eCommerce profitability—and how to shift costs from the consumer
Despite its popularity among consumers, making eCommerce profitable remains a significant challenge for almost all retailers.
Even the largest U.S. player, Amazon, makes little to no profit from its retail business! For 2019, retail represented 63% of Amazon’s operating income yet that business made a slight loss (-1%). Its profits were made by Amazon’s high margin business lines such as Amazon Web Services, online advertising, and Marketplace third-party seller services. That same year, Walmart’s eCommerce business, the number two U.S. eCommerce business, lost $2B.
The challenge is that eCommerce shifts many costs of doing business from the consumer to the “e-retailer”.
eCommerce vendors must pick and pack the goods, arrange for (and often pay for) shipment, and take on the risks associated with doing business online. In addition, product returns from eCommerce purchases are about three times the in-store volume. Handling returns and returning payments is also very expensive. It’s no surprise that omni-channel retailers use their online platforms to drive consumers to their stores by offering services like ship-to-store, curbside pick-up, and free store returns!
Finally, with billions of web pages and hundreds of eCommerce sites and vendors to choose from, sellers must personalise their messaging, optimise their sites, and pay for product-level, digital advertising to attract and convert interested consumers.
Data is key to eCommerce success
As in traditional selling, the key to success and bottom-line growth is improving customer experience, which starts with an understanding your customers, at the level of the individual.
To paint a picture of who your customers are and what they care about, leverage your eCommerce platform to capture consumer data. Online interactions provide the means to collect and analyse data on hundreds, thousands, or even millions of customers in ways that are impossible through simple face-to-face in-store interactions.
This approach will allow you to answer questions like:
- Who are they?
- Where are they located?
- How far from the nearest store or fulfillment center?
- How do they like to be contacted for each type of information?
- What are their lifestyles like?
- What are their preferences and needs?
- How important is “free” versus “quick” when it comes to shipping?
- What kind of loyalty program benefits are most attractive?
Once you have accurate customer data, there’s so much more that you can do to help drive profitability in today’s digital world.
Data validation for eCommerce
Powering your eCommerce platform with data validation means always reaching and staying connected with your customers. In other words: You have a data-driven strategy to build loyalty.
Contact data validation is verifying information like emails, mailing addresses, and phone numbers—which is crucial information that gives you a deeper understanding of who your customers are and keeps you in touch with them.
Whether you start by validating address, email, phone data individually or altogether, each piece gets you closer to your customer, on track with your data validation strategy, and most importantly, bottom-line growth.
Let’s jump into the most important components of your eCommerce data validation strategy—email, address, and phone data.
What is address verification?
Address verification software makes sure you have the right customer addresses on file. The software combs through your existing address lists to find inaccurate addresses. Whether you are performing a bureau cleanse or have realtime address verification integrated into your online forms, Experian’s address verification software validates the mailing address on the spot.
Our address validation tool uses delivery point validation to verify mailing addresses. Delivery point validation lets you feel confident that you have accurate, deliverable addresses and speeds the form-fill process for consumers at check out, reducing friction as well as cart abandonment rates.
Benefits of address verification
- Ensure accurate and timely product delivery, while maximising customer satisfaction.
- Plan more cost-effective fulfillment strategies, determining optimum fulfillment center locations and last-mile delivery services.
- Optimise store assortments to match the needs of likely patrons.
- Position products closer to where the demand is likely to be, whether to encourage store pick-up or reduce last mile delivery costs.
- Reduce address correction fees and the cost of lost products.
The nightmare of invalid addresses. In our 2021 Global data management research, we find that 32 percent of organisations believe a third of data is inaccurate in some way. Add to that the cost of investigating the problem, dealing with dissatisfied customers, and packaging and replacing lost products. The costs can quickly exceed the profit made on the original sale.
Address verification for eCommerce solutions significantly reduces the likelihood of packages going astray and is your starting point for accurate data on where your customers live and who they are. Experian Address Validation is linked to our enrichment dataset to deliver ANZ geocodes and household information.
Australia Post reports that parcels without a valid Delivery Point Identifier (DPID) will spend about one business day longer in their network, negatively impacting the customer experience and causing the NPS to drop by around two points.
What’s more, address verification is a great start to your eCommerce data validation strategy as it is a key component to data matching and building a more complete database, while improving your business strategy and customer experience.
What is email verification?
Email validation checks for spelling, formatting, or syntax errors and lets the user know if there’s an issue. Real-time email verification also sends a test message to check that the email is connected to a mailbox that can receive messages.
Benefits of email verification
- Reliable email data supports direct communication with customers to quickly and effectively provide notifications and update
A deeper look: Consumers rely on email to receive receipts, shipment confirmation and status updates, and product availability notifications. When these aren’t received because of an email address error, it decreases customer satisfaction and likely generates a support center call.
- Valid email data is a significant source of revenue. Email campaigns provide an inexpensive way to deliver personalised offers directly to named consumers and can be a significant driver of ecommerce site visits.
A deeper look: The average lifetime value of a consumer email address, in terms of sales generated, is typically over $50. While that doesn’t sound like a lot, the average cost of ensuring an email address is accurate, is generally less than a few cents.
- Email data can contribute to determining an accurate identity for each consumer. While some email addresses are shared, the vast majority are unique to an individual.
A deeper look: Pairing a consumer’s email address with their name and mailing address helps significantly in determining who they are, which in turn supports the acquisition of additional information you may require.
What is phone verification?
Phone number validation is the process of checking if a phone number is accurate. It lets you find out if the phone number you have for a business contact or customer is active and able to receive calls.
Benefits of phone verification
- Valid phone data provides an additional means of distinguishing between customers and validating their identities.
While landline phone numbers align to households rather than individuals, the majority of adult consumers now have their own unique mobile phone number and mobile phones are fast becoming device of choice for shopping—both online and in store (where they are used for price checking and product comparisons).
- Support accurate and non-intrusive notifications and alerts. Non-intrusive because consumers will generally accept text messages from businesses that they are interacting with. It’s helpful to receive texts about orders received, package deliveries, and reminders about product availability and pick-ups.
- Phone numbers can also be used to generate sales for omni-channel retailers, by delivering promotions when consumers are in the vicinity of stores.
What’s even better, these solutions are available in various platforms made to make your data fit for purpose. Depending on the needs of your business you could look to:
- Integrate real-time verification into your website to validate contact data as it is entered into the form.
- Verify addresses in bulk at a regular cadence so you can confidently work with trustworthy data without adding to your tech stack.
Having a strong eCommerce data validation strategy opens venues to explore whole new areas of savings and optimisations.
- Accurate contact data coupled with consumer attributes supports targeted advertising, which in turn, produces higher conversion rates and revenue streams, and improves marketing ROI.
- Trustworthy data improves identity resolution and increases the value of third-party data that can be used to better understand your customers’ broader buying behaviors and purchase habits.
- Greater accuracy reduces risk when it comes to privacy rule compliance.
eCommerce data validation ROI
Understanding eCommerce data validation ROI is quite simple and has enormous impact on determining your future eCommerce data validation strategy.
Breaking down the crucial components to data validation for eCommerce, the costs are small, and the ROI is large:
- There are significant benefits of being able to reach each and every customer when and how they prefer.
- You get a better understanding of who and where your customers are in order to deliver personalised messages, product availability, and great delivery service.
- You can confidently contact customers quickly when necessary.
The precise numbers may differ significantly from company to company, depending on the volume of customers and the specific use case, but it’s hard to put a price on great customer satisfaction.