Iflexion
Big Data is Transforming E-Commerce

How Big Data is Transforming Ecommerce

This is the winning entry for the Iflexion Scholarship 2019. Each year, we pick one student to award $1,000 against their tuition fees in recognition of their awareness of technologies and how they change our lives, as seen in their competing essay.

All opinions are expressed by the author and may not coincide with Iflexion’s.

Last year, a few Indian e-retailers aimed to tackle American and Chinese ecommerce giants with some forward thinking. Companies like Flipkart and Patym invested billions of dollars in AI technology to manage search features, product recommendations and UI of their online stores. For Flipkart in particular, this meant a unique and personalized homepage for each of its 225 million users. Fast forward to today, however, and not much has changed: the Indian retail revolution never came. What went wrong? Experts said, the fault was in the data: isolated silos limited the exposure and impact of AI algorithms on the businesses.

“Your AI algorithms are only as good as the amount of data that they have access to.” (Shivangi Tripathi, Dynamic Yield).

Flipkart’s struggle is a reminder that with every new innovation or promising technology, you’ve got to remember to get the basics right. Big Data is one of those basics: a central pillar of the ecommerce industry.

The phrase ‘Big Data’ dates as far back as 1998, when the World Wide Web was only seven years old, and the internet was a much smaller place. At that time, under 200 million users browsed around 2.5 million websites. Most of these users may not have even heard of Google, let alone used it; being fresh out the gate, the search engine was only receiving 10,000 search queries per day.

Today, twenty times as many people use the internet every day. The website count has risen from the millions to billions, and Google fields over 40,000 searches every second. Overall, in 2018 2.5 quintillion bytes of new data were created every day. Count that in pennies and it’s enough to cover the surface of the earth five times. It means 90% of all data ever created was created in the last two years.

Needless to say, the definition of “big” has changed a lot in two decades. The concept of Big Data is now more important than ever, and that’s not going to change any time soon.

Companies have proven time and again that taking advantage of this ocean of data is an essential part of a successful online business. It’s part of why ecommerce giant Amazon has grown into the 8th largest company in the U.S, despite ecommerce representing less than 12% of all retail spending in the country.

Considering the rate of change in the online retail business, you’d think any hope of drawing up a guide for success would be hopeless. But the reason Big Data is still relevant is that the phrase “know your customer” still rings true.

Understanding the customer and anticipating their needs has been at the center of commerce for decades, and now companies can know their customers better than they know themselves. Not only what they want, but why they want it, how they look for it, how long they are willing to search, what else they’d be interested in, and hundreds upon thousands of other factors that make up the shopping experience. This is where Big Data is helping to craft the perfect shopping experience.

A Complete Customer Picture

With this volume of information and modern data-gathering technology, companies can benefit from a very detailed, cross-sector picture of every customer. We can now look beyond demographics and into psychographics; aspects of behavior, attitude and personality which, when tracked, become the primary method of attracting prospective customers to your businesses. The recent data breach from Cambridge Analytica gave the world an insight into what many companies already know: your online footprint holds a treasure trove of information.

Once they’ve arrived on your site, the customer continues to generate data that the company can put to use. Without the effective application of Big Data, failed searches would end in disappointment: the customer failed to find what they want, the company failed to make a sale. And we know (thanks again, data) that 91% of unhappy customers won’t buy from a company again if they receive bad service.

Now, even a failed search can be an opportunity for growth. The retailer knows what’s in demand, which could influence inventory decisions. They also know the products certain types of customers are looking for, and what other customers sharing their characteristics have bought. All this allows the search engine on an ecommerce portal to generate hundreds of options that could result in a sale.

Mobile Marketplaces

The world is reaching a tipping point in how consumers interact with the online retail market. In 2018, almost 40% of all ecommerce sales worldwide were made from mobile devices. This number is predicted to rise to over 53% within the next two years.

It’s becoming increasingly apparent that the desktop computer is becoming a thing of the past, and the laptop is on the same path. In line with this trend, established brands are flooding into the app market, and some startups are hedging their bets by existing primarily (in some cases solely) as a mobile app.

And following the trend is paying back. Social shopping platform Depop, founded in 2012, operates entirely through its iOS and Android apps and saw earnings of $230 million in merchandise value in 2017 alone.

Physical Experience

A study by Imprint Plus revealed that seeing and assessing the quality of a product in-store is important for the majority of shoppers. With this in mind, online retailers are looking for workarounds to satisfy the need for a physical shopping experience.

It’s a hurdle that has afflicted online eyewear retailers, who currently enjoy only 10% of all prescription eyewear sales in the U.S. Many brands already borrow from brick-and-mortar practices by offering a free trial and return policies, but some brands are going a step further. Zenni Optical attributes its 30% year-on-year growth revenue to their 2D virtual try-on technology, allowing users immediate trial experience, and is in development of a 3D video-based try-on. Chief Product Officer Bai Gan believes that with these innovations, there’s no reason the online eyewear industry can’t boost the online market share up to 40%.

Online to Offline

Having such a detailed picture of the ideal customer has encouraged more and more brands to become a one-stop shop. Increased information has grown their inventories bigger and bigger, using what they already know about their customers’ buying habits to maximize revenue. But as brands continue to grow their businesses to capitalize on their research, they hit an inevitable ceiling. What’s the next step? This is perhaps the most surprising transformation that Big Data has had on ecommerce: the move from online to offline.

Amazon is seen as one of the most successful companies of all time, and yet it’s only the second largest retail company in the U.S. It is beat out by a physical retailer, Walmart, whose yearly revenue is more than double Amazon’s because it operates in the brick-and-mortar retail market, which represents almost 90% of all commerce in the U.S.

This gulf is global: worldwide, ecommerce sales represent less than 20% of all retail sales. The data is clear: if you can’t beat ‘em, join ‘em. This is why both Amazon and Alibaba, two ecommerce giants on opposite sides of the Pacific, have recently begun investing in traditional retail outlets. Amazon has already bought the grocery chain Whole Foods and has launched pilot Amazon Go stores in the U.S., with plans to open in the UK. Hema, the supermarket chain owned by Alibaba, plans to have 100 stores in China by the end of the year. So far, the two ventures have received mixed reviews, but it’s too soon to say. Whatever the result, it’s safe to say they’ll follow the data, as it hasn’t let them down yet.

How Big Data is Transforming Ecommerce
February 21, 2019