I wrote this sometime back for a friend of mine, who took the plunge and started an e-commerce business, after leaving his cushy job at a Global Technology giant. Though the background of the article, mirrors the Indian Retail/ E-tail ecosystem, that is yet to come up to world standards in terms of customer centricity, the fundamentals are the same anywhere in the world.
The fundamental mistake that Modern Retailers in India make, time and again, is the assumption that all their customers are alike. This is at the root of all their problems. The other problem that they face is their inability to measure metrics that will help them have a tight control over their business, so that they know which levers to pull to stimulate growth. In this article, I will take a look at e-tailers and stimulate thoughts on the kinds of measurements that they should be doing at their end to run their businesses.
One can forgive the Modern Retailers for their sloth and inexperience as far as “customer centricity” is concerned, but few can let the online retailers off the hook. The so-called poster boys of Indian e-commerce seldom make an effort to even trace their customers, understand their repeat purchase behavior, understand their path to purchase and group their customers into segments. The online retailers have very primitive forms of Analytics and have thrown the fundamentals of good retailing to the winds- that of keeping the customer at the center of all their decisions and trying to understand their buying behavior. It is conventional wisdom in the world of Retail that it is 12 times more expensive and difficult to acquire a new customer than to keep an existing one happy and retain him. And yet the online Retailers are chasing ever more new customers. Their excuse for doing so is that repeat visits are very rare- instead of trying to figure out why that is so, they spend more money on advertising and marketing. Thus they are ignoring the fundamental principle on which retailing is based- that the customer will come back to their store (in this case their website) and buy more products from them.
The biggest challenge that e-tailers face is the lack of a customer interface with their employees as well as their products. This, more than ever, dictates that they should be extra careful in building a personal relationship with the customer. This means a greater degree of personalization of products/offers than a traditional retailer. This means doing more rigorous Analytics and building models to refine the targeting of offers, differentiated pricing etc.
Another big advantage that online retailing provides is the fact that you can analyze every virtual footfall of a customer and even observe visits that do not result in sales. This is difficult to measure in a physical store and you often do not have information on why a customer did not shop at your store.
Here are a few important analysis that every e-tailer should do and a few questions that they should try and answer by analyzing their data.
As usual, I can go on endlessly, but the idea here is to give you a sense of how minutely your e-tail business needs to be measured to keep you competitive and rise above the clutter of the also-rans in this space. May the best one win!