two major areas:

  1. Customer Acquisition Channels
  2. Customer Shopping Behaviour

Let us see how.

Customer Acquisition Channels

This is the source of customer traffic to your business. Understanding where your customers are coming from is extremely important for business growth.

E-retail channels are primarily organic search, direct search, referral, e-mails, and social media. These channels actually lead customers to e-retail store (i.e. the website). So, e-retailers can easily measure the percent of customers acquired from these different channels. They can then devise their deliberate strategy around these insights.

For example, Facebook generates 13.9% of e-retail website traffic, but actual sale happens in only 4.7% of cases. This is a critical piece of information as it will allow you to allocate resources efficiently and ultimately improve ROI.

Traditional retail channels are mainly word of mouth or advertisements in print, television, radio, and social media. For traditional retailers, it is nearly impossible to accurately calculate the percent of customers acquired from these different channels. This is because, these channels do not ‘redirect’ them to store.

For example, a customer actually visiting a store may have seen an ad or may have been referred by word of mouth. Moreover, they may not even remember this information when they visit the store.

Customer Shopping Behaviour

Customer behaviour varies a lot between in-store purchase and online purchase. Understanding customer behaviour is central to acquiring more customers.

In e-retail, KPIs like Shopping Cart Abandonment (SCA) and Customer Lifetime Value (CLV) are important and helpful. The analysis of shopping cart abandonment rate and the list of discarded items can help improve our understanding of purchase intent of customers. Similarly, understanding a customer’s lifetime value helps in targeting profitable customers more effectively.

Whereas for traditional retail, understanding shopping behaviour for every customer is problematic and costly. We can only perform market basket analysis. This will only analyse the products added together in cart. But there is no definite way to measure discarded items from cart in physical store. Moreover, physical space oriented KPIs like sales per square foot are not relevant to e-retail.  

In a nutshell, it is essential for retailers to rethink the right KPIs while taking the retail business online. More so, considering that omni-channel shopping is becoming the norm.

Author: Sumit Patil

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Cover Photo courtesy: Blue Planet Studio

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