The more eCommerce businesses know about the future, the easier it can be to ensure current operations anticipate upcoming trends.
It sounds like abstract fortune telling, but it’s math in the form of predictive analytics. Here’s what eCommerce store owners need to know about how predictive analytics works, why it’s necessary, and what it can do for their businesses.
How Predictive Analytics Works
The goal of predictive analytics can be summed up in a simple question: What happens next?
The specifics are up to the business. A common area of analytic focus includes customer trends, such as buying habits or website engagement. Predictive analytics can also extend to questions around supply chain and inventory management.
To determine what happens next, predictive analytics tools use a mix of current and historical data. Current data is leveraged to map existing trends: What are customers buying from your site right now? How often? Which product categories are seeing the highest conversion rates?
Historical data is then used to assess past trends and their likelihood to repeat. Combined with current data, analytic models generate predictions about what may happen if current conditions remain the same. These predictions aren’t guaranteed, but they can help set the stage for strategic decision-making.
The Need for Predictive Analytics in eCommerce
Retail eCommerce sales in the United States surpassed $299 billion in Q4 of 2022, an increase of 4.1% from Q3. eCommerce sales in 2022 accounted for 14.6% of total sales.
While the steady growth of online shopping creates an opportunity for eCommerce companies, it also comes with challenges. As more stores make the move online, competition naturally increases. To stand out from the crowd, businesses need to better understand what customers want, and then deliver on these consumer expectations. Examples include providing transparent pricing, fast and free shipping, and sales personalization.
Put simply, predictive analytics helps companies discover current practices that are working, which trends are taking the market, and where they can make changes to increase conversion rates.
Benefits of Implementing Predictive Analytics
By implementing predictive analytics businesses can access key benefits, such as:
Increased Customer Acquisition
The more customers you have, the better sales can be. This speaks to new and existing customers – a healthy mix of both can set up eCommerce stores for immediate and ongoing returns.
Predictive analytics can help companies pinpoint where they may be losing customers and where they can adjust to encourage more conversions. For example, analytics might show a decline in the number of new visitors to your website. Using historical data as a guide, you can assess the impact of website changes on customer behaviors, and then implement new features or functions designed to capture consumer interest.
Enhanced Market Forecasting
The combined influences of mobile shopping, social media selling, and supply chain issues have contributed to a rapidly changing eCommerce market. Products of the week, day, or moment have replaced more reliable standbys, meaning companies must be prepared to change direction on demand.
By implementing predictive analytics, companies can create more accurate market forecasts that help inform inventory ordering, product pricing, and sales promotions.
Improved Marketing Strategies
Better marketing can mean more sales. For eCommerce businesses, this means meeting consumers where they are. For example, consider the use of social media influencers and actively engaging with customers on social media platforms.
Predictive analytics provides insight into key social trends that marketers can use to create campaigns that speak to target audiences on the digital touch points they prefer.
Making the Most of Tomorrow, Today
With the gap between traditional and eCommerce retail closing, companies face increased competition, evolving customer needs, and greater challenges in effectively managing their supply chain.
Predictive analytics helps make it possible for companies to understand what trends are on the horizon and how likely they are to impact business operations.
Equipped with this data, eCommerce stores can be in a better position to take specific action that helps safeguard current revenues and sets the stage for sustained success.
