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Big Data in E-commerce

Artur Olechowski d08c1359d2

08/09/2020 |

11 min read

Artur Olechowski

According to the IDC, the digital universe of data will grow by 61% to reach a smashing 175 zettabytes worldwide by 2025. There's no denying that a large chunk of the digital world belongs to e-commerce, which takes advantage of customer social media activity, web browser history, geolocation, and data about abandoned online shopping carts. 
Most e-commerce businesses are able to collect and process data at scale today. Many of them leverage data analytics to: 

  • understand their customers' purchasing behaviors, 
  • follow the changing market trends, 
  • gain insights that allow them to become more proactive,
  • deliver more personalized experiences to customers. 

The global Big Data in the e-commerce industry is expected to grow at the CAGR of 13.27% between 2019 and 2028

But what exactly is Big Data? And how can e-commerce businesses capture this powerful technology trend to their advantage? In this article, we take a closer look on the key trends in the usage of Big Data technologies by e-commerce companies and offer you some tips to help you get started in this game-changing field. 


What is Big Data and why is it worth your attention?

Big Data is one of the buzzwords in the modern IT world, to the extent that its meaning might not be so clear to everyone. In its essence, Big Data refers to very large data sets that can be analyzed to reveal patterns and trends in complex areas such as customer behavior. 

Today, people produce an estimated 1.7 MB of new information every second. Big Data technologies are an essential tool for businesses across all industries, but they bring a particular advantage to e-commerce companies. Here's why.


Big Data in e-commerce – overview

One of the most challenging things about running an e-commerce business is its sheer unpredictability. As technologies and human behaviors change constantly, business owners need to be ready to adapt. Moreover, the competition in the field is very high, and business owners face serious problems such as shopping cart abandonment and low customer loyalty. They are also competing against giants like Amazon.

That's why e-commerce companies are always on the lookout for new ways to retain their customers and boost the user experience. The solution is right at their fingertips: Big Data. 

Note that in the e-commerce sector, companies have a serious advantage over traditional retailers that operate brick-and-mortar shops: e-commerce platforms are nimble and adaptable. These shops aren't confined to a particular location and can potentially reach a global market. But the most important value is the access to data that brick-and-mortar retailers could never get their hands on. 

Becoming a data-driven e-commerce business is a key growth direction that provides e-commerce retailers with the competitive advantage they need today.

As businesses scale up, they also collect an increasing amount of data. They need to get interested in data and its processing; this is just inevitable. That's why a data-driven e-commerce company should regularly measure and improve upon:

  • shopper analysis, 
  • customer service personalization, 
  • customer experience, 
  • security of online payment processing, 
  • targeted advertising.


Benefits of Big Data for e-commerce

Some of the key benefits of using Big Data technologies include making better strategic decisions, improved operational control processes, a better understanding of customers, and significant cost reductions.

But these benefits are just the tip of the iceberg. Here is a more detailed outline of all the advantages an e-commerce business gets to enjoy once it delves into Big Data successfully.


Improved shopping experience

E-commerce companies can tap into massive data that can power predictive analytics tools for anticipating how customers will behave in the future on the basis of their current behavior pattern. This, in turn, helps retailers to improve their shopping experience.

For example, retail websites can measure: 

  • the number of clicks per page, 
  • the average number of products customers add to shopping carts before checking out, 
  • the average length of time between a visit to the homepage and making a purchase. 

If customers sign up for interested subscription programs, you can further analyze their:

  • demographic data, 
  • age, 
  • preferences, 
  • socioeconomic information. 

Analytics solutions based on Big Data help e-commerce companies to:

  • build new strategies for preventing shopping cart abandonment, 
  • reduce the time to purchase, 
  • address new customer segments, 
  • predict inventory needs that change with seasonality. 

For example, the world's largest PC vendor Lenovo used real-time predictive analytics to boost the customer experience and achieved an 11% increase in revenue per retail unit. 

Delivering a great customer experience is what makes e-commerce retailers stand out from their competitors. It also leads the way to improving customer loyalty, which is a very important value in the online world.


Pricing optimization

For e-commerce businesses, retail margins are what determines their revenue. However, if their prices are too high, customers are less likely to buy from them. 

That's why pricing optimization is so critical for e-commerce. Customers can simply google the product and find out at what price other e-commerce retailers are offering it. Solutions powered by Big Data can help e-commerce business owners to solve this issue by collecting and comparing prices of various goods from around the internet. 

Managers can then adjust pricing according to competitor prices, as well as other data such as the popularity of items or the average number of sales. What's more important, Big Data allows them to do this in real time, and match the changing demand and supply or customer trends instantly.


Greater security of online payments

To have a positive shopping experience, customers need to know that their e-commerce retailer is trustworthy, and the payment data are secure. 

Big Data analysis helps to recognize suspicious spending behaviors and prevent fraud before it happens. 

Moreover, such tools allow setting up alerts for various fraudulent activities — for example, a series of different purchases on the same credit card with short time or multiple payment methods coming from the same IP address. 

E-commerce sites currently offer several payment methods on one centralized platform. This is where Big Data can help as well. For instance, retailers can use Big Data analytics to learn which payment methods are preferred among their customers and measure the effectiveness of new payment options such as and paying in installments. 

Payments are part of the checkout process, so by ensuring that customers have a wide range of options to choose from, businesses can lower the chances of abandoned shopping carts. 


Personalization of the customer experience

Big Data can help companies deliver a more personalized shopping experience. This has a huge impact on purchasing decisions and loyalty. In a recent survey, 86% of customers said that personalization plays an important role in their buying decisions. 

