E-commerce players have tried everything from cash-on-delivery to one-day delivery and from free returns to no question asked returns to engage customers. With all these offerings the cart abandonment rate is still averaging 60-80%.
While some e-commerce platforms average at 60%, for some cart abandonment rate goes up to 80%. Why some sites have a higher abandonment rate while some have low? What are the metrics marketplaces are continuously working upon to offer better experience and control return rates? What are the technologies and methodologies that stores have leveraged to leap past their competitors? Competitor benchmarking can answer all these intricate questions, which otherwise are tough to comprehend.
A TechCrunch study from 2018 revealed, “People spend more money on Amazon than all other marketplaces combined”. Amazon is an epitome of the marketplace and perhaps the best site to gauge and benchmark varied metrics like customer experience, customer lifetime value and conversion rate. Taking a cue from, how Amazon or other big players deal with varied challenges like cart abandonment, customer churn, and return can help marketplaces improve immensely.
Why E-commerce Players should invest in Competitor Benchmarking?
Ever since Statista predicted that by 2022 e-commerce revenue will touch $6.54 trillion, players have started working on their shortcomings. With multiple unicorn e-commerce start-ups trying to grab a piece of the pie, the competition has stiffened.
By benchmarking KPIs that are deemed important against global or local competitors, e-commerce players can increase their market share. When implemented correctly, competitor benchmarking can show the path for establishment transformation.
How to grow a Marketplace using Competitor Benchmarking?
The global e-commerce industry is growing annually at 23% and it is expected to have 2 billion customers by the end of 2020. If you don’t ramp up your on-site features to offer an improved customer experience, the likes of Amazon, eBay, Etsy and Walmart will steal the entire thunder.
Since players like Amazon have deep pockets and abundant resources to invest in analytics and innovation, other players need to rely on competitor benchmarking. By benchmarking varied metrics against their competitors, e-commerce players can discover missing links.
In the customer service industry, competitor benchmarking is the most preferred way of analyzing performance and improving it. By benchmarking against the best, organizations can improve efficiency, cost-effectiveness, and output of their varied processes.
E-commerce players can discover keys to better conversion, retention, and customer experience by benchmarking for the following processes:
1. Seller Management & Assortment Planning
Recently, Amazon emerged as the preferred platform for product discovery by beating Google. Amazon is the first place people go looking for new product ideas because it never disappoints them. With 12 million+ products, Amazon has made it easier for users to find the desired product.
The increasing breadth of assortment can help contemporary players offer a better on-site experience to customers. The lesser the product discovery time, the higher the conversion rate.
How benchmarking works for Seller Management?
E-commerce platforms traverse their competitor’s website inside-out assessing the most popular products. Marketplaces also prepare a list of most searched products that are missing from their platform.
With the two lists, it gets easier for them to identify the products that are missing on your platform but available on your competitor’s site. In the next step, they discover sellers who are selling the missing products. Once they have the information about these sellers, they start with the onboarding process.
In a unique approach to increase the breadth of assortment, e-commerce businesses get in touch with their existing sellers and local store owners. The platform tries to convince these sellers and store-owners to start selling the missing product.
E-commerce platforms have dedicated funds for incubating these sellers. The sellers are offered with requisite support related to inventory acquisition, management, storage, and shipment.
Benefits of benchmarking Assortment Planning:
Improved customer satisfaction: A good number of products allow users to compare and research thoroughly before making a purchase. The availability of more products stops users from visiting the competitor’s website.
Increased Opportunity for Cross-selling: With more products, e-commerce marketplaces can finally leverage the potential of cross-selling through product recommendations. Similar products and often bought together are some product recommendation techniques that generate impressive results.
2. SKU Price Management
A study found 81% of customer’s research and compare products online before buying. With price being an important decision influencer, marketplaces cannot ignore it. By benchmarking popular and best-selling products for pricing against the competitors, marketplaces can drive enormous revenue.
Benchmarking for better pricing has another benefit like:
Increases the Customer Lifetime Value: By matching price, one can easily retain their loyal customers. When customers continuously buy from your website, the customer lifetime value increases, which is a good measure of success for e-commerce organizations. Increasing customer lifetime value also helps marketplaces cut investment in customer acquisition.
Also, the argument that “benchmarking for pricing will increase e-commerce losses” holds not much weight because to acquire a new customer an enterprise needs to spend five times more. Also, 76% of organizations consider CLV to be an important measure of success hence benchmarking on price makes sense.
Increases Profits: An Invespcro study reveals “increasing customer retention rates by 5% increases profits by 25% to 95%”. With 63% of customers agreeing to never shop from a site after just one bad experience, it makes sense to lose some money in price matching than turning the entire CLV null. With customers willing to buy from sites that offer a quality experience, offering a discount in the form of price matching every then and now can help e-commerce players generate referral sales and increase profit by 25-95%.
3. Catalog & Search
With customers often looking for an online experience similar to one provided by Amazon and Google, it gets tough for nascent players to convert traffic into sales. Amazon has been around for 2 decades now, it has optimized the on-site user experience in such a way that people find relevant information with just one click. While to copy Amazon’s catalog layout is illicit and not advised, you can always benchmark your marketplace against Amazon for Catalog Quality.
Some of the attributes to look when benchmarking Catalog includes:
- Are customers able to identify the important attributes of the product?
- Is it easier for customers to locate varied CTA buttons like Add to Cart and Buy Now?
- How compelling is your marketing copy and calls to action?
- Are you providing your consumers with optimal content on product pages?
