22. June 2024

eCommerce Segmentation: Data Driven eCom Strategy

eCommerce Segmentation is a vital part of today’s digital world. The importance of eCommerce does not need to be stressed. eCommerce is already responsible for an almost 21% share of retail sales globally. Soon this figure is going to approach about a quarter of all retail sales according to Forbes. With this being the case, manufacturers or brands are investing more resources into online sales. 

What are the 3 key challenges in building a viable eCommerce strategy?

With eCommerce being an unquestionable part of most sales strategies, manufacturers are beginning to face common challenges. The 3 key strategic challenges are as follows:

  • Retailer selection: How to choose the right one
  • How to invest in resources towards these retailers
  • Trading terms: How to negotiate

Let’s explore each of these challenges:

  1. Selection: The biggest challenge facing manufacturers. With an endless number of retailers available in every country, how can brands ensure that they have the right retailer mix to serve their target audience? 
  1. Resource Investment or Prioritization: Not all retailers are equal. Resource investments in each of them can yield different types of results based on the reach and the features of the retailer. How can brands ensure that they are prioritizing resources efficiently?
  1. Trade Term Negotiation: Each retailer that brands partner with will have their own set of expectations when it comes to partnership terms. This affects everything from inventory planning to marketing budgets. How can brands ensure that trade terms are mutually beneficial?

Most brands go by their knowledge of the industry or assess the presence of their competitors when driving strategic decisions. This is the beginning, however, using data to drive decision-making can help manufacturers build more educated strategies. 
Where can manufacturers find the data that can help them make data-driven decisions? The answer lies in something we like to refer to as an eCommerce Segmentation.

What is eCommerce Segmentation?

This is an analytical process that can assess retailers for their strengths and weaknesses. It allows brands to segment retailers into different priority groups. This can be used as a building block for their eCommerce strategy.

Segments can help with each strategic question:

  1. Selection – the best retailers rise to the top and make a clear case for working with them
  2. Prioritization – by understanding the limitations of retail partners, brands can allocate resources (budgets, Key Account Managers or KAMs, effort, assets, etc.) more efficiently.
  3. Negotiation – understanding retailer limitations, especially with respect to how they compare to market leaders allows brands to go into negotiations better informed. KAMs will know where to invest and where to challenge retailers.

What is the Watersky Way?

This is when users become aware of a need. Brands should focus on generating awareness that they offer solutions to address this need. For retailers, this means setting up their site search and navigation to support discoverability. This applies to both products as well as useful content. In turn, this stage gives retailers a chance to learn what new consumers need from your website and what they are looking for. Based on this information, you can develop or invest in future eCommerce strategies.

Benefits of a Watersky eCommerce Segmentation:

  • Our system can analyze any retailer type in any market (with the exception of Shopping Clubs and two markets – China & South Korea)
  • We need minimal input from brand teams and do not have access to data platforms such as your Google Analytics, Profitero, etc.
  • In a few weeks, brand managers and KAMs gain detailed and actionable insights into the retail landscape in their chosen market.

How do we carry our eCommerce Segmentation out? Take a look, we’ll walk you through it step-by-step.

eCommerce Segmentation Process Step 1: Landscape Screening

First, it is important to understand what the retail environment is like in a given market. Thus, our eCommerce Segmentation process begins with the landscape screening. 

How does landscape screening work? Screening is a process of identifying the best options available through the process of elimination. For each brand or client that we work with, we screen a very large number of retailers to identify the best possibilities.

The process begins by collecting data and analyzing retailers on various metrics – both qualitative and quantitative. How do we determine which metrics to measure? We combine our expertise in eCommerce analytics with your industry insights. Brands have the opportunity here to define factors that are must-haves for their sector. For example, in the luxury sector, it may be important that retailers have a clearly labeled premium section. As a result, you have the chance to tell us what matters to your target market. We have already tailored the data collection to your industry. We don’t just assess retailers on important digital parameters but also on how well they’re suited to sell your particular product category.

Screening-Methodology
Screening-Methodology

Why this step is necessary?

Online retail opportunities are increasing at a faster rate than brands can keep up with!  In order to gain a broader understanding of the market and its options, a landscape screening is necessary. Deliberately casting a wide net at this stage will prevent you from missing any opportunities. As a brand, launching each new retailer requires resource investments from you. The results from screening provide you with all the essential data to prioritize retailers for further assessment. By conducting these screenings, you have a data-driven way to understand why a majority of these retailers are not an immediate priority for your business, allowing you to focus on digging deeper into where the true opportunity lies.

