December feels already long behind with high (online) sales due to the holidays season. These sales are traditionally linked in The Netherlands with the race for gifts for Sinterklaas and Christmas. Lately a number of initiatives coming from abroad have been giving an extra boost to those sales. Black Friday is the day after Thanksgiving in the USA which marks the start of the Christmas sales in (physical) stores. Cyber Monday is the Monday after Black Friday and marks the start of the online Christmas sales. This type of events is gaining increasing popularity in the Netherlands. However, and from a customer centricity perspective, as preached by Professor Peter Fader, it is yet questionable whether this is helpful on the long run, as those actions focus more on the volatile customers than the loyal ones with a higher customer value.
While online retailers are fighting for a share of the pie during such events, companies at the top are relying on something else to continuously increase their competitive advantage: DATA. The world economy is being more and more data driven as 7 out of the top 10 highest valued companies in the world are data driven (Amazon, Apple, Google, Microsoft, Facebook, Alibaba, Tencent). That is also the case in The Netherlands when looking at the top 3 online retailers on the Twinkle100 list: Bol.com, Coolblue and Albert Heijn Online. Yet it is the question how the arrival of Amazon to the Netherlands this year would affect those first 3 positions.
Top online retailers use Big Data in several ways to build a competitive advantage and generate higher revenues. Let’s showcase the main opportunities:
- Better understanding of your customers: by analysing customer preferences, purchases and behaviour, online retailers can predict their customers’ lifetime value and therefore make use of customer segmentation to better reach your customer base and cater to their needs.
- Improvement of the daily operations: by analysing e-commerce data, online retailers can better manage their inventory and supply chain through operational efficiency. Also by forecasting customer demand and product returns, pricing could be optimised and costs minimised.
However, most challenger companies have not reached a sufficient data maturity yet in order to fully leverage the data at their disposal. These are the common challenges those companies face:
- No C-suite backed strategy: (Online) Retail companies need to have a C-suite backed Data strategy that envisions how data will enhance and support the corporate business strategy. Still (way too) many companies delegate everything that has to do with data to some IT department somewhere down the organisational tree while the corporate leadership is not aware yet of the crucial importance of data for their business.
- Drowning in data: (Online) Retail companies are currently drowning in the huge amount of data they have at their disposal. The quality, accuracy and structure of this data are however in many cases not good enough for its optimal usability.
- No fast-paced insights: In today’s (Online) Retail industry where trends are fast-paced and patterns short-lived, it is a challenge to gain the required insights and act on them in a timely manner.
- Dependence on Google: In a world where online marketing is heavily dependant on the Google platform, it is hard to create a competitive advantage through the marketing strategy while being serviced by a 3rd party (Google) that is servicing all other competitors as well.
- Demanding privacy boundaries: As customers are more and more aware of the value of their data and the privacy issues related to it, it is becoming more challenging to get their trust in allowing the use of their data for a better personalised experience, especially with cyber security as a hot topic these days.
We, Amsterdam Data Collective, believe that these challenges can be overcome by setting up a data strategy that is central within the corporate strategy, setting up a sustainable data science process and empowering business decision makers with the insights they require to make a difference. Here are selected examples of projects we have delivered in the field of Customer and Marketing Analytics.
Now back to our initial question, who will be the number 1 Online Retailer in the Netherlands in 2020?
Looking back at the revenue growth of the top online retailers in the previous years and taking into account the arrival of Amazon to the Netherlands in 2020, we believe that Bol.com will still be number 1, mainly due to the big gap it has created with direct competitor Coolblue and global competitor Amazon. However, that gap could definitely be bridged within a couple of years, depending on how aggressively will Amazon approach the Dutch market, as they definitely have the power to sustain losses first in order to skim the market and go for market share. Exciting times to come! Don’t you think?