The ecommerce industry in India has witnessed significant growth on the backdrop of increasing internet penetration, smart phone usage, digital payments infrastructure as well as the ever-improving fulfilment landscape. Despite this, there are many challenges ecommerce companies face that are linked to customer acquisition and retention, and delivering a great customer experience — all of which is critical to profitable growth of the business.
The core revenue stream for ecommerce is to get consumers to buy their products or services and to ensure most of the customers returned for the product or service due to a differentiated product or service offer and a great experience. However, there is value in looking at new revenue streams that go beyond the core — such as monetizing first party data, monetizing retail media and/or monetizing customer contacts. Each of these revenue streams could generate 5-10% additional revenue and can be a significant revenue growth opportunity coupled with higher profitability.
Monetizing data
All ecommerce businesses have a wealth of first party customer data. The most important aspect for them is to determine what data to collect – what can help improve customer engagement and retention, considering data privacy regulations, and understanding why customers are willing to share certain data and what value do they expect in return. When first-party data is used responsibly, it can help build direct relationships with customers, aiding both revenue growth and profitability. Various research on consumers clearly highlights that a vast majority of consumers are willing to share personal data if the brand/company creates a unique solution for them. This, in turn, can lead to higher conversion and average order values, as well as repeat visitation and loyalty, further strengthening the core business.
For large ecommerce businesses, with million of transactions and equally large number of unique customer records, the right set of data can help create a platform for consumer research. The anonymous data could be used by brands to test a new product concept or launch a new product or poll a customer cohort on a product or a service. It is akin to building out a consumer insights platform that can be leveraged by several brands and can generate a whole new revenue stream for the organization.
Consumer insights platform on offer to brands could potentially generated 2-5% additional revenues.
Monetizing retail media
The retail media network space is evolving at a very fast pace and the global retail media market is estimated to be $ 55-60 billion by 2030. In India, the size of the retail media market is expected to be $ 3.5 billion by 2030 and has overtaken several other media channels such as OOH, radio, and cinemas in terms of size.
Consumers increasingly view a digital ad as a source of new information — especially ads that are relevant, timely, not intrusive and present a concrete benefit. The reason why retail media has gained a lot of interest is that it is one of the most influential touchpoints where the customer is primed to buy, in the overall customer journey.
For an ecommerce firm, it is about how best to leverage the visits to their website or app and to advertise products and services that are most relevant and timely and offer a value to a consumer who is in the purchase journey, and in the process generate additional revenues. For a brand, it is about access to first party data, deeper insights and the ability to reach consumers at the right time in their shopping journey. Targeting high intent shoppers at the point of sale means higher conversion and far higher returns on ad spends. In physical retail, brands compete for placement on the retail shelf and merchandising and operations teams work together for success. The same principle can be extended to the world of ecommerce.
Retail media networks could generate 10-15% additional revenue, with a far higher profit margin.
Monetizing customer contacts
For most eCommerce businesses, the two occasions when customers get to interact with the brand in the real world is at the time of delivery and if they must contact customer support. Even though a large proportion of customer contacts are often linked to orders and fulfilment, there is about 25-30% of contacts linked to product and service queries. It is a great opportunity to not just respond to the customer query but also try and convert the customer then and there to drive a sale transaction. The customer support centre transitions from a cost centre to a profit centre, adding a whole new revenue stream.
For omnichannel retailers who have embarked on this journey, this additional revenue stream can generate 7-10% in revenues.
While leveraging alternate revenue streams is a great way to monetize and bring in additional revenues at higher profitability, it is an evolving space with many unknowns. When ecommerce businesses start to journey on the path of monetizing data, the key question is where does one draw the line on the core business model. But being able to leverage first-party data to personalize and improve the overall customer experience is a necessity today. In the retail media space, the ability to look beyond the siloed view from one retailer and have a consolidated view of shopper behaviour across the spectrum would be immensely valuable for brands but will also need collaboration and regulations with common performance metrics; this is an evolving space. Despite the challenges and unknowns, it is well worth the time and effort of ecommerce businesses to embark on the journey of unleashing the potential of alternate revenue streams.
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