The Role of Big Data in E-commerce
Big data has become an essential factor for e-commerce businesses. An IDC report predicts that the amount of digital data globally will rise by 61% to 175 zettabytes by 2025, and the e-commerce industry will make up a significant part of this. What is big data, and how does it influence the e-commerce industry?
In e-commerce, big data is like a puzzle consisting of countless tiny pieces of information about your business and customers’ purchasing habits, preferences, and behaviours. These pieces are collected from various sources and sorted to gain valuable insights.
In this article, we’ll look into the role of big data in e-commerce, discussing how it provides insights by analysing customer behaviour and helps you make data-driven decisions.
What is Big Data?
Big data is the large amount of data businesses collect from different sources and processes. These data include sales numbers, consumer behaviour, social media analytics, etc. This data can be characterised by its high velocity, volume and variety.
When analysed correctly, Big data improves decision-making, streamlines operations, and gives your brand a competitive edge in e-commerce. Big data provides numerous benefits, making it essential for any e-commerce business that wishes to make data-driven decisions and boost conversions!
Application of Big Data in E-commerce
Big data analytics in e-commerce is like having an informant who helps you stay ahead of the competition by providing valuable insights on how to improve your business. Every e-commerce business requires useful information to operate effectively, which can be obtained from several sources. Businesses can also monitor and adapt to market trends.
Here are some ways big data plays a significant role in e-commerce.
Inventory management
Big data can help forecast the quantity of each product required in your business. This allows you to manage your inventory accurately. It can help you analyse your past sales and the current market trends to predict the quantity of a product you should purchase. This way, you can avoid understocking and overstocking, which cost money to store, as well as missing out on sales due to out-of-stock items.
Another essential way big data helps is by improving how your products are transported to ensure safe and timely delivery to your customers. Big data can help you predict how long it will take to deliver to your customer, allowing you to avoid guesswork. This can help the logistics manager decide on the best routes to avoid delays, save money, and ensure deliveries arrive on time.
Price optimisation
One aspect where big data is beneficial is dynamic pricing. Pricing is an essential factor when acquiring and retaining customers in e-commerce. Big data can help you improve your pricing by implementing the right strategies. It analyses market and competitor pricing, enabling you to make informed decisions when adjusting your pricing.
Big data analytics allows you to monitor a product’s supply, demand, and the prices at which competitors sell it. If the cost of that product rises or falls, you can adjust your price to match the market price.
Customer service
Using machine learning, artificial intelligence (AI), and big data, e-commerce businesses can improve customer support. A clear example of this is the use of automated chatbots. These AI-powered chatbots can analyse large amounts of data, allowing them to quickly respond to customer queries without needing a customer service representative. This speeds up response times and gives customer service representatives more time to focus on other problems.
Extensive data analysis can help you identify common customer problems, which can then be used to improve your customer support. For example, if the data shows customers cannot make payments, you should simplify the checkout process.
Product management
Good product management is an essential aspect of e-commerce and is crucial to the success of any business; this is another area where big data analytics plays an important role. Big Data can help you pick the right products that appeal to different customer tastes. By using big data to examine what customers purchase and enjoy, you can determine which products are popular and should be displayed more.
Big data is also helpful when it comes to making new products. It assists you in determining what people want by considering factors such as customer feedback, market trends, and what other businesses are doing. If big data shows that more people are getting into fitness and they like health-related stuff, you can also decide to make new fitness equipment or health supplements. This way, you can ensure your new products align with market demand.
Performance monitoring
Big data is also beneficial when it comes to monitoring the performance of websites. You can check your page load time, bounce rate, and other metrics to learn what your customers experience while using your website, particularly when analysing website performance. For example, if you discover your landing page has a high bounce rate, you must take the appropriate actions to reduce it and improve the user experience. One way to do this is by A/B testing two variations of the features on your landing page to determine the best way to increase engagement.
Big data can help you monitor your website and identify areas for improvement to improve your customer experience.
Demand forecasting and trend prediction
Big data plays an important role in customer analysis. It can help you understand your customers’ behaviour and needs and collect their personal information. This data about your customers can help you forecast their demand.
For your business to be successful while giving your customers a good experience, you need to monitor every purchase your customers make. This can be a challenging task, and it may sometimes be impossible to monitor every purchase, but with big data, you can watch your customers and make the right decisions based on their past behaviours.
These past behaviours can be used to forecast demand. With the forecasted demand, you can plan your inventory to avoid overstocking or understocking.
Competitor analysis
Big data analytics can help with competitor analysis by looking into market trends and direct competitors. These insights can help you understand and make the right decisions that’ll grow your business and, in turn, make you stand out from the competition. It might mean changing your market strategy or expanding your product catalogue to keep up with the market trend. Big data can assist e-commerce platforms in monitoring the competitive online shopping environment, which is necessary to implement the right strategy leading to long-term success.
Customer insight
By analysing your customers’ behaviour, you can closely examine how they navigate your websites to understand what they like to buy. For example, if many customers often purchase cooking utensils, it shows the type of customers you have and what kind of products they buy.
Using big data helps you personalise each customer’s shopping experience. Showing them products similar to their previous purchases can save them hours of searching for a product and help you build a connection with them, which is an important step towards retaining them. Big Data also allows you to divide your customers into groups based on demography, age, occupation, etc. This can help you improve your targeted marketing campaign.