That's especially true for Millennials who are interested in purchasing items online and assume that brands are already collecting information about them, so they expect to receive personalized recommendations. 

By using Big Data analytics tools, companies can build a 360° view of the customer that allows segmenting customers on the basis of different factors. 

With this information at hand, companies can send tailored discounts and promotions, use different marketing strategies for different customers, and launch products that are relevant for a particular segment. And by using a Big Data-powered search engine, retailers can deliver even more personalized recommendations.


Demand forecasting

To reach an optimal turnover of goods and grow their revenue, e-commerce businesses need to build the capability of analyzing the current demand for items accurately. The longer an item stays in a warehouse, the more you pay for storing it. That's why it's key to optimize these expenses — otherwise, your e-commerce business is going to face financial troubles. 

Big Data tools can forecast the demand for groups of items or for particular products in detail. Such solutions help to determine which items to store in which of your warehouses and offer you an approximate number of sales per item. This is how you can prepare to meet customer demand in a given location better.


Generating more sales

Another benefit of Big Data is that it allows retailers to customize their recommendations and promotional coupons to match the desires of their customers in real time. 

Big Data that focuses on consumers can help e-commerce businesses to run more accurate marketing campaigns and remind people that they still have something left in the cart. 

How do e-commerce businesses use Big Data to boost sales? Domino's Pizza is an excellent example here. Domino's Pizza launched an AnyWare ordering program that allows customers to purchase pizza using their smartwatches, cars, TVs, and even social media. Making sales so easy and convenient made a real difference to the company's customers. However, combining data from disparate sales channels in real time would be impossible without Big Data technology. 

By using a Big Data platform, Domino's integrated data from the 5000 unstructured and structured sources. By combining this data with global operations, the company can collect, clean, and process data from every point-of-sale system and supply center. This helps Domino's to keep their service level up and prepare for potential changes beforehand, all the while delivering outstanding service.


Better customer service

Customer satisfaction is the key to building retention and loyalty. Even if you offer the most competitive prices and products, you still need exceptional customer service to win on the e-commerce scene. 

Acquiring a new customer is far more costly than keeping an already existing customer happy. Moreover, loyal customers spend up to 67% more than new customers

E-commerce retailers that focus on providing the best customer service possible get to increase their chances of referrals and sustain their current stream of revenue. Keeping customers satisfied should be a priority for every single e-commerce company out there. 

How can Big Data help here? 

Big Data solutions can reveal problems in customer satisfaction at different levels, from product delivery to brand perception (for example, by analyzing social media). Big Data analytics can identify the exact moment when the customer perception or satisfaction changes. Once companies identify the areas that require improvement, it's much easier to boost the quality of customer service. 


Big Data analytics and e-commerce – how to get started

Big Data is going to have a huge impact on the e-commerce industry, and its popularity is likely to continue in the same vein. Experts predict that 95% of purchases will be made via e-commerce 2040.

To prepare for such high demand, e-commerce retailers need to implement Big Data analytics to upgrade their customer support and become better informed about their customer base. 

To harness the power of Big Data, companies need to make an investment in cloud-based Big Data analytics platforms. Such cloud-based tools can store, transform, and analyze data quickly and efficiently. 

Here are a few tips for e-commerce businesses that are looking to implement a Big Data analytics platform and take advantage of the rich data sets for their operations. 

  • Big Data isn't a magic bullet — unrealistic expectations about the data will only make you feel disappointed afterwards. Big Data is just a tool, and it's how it is used that defines how successful or how unsuccessful your experience will be. 
  • Understand the basics of Big Data — this will enable you to ask the right questions and hire the best staff for your Big Data analytics project. 
  • Understand the problem of security — Big Data tools gather a lot of data about every single customer who visits your site. This is a lot of sensitive information. If your security is compromised, you could lose your reputation. That's why before adopting the data technology, make sure to hire a cybersecurity expert to keep all of your data private and secure. 
  • Lack of analytics will become a bigger problem — Big Data is all about gathering information, but to make use of it, your system should also be able to process it. High-quality Big Data solutions can do that and then visualize insights in a simple manner. That's how you can make this valuable information useful to everyone, from managers to customer service reps. 
  • Invest in proper equipment — even if you decided to implement a cloud-based Big Data platform, the hardware and software parts of your system are still important elements of the mix. That's why it pays to pay attention to them and never underestimate the importance of your equipment. 


Big Data Case Study – BMW/Deloitte

At Codete, we have been involved in several projects that tie cutting-edge Big Data R&D efforts to retail. For example, one of our teams cooperated with Deloitte on a spin-off project for the automotive industry leader BMW. 

The project required expertise and scientific approach to data architecture and analysis, and our internal R&D department worked closely together with BMW to help the company track the vehicles from the factory to the car dealers. The innovative system provides advanced data processing via a distributed architecture, using state-of-the-art Big Data tools to help BMW track their products and understand how this journey impacts customers.

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We hope that this article helps all the e-commerce businesses out there to realize the potential Big Data holds for their operations. 

If you'd like to learn more about what Big Data analytics can do for your business, get in touch with us. Our consultants have launched many Big Data implementation projects, and know-how e-commerce businesses can benefit from adding Big Data into their arsenal of tools.

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Artur Olechowski d08c1359d2

Artur Olechowski

Managing Director at Codete. Master of Law, a graduate of postgraduate studies at the University of Economics in Krakow. In his daily work, he masters the combination of business strategy and technology.

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