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How E-Commerce Can Help You Crunch the Numbers
Jewelers have a chance to gather important data about their customers.
Dec 15, 2020 10:59 AM
By Jean Z. Poh
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RAPAPORT... What if the pandemic presents the largest growth opportunity the jewelry industry has
ever seen? Covid-19 and lockdowns have effectively wiped out in-person shopping, but they’ve also forced the jewelry industry as a whole to embrace e-commerce. The resulting data, if used correctly, can result in a long-overdue industry-wide recalibration that will dramatically improve efficiency and transform the customer experience to be more in line with the expectations of today’s consumer.
“Big data” is the most recent buzzword consultants are touting as the silver bullet for helping retailers predict customer behavior, gain marketing insights to boost sales, make accurate inventory projections, and increase customer satisfaction. Oxford Languages defines “big data” as “extremely large data sets that may be analyzed computationally to reveal patterns, trends, and associations, especially relating to human behavior and interactions.”
Walmart reportedly processes approximately one million customer transactions per hour, providing the US retail giant with over 2.4 petabytes of data. But what does that look like when applied to the jewelry industry? The price point and purchasing behavior for jewelry make it virtually impossible for us to amass as much data as the consumer-goods sector, because people buy jewelry far less frequently than they buy household goods, and the purchasing timeline tends to be much longer.
Still, one doesn’t need to have as much data as Walmart to derive meaningful insights that can impact one’s bottom line. Even small direct-to-consumer brands can use basic metrics to optimize and grow their business in multiple key areas.
1. Customer profiling
Once one begins selling online, a world of customer data becomes readily accessible through centralized digital sales and marketing platforms. The first step is to analyze your existing client base using available tools and come up with a customer profile.
Such an analysis can reveal, for example, that the majority of your customers are married men between the ages of 35 and 65 who live in wealthy suburban areas and purchase anniversary or birthday gifts for their significant others. Alternatively, you may discover that your main client is a female professional of 35 or older who lives in a major metropolitan area, shops for herself once a year on her birthday and spends an average of $500. You now have the ability to gain new potential customers by targeting people who resemble your core client, on the platforms they frequent the most — for example, showing Facebook ads to “lookalike audiences” of men over 35 who live in affluent suburbs, or showing Instagram ads for jewelry in the $500 range to urban, professional women ahead of their birthdays.
This level of precision can help companies strategically and rapidly grow their customer base in a more targeted and cost-efficient manner that was previously unattainable through traditional print advertising.
2. Product mix and inventory optimization
Inventory is the biggest risk for jewelry companies, and every dollar that’s tied up in inventory comes at the expense of cash flow that could otherwise be going toward marketing and revenue growth. Without data on what’s selling where and when, jewelers must rely on gut feeling and experience to decide which products to produce or stock, and at which price points. This leads to wasteful production practices and either excess inventory or not enough stock, as well as missed opportunities.
E-commerce concentrates data and makes it easy to see exactly which price points and styles are performing in specific geographic locations. With that information, brands can tighten up production, reduce waