The Future of Data-Driven E-Commerce

After looking at the e-commerce picture quite a bit, I’ve come to a conclusion: any attempts to simplify the situation should be treated as suspect. Yes it’s true that e-commerce is disrupting retail and is a real threat to brick-and-mortar. But it’s also true that plenty of people still want to go to stores. If anything, the future is omnichannel, and if anyone is going to beat out giants like Amazon, Alibaba, and Walmart, they’ll do it locally, in niche markets, as part of a group of local businesses that thrive by differentiating themselves from the big guys.

If the little guys are to survive, they’ll harness e-commerce and data too, and they’ll get a boost from on-demand delivery services. What are the chances this will happen? What are the chances that enterprises with sophisticated algorithms and millions of dollars to throw at research and development won’t annihilate the majority of small businesses? That’s exactly what I’m here to discuss.

What Warby Parker’s Data Strategy Means for Brick-and-Mortar

Warby Parker, the stylish eyeglasses store that began online, figured out it needed to use customer data for something besides targeted ads. The company used big data to find out where its customers will shop, and then opened physical locations in the shopping hotspots. People wanted a place to try on glasses. Although it seems contrary to the current environment of rapid e-commerce-takes-all growth, Warby Parker needs brick-and-mortar locations to help its business thrive.

But the company wouldn’t have a brick-and-mortar strategy if it weren’t for what co-CEO Neil Blumenthal calls deep data. For Warby Parker, Comprehensive data-points on customers inform future store locations. According to Entrepreneur‘s Nancy Miller, Population density, the number of eyeglass customers and pre-existing ecommerce sales in the area all play a part in the comprehensive consideration of an area.

This indicates that businesses that develop an online store through an e-commerce platform with built-in consumer behavior analytics can use data to reach niche markets (popular platforms include Shopify, BigCommerce, and YoKart, among many). It’s also indicative of what, exactly, brick-and-mortar is good for.

What People Want to Buy in Stores

The fate of stores means a great deal to small businesses, and it means a lot to the freight industry, because Amazon only uses certain carriers (you can look at a list of those carriers here). Additionally, Amazon is gearing up to start its own delivery service, which could threaten the biggest carriers: UPS, FedEx, DHL Express, and the U.S. Postal Service. Overall, a big part of the freight industry is still relying on the symbiotic relationship with brick-and-mortar.

Freight brokerage company FreightPros has compiled a number of useful figures and facts regarding online shopping vs. in-store shopping:

E-commerce is growing three times faster than brick-and-mortar commerce.
Amazon is leading the pack ” Jeff Bezos company accounted for 44 percent of e-commerce sales in 2017.
Traditional merchants still sell 10 times more merchandise than e-commerce shops, with people spending 64 percent of their shopping money in stores vs. 36 percent online.
People prefer to buy food and clothing in stores, but clothing is also the number one selling product category online, which makes it a good bet for omnichannel sales.

Overall, clothing and food ” things you need to touch and see in person ” should continue to see strong in-store sales. But there are no guarantees for small-to-medium-sized businesses (SMBs); Amazon’s Whole Foods could trip up any grocery store as the e-commerce giant applies its data-based approach to grocery, and 67 percent of millennials prefer shopping online. Millennials don’t exclude clothing from their e-commerce preferences.

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As millennials gain buying power, expect the scales to tip in Amazon’s favor for both grocery and clothing if SMBs don’t pursue an omnichannel, data-based approach like Warby Parker’s.

Why Ecommerce Will Be Essential for All Businesses

It’s simple: if e-commerce continues growing the way it has been, even shoppers who prefer to shop small in local stores will want the option to order online from their favorite small businesses. Right now, plenty of SMBs also sell through Amazon. But they don’t realize selling through Amazon just helps Amazon get bigger, while it excludes customers who don’t support Amazon but want to support small businesses and shop online as well.

If more small businesses become e-commerce merchants, they’ll see the world of big data open up to them. Assuming laws and regulations regarding data usage in the U.S. remain the same, the following figures from the New Jersey Institute of Technology point to a huge explosion of data-driven e-commerce, innovation, and competition:

By 2020, there will be 13,000 exabytes of big data that companies can use to gain insights and make decisions.
Eighty-eight percent of data come from transactions; like Warby Parker, businesses will be able to leverage transaction data for both e-commerce and brick-and-mortar innovation.
Ninety-one percent of companies are using tools to manage and analyze data. The next step is monetization.
The clincher: According to NJIT, A retailer using big data to fullest has the potential to increase its operating margin by more than 60 percent and benefit from 0.5 percent to 1 percent annual productivity growth.

Heading towards 2020, and beyond, so much data and money will be on the table it will be absurd for small businesses not to do something about it. This is good news for consumers. SMBs can find new ways to offer value through data. They can proffer new levels of transparency and invite more interaction and decision-making from customers.

The world can benefit from more competition and innovation in the big data space. It’s up to SMBs to make this happen, or they’ll get eaten alive by Amazon.