How do we screen?

We use our analytical tool to find retailers based on generic and branded keywords to collect as many relevant results as possible. This allows us to find retailers exactly as your consumers would when they begin their eCommerce interactions. During this process, the results (in this case, online shops/retailers) are gathered and subjected to a process of elimination. We have refined the retailer list based on quantitative and qualitative criteria.

eComm Landscape - Retailer List
eComm Landscape – Retailer List

Screening Criteria

This is based on the predetermined screening criteria. Results are only considered valid if they pass on most factors.

How do we define these screening criteria? The screening criteria are based on standard criteria that a retailer needs for success – starting with their market footprint. We also assess factors that are essential for digital operations such as whether they have a secure website, etc.

Screening Criteria - Retailer List
Screening Criteria – Retailer List

This is combined with criteria provided by the brand to help assess industry/product category fit. All retailers who qualify at this stage are then subjected to further assessment.

Quantitative screening criteria related to traffic, search engine optimization, and social media are then applied to all remaining retailers so that they can be ranked in order of initial potential.

Retailer Ranks & Scores
Retailer Ranks & Scores

Every retailer will receive a score during this step of the screening process. Using the scores, you can determine which retailers to move on to the next phase, which is Retailer Benchmarking. There is, however, another phase before we move to the last, which is the Mid-Point review or better said the presentation of the results.

eCommerce Segmentation Process Step 2: Mid-Point Review

It is at the Mid-Point review that the results of the first phase are presented to a client. An overview of the process and the results is presented to key decision-makers. The purpose of the Mid-Point Assessment is to review the initial findings, exchange ideas, and brainstorm. In addition, even determine which are the top retailers that the client wants to examine in greater detail during the final phase of the project.

Why this step is necessary?

Despite the overview of the deck being self-explanatory, a lot of questions arise regarding the analysis and process. In order to maximize the effectiveness of our team and client relationship, it is crucial to walk through the process and findings together. The Mid-Point gives you an opportunity to address questions, understand the results, and share your perspective.

What initial results do we present?

This is the phase where we review what the data actually reveals about your market. You will get to see which retailers hold the most potential. Moreover, we will show you the reason why other retailers or entities were eliminated as we take you through each step of the screening process.

Combining what the data shows with your insider’s perspective is crucial for moving on to the final step of the process. Here you make a retailer a selection based on initial scores from the screening as well as business context from the client team.

Selected retailers move on to the final analysis. The last phase involves analyzing each selected retailer in depth to generate a competitive retailer attractiveness score, which includes size and capability metrics. Let’s see how this is done.

eCommerce Segmentation - Next Steps
eCommerce Segmentation – Next Steps

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eCommerce Segmentation Process Step 3: Retailer Benchmarking

Retailer Benchmarking is the third and final phase of the eCommerce Segmentation. It’s no secret that today’s shoppers are less predictable than in the past. As a result, their behavior patterns change constantly. These factors have forced retailers to adapt accordingly, putting greater focus on areas like mobile shopping, guided selling tools, and other measures to prevent abandoned shopping carts. Our benchmarking process analyzes each selected retailer on 200+ factors. With this analysis, you will be able to measure the retailer’s overall attractiveness through size and capability metrics.

What is the significance of this? The goal of the process is to use evidence and data to showcase how retailers stack up against each other through the attractiveness score. For our clients, it is imperative to know where the highest potential lies and where improvements can be made. By showcasing this, we aim to assist you in choosing the right online retail platforms. Furthermore, also understand where these platforms’ limitations lie.

eCommerce Segmentation - Retailer Benchmarking
eCommerce Segmentation – Retailer Benchmarking

Retailer Attractiveness

The in-depth analysis of the retailer’s attractiveness tells you how important a retailer is. It sums up all analyzed factors in one result and hence gives a quick summary of how the player is doing, versus all its competitors included in the retailer benchmarking process.