- Are images used in the catalog of International standards?
Benefits of benchmarking On-site Search Results
With over 43% of visitors using the search functionality on e-commerce platforms, search accuracy is becoming vital for quality customer experience. While relevant results will help players acquire competitive advantage meanwhile inaccuracies can impact customer churn and loyalty negatively.
By benchmarking on-site search result and improving product discovery, marketplaces can garner varied benefits like:
- Optimized search results
- Personalized recommendation results
- Increased impressions and click-through rate
- Improved customer satisfaction
- Hike in revenue
Must Read: Challenges of E-commerce Catalog Management
4. Social Media
Multiple e-commerce players are utilizing social media platforms effectively for targeting, educating and servicing users. Checkout on Instagram and order updates on Messenger/WhatsApp are some features that have helped marketplaces render quality customer experience. The increasing popularity of social media among baby boomers and the millennial generation has helped e-commerce marketplaces sell products without making customers visit their platform.
Benchmarking your competitor’s social media channels can help you identify multiple attributes that are necessary for success on social media like:
- The right target audience
- Whether carousel, video or images work as the best ad format
- Is it the quirky or the informative ad copy that drives maximum conversions
Benefits of benchmarking social media channels include:
- Identify what kind of ad format works best for holidays or festivals
- Run cost-effective ads for customer acquisition and product promotion
- Discover how other players are banking upon new trends for driving sales
- Understand how other players are handling complaints on social media
5. Customer Service Benchmarking
A Microsoft report suggests “96% of customers consider customer service as an important factor in deciding loyalty to a brand”. With customer service and experience being one of the most important factors of driving brand loyalty, e-commerce marketplaces cannot ignore it.
In the coming years, the competition in e-commerce space will grow immensely and businesses will try to target the same audience. Players with deep pockets will be able to retain customers by offering hefty discounts but the reputed and the new players will have to struggle to offer a quality experience.
By benchmarking competitors that have a reputation for offering quality experience, e-commerce players can save huge money. Competitor benchmarking will reveal the nuanced approach these players take to optimize customer service. Once all the secrets are known, new players can build a paradigm around it and follow it religiously.
Additional E-commerce Metrics to Benchmark
Apart from the metrics that measure customer experience or sales, e-commerce stores must also look into benchmarks, which impacts the overall brand value. With competitor benchmarking, you must look into the metrics like:
Cost Per Acquisition
By critically reviewing the investment made through varied channels for customer acquisition, organizations can discover loopholes and shortcomings. When investments are made through social media, search engines and other forums for customer acquisition, benchmarking cost is indispensable.
Conducting benchmarking on acquisition costs can be tricky because not every player relies on the same channel. Hence there are a few things to consider before getting started with benchmarking.
Consider the following questions:
- What acquisition channels are my competitors using?
- Which channels are they having the most success with?
- How does my budget compare with my competitors?
- Which channels are creating the most impact and which channels are failing?
- Is my budget too thinly spread across channels?
Customer Lifetime Value
Once a customer is acquired everything he or she buys including the first purchase makes for the customer lifetime value. If a customer creates an account and buys nothing then the CLV for that user will be zero.
Since repeat customers spend 43% more than new customers, measuring CLV can help businesses take a call on customer acquisition vs customer retention debate.
An Adobe study found “€5.34 is the average amount spent by a repeat customer in comparison to €1.75 spent by first-timers”. Benchmarking CLV will reveal varied hits and misses made in the past. If conversions and CLV are high, in comparison to competitors, then you’re in good shape. If otherwise one can always ramp up the budget on acquisition channels when required, but nurturing existing customers is the best approach for long-term success.
Year over Year Revenue
Well, Year over Year Revenue is the most traditional way of competitor benchmarking but then it is also the most accurate way of measuring success. YOY Revenue helps businesses understand the loss they have garnered against the investment they have made or received.
Conducting competitor analysis has its own set of additional benefits that e-commerce businesses can leverage to build an unstoppable business. The tricky thing with benchmarking on a year over year revenue is that your competitor might be in business for a longer period.
Some of the other attributes to look at when benchmarking on Year over Year Revenue:
- The amount of loss the competitor has acquired in recent past
- The region where the companies function in and how much tax liability they have
- The percentage of budget your competitor has spent on acquisition, advertising and discounting
Average Order Value
Benchmarking average order value is integral because it reveals the true impact of customer retention. With the accurate measurement of average order value, organizations can gain an intricate understanding of things that worked and went wrong.
Almost 22% of the population worldwide shops online and baby boomers are the generation that spends the most online. With over 1 billion customers spending a total of $3 trillion annually on e-commerce platforms, measuring average order value can explain whether your approach is correct or not.
If your click-through rate or conversion rate is higher but your average order value is lower that means, your ad copy is good but your product/service catalog needs improvement. Benchmarking helps you identify areas that can help you increase the average order value.
Some of the general outputs of benchmarking average order value include the following:
- Your marketplace requires improvement related to Up-selling & Cross-selling tabs
- Product recommendations shared on-site lacks depth
- Your site needs to work on personalization of product recommendations
Competitor benchmarking is perhaps one option that can help e-commerce marketplaces get rid of varied problems. When leveraged properly, this e-commerce analytics tool can impact average order value, customer retention, revenue, return rates and conversion rate for the better.
With multiple online marketplaces selling the same product, the one that provides the best experience and price will emerge victoriously. E-commerce competitor benchmarking services can help you be the most preferred platform for product discovery and recurring purchases.