Successful Planning – Why Online Retailers Should Be Data-Driven

7 May 2018
Anne Golombek

Guest Post Author: Händlerbund

Händlerbund, with its headquarters in Leipzig, Germany, was founded in 2008. Their focus is on the representation of interests and legal support of small and medium-sized enterprises from all over Europe. Due to the rapid development of the eCommerce market, Händlerbund has developed into an eCommerce network and currently supports over 70,000 online presences. With a 360° approach, Händlerbund wants to promote the professionalization of eCommerce companies together with its members and service partners.

eCommerce is developing rapidly, its potential in Germany will not have been exhausted for quite some time. The number of online customers is growing, comparatively young sectors such as food deliveries or the online furniture market are constantly developing. In Germany, the sales curve in online retail is steep and has been growing at double-digit rates for around six years. In recent years, German eCommerce revenue has shown an annual growth of between 10% and 16%.

Revenues aren’t everything

This positive vibe has also been confirmed by a current Händlerbund study involving more than 500 online retailers. Almost two thirds of these retailers surveyed (65%) are “very satisfied” or “satisfied”.  At the same time, however, almost 1 in 3 (31%) stated lower sales than in the previous year. How do these figures fit together?

Contrary to the expectations of many inexperienced retailers, revenue growth in online retail is decisive, but by no means the only indicator of success. Factors such as profitability, new customer acquisition or brand awareness can also be decisive for measuring corporate success. Regardless of which KPI is decisive, close monitoring and data-driven decision-making based on it is, and remains, crucial.

Setting Goals and Defining Strategies

Depending on whether an online retailer defines itself as a niche provider, innovative start-up or premium shop, the marketing goals and strategies should also be adapted accordingly. A common error is the outsourcing of the analysis and reporting work. Anyone working in the online business today must consider the analysis of their company and data-driven decision-making as part of their core business and define it as one of the most important tasks in their daily business. Global competition, which German online retailers also have to face considering the power of Amazon, Alibaba or Google Shopping, is omnipresent and can hardly be mastered without comprehensive data transparency.

Enhanced KPIs Improve Data-Driven Decision-Making

The Commerce Reporting Standard Initiative has set itself the goal of establishing a best practice metrics and KPI model for sustainable online sales. This proposes a data-driven work culture at all levels, which is not based on pure controlling, but intends to establish data-driven decision-making in all areas of the company.

According to Händlerbund’s experiences, the most frequently considered KPIs for eCommerce companies to date are aspects such as the number of shop visitors, the number of orders and their average order value. However, comprehensive and uniform reporting standards are outstanding for future-proof work in e-business. What could they look like? First of all, the status quo of data analysis is one way of defining further standards. Experience at Händlerbund has shown that a differentiation into the following ten frequently focused and another ten frequently underestimated KPIs can be made:

Händlerbund Insight: The top 10 most considered KPIs
Visitor numbers, page clicks, bestsellers, bounce rates, strongest sales channels, shopping cart sizes, conversion rates, profit margins and turnover

Händlerbund Insight: Top 10 frequently underestimated KPIs
Reference sources, ranking factors, advertising visibility, returning customers, canceled orders, processing costs, packaging costs, personnel, time spent per order, net profits

For example, in order to determine the actual costs per order in the online shop and compare those to the order value, data from other business units such as financial accounting and controlling must also be analyzed in marketing. How much do the packaging materials cost? How much do the employees in the warehouse earn? How many orders does an employee process per day? Such departmental overlaps also require a consistent system of KPIs for communication and efficient cooperation between departments.

Greatest Challenges for 2018

As Händlerbund’s annual study shows, professional online marketing (42%) and customer loyalty (34%) are seen as major challenges for the current eCommerce year. The results also show that there is a lot of catching-up to do in the controlling of online shops and that it is sometimes difficult for entrepreneurs to consider all relevant KPIs for analysis and to relate them to each other. In order not being pushed away by the big players in the industry, online retailers should not miss out on the opportunities given. Data and KPIs can be key to future success.

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