This factor is scored from 0 (worst) to 100 (best) and is used to show the difference in importance between different players. The scores are hence not used in isolation, but to compare different platforms. Just a simple note reaching a score of 100 here is close to impossible because the digital environment keeps changing a lot and keeps advancing in a short period of time. However, there are many retailers that can and will reach a score between 70 and 80, especially those in advanced industries. The attractiveness score comes from two types of measurements – Size Metrics & Capability Metrics.

eCommerce Segmentation - Retailer Attractiveness
eCommerce Segmentation – Retailer Attractiveness

Size Metrics

Benchmarking requires size metrics. Size quantifies the platform’s presence in the market. It sums up factors such as website traffic, app downloads, and social media followers… and gives an indication of how likely the platform is to attract users. It is important to know how popular a retailer is or, better said, how likely your products are to sell on the platform, based on its reach or footprint. It is common for retailers of a large size to have a bigger base of users who are likely to convert. Your brand can benefit from this, whether it is by reaching an entirely new market or making your products more accessible to your existing consumers. In addition to our own proprietary system, we use a variety of well-known and dependable tools for collecting size metrics.

eCommerce Segmentation - Retailer Size Metrics
eCommerce Segmentation – Retailer Size Metrics

Capability Metrics

Online shopping capability metrics are used to measure the whole customer experience. It’s here that all the interaction happens when customers shop online. Capabilities measure how well the platform drives conversion, by using cutting-edge features that increase the shopper’s likelihood to buy.

This area hence evaluates the quality of the platform’s search bar, product page, brand shops, social commerce activities, etc. As soon as users land on the retailer’s platform, the process begins. Does the image size seem to be right? Does the image quality look good? How is the retailer able to make the customer purchase a product and why not even repurchase it later on? What guided selling tools do they offer and what other support do they provide? As part of the capability metrics, all of these factors as well as many others are analyzed.

Scores are assigned to each data point based on its relevance. During this part of the analysis, our specialized analytical team collects and analyzes the necessary data using their 1000+ hours of analytical experience to grade each factor.

eCommerce Segmentation - Retailer Capability Metrics
eCommerce Segmentation – Retailer Capability Metrics

Results

Following the collection of all the data mentioned above, it is time to generate meaningful insights for the client. What will we present to you in the form of insights? Among its features are a drill-down into all the metrics related to size and capabilities, traffic close-ups, competitor overviews, and deep dives into each retailer separately. Using visuals, the reader can better understand the data and insights throughout this report. Three chapters summarize this information:

eCommerce Segmentation - Results Drill Down
eCommerce Segmentation – Results Drill Down

Overall competitive landscape

The overall competitive landscape overview will provide a broader view of the market. Different graphics and charts will assist you in reading and understanding the market you are entering. How do retailers rank in the competitive benchmarking, and how do they fall into segments based on their performance. This view is the top strategic overview that influences your eCommerce strategy.

Overall Landscape - Size vs Capabilities
Overall Landscape – Size vs Capabilities

Retailer Capability Mapping

While a large footprint helps retailers attract customers, it’s the capabilities that drive the conversion rate. This section hence breaks the capability score down into different underlying dimensions:

  • Product Page
  • Search Function
  • Brand Shop
  • Many other factors…

This section shows in-depth profiles of each retailer, across all analyzed areas. The chart shows the relative strengths and weaknesses of each retailer. Likewise, how it compares to best-in-class examples and country averages. You can use this data as a basis for substantiating your negotiation position.

eCommerce Segmentation - Retailer Capability Mapping
eCommerce Segmentation – Retailer Capability Mapping

Best Practice Library

This library contains best-in-class examples from all retailers within a given industry. The consolidated library of best-in-class eCom capabilities is there to help you and your team negotiate. e.g., by showing what you demand as a brand from a retailer in order to invest. Due to the rapid advancement in eCommerce marketing, it is important to keep up with the newest trends to keep customer satisfaction high.

Category Promenance
Example: Category Promenance
Guided Selling
Example: Guided Selling
Mobile UX
Example: Mobile UX

How you can use the results

This report provides top management and KAMs with valuable insights into retail relationships.

C-Suite

The retailer ranking as well as the eCommerce segmentation overview helps anyone in senior management get a quick overview of the retail landscape in your specific market for your specific product category. 

Without going into details, they are able to understand why your team will prioritize resources and efforts the way you propose to do so.

eCommerce or Sales Directors

The overview report along with the summary of key recommendations provided helps eCommerce strategists allocate resources, launch new platforms as well as deprioritize actions. 

This combined with looking at retailer capabilities for top retailers also helps them understand what sets the standards in your industry.

Key Account Managers

For KAMs managing relationships with specific retailers, the capability maps as well as the best-in-class library are extremely actionable. It is clear to see where current retail partners excel. Therefore, understand where investments with them are likely to pay off.

On the flip side, it is also clear to see where the limitations are. Thus, the terms of trade can be challenged at the next negotiation.

What To Do Next?

Talk to us to understand how you can assess your current and future retail partners!
Reach out to us at moin@watersky.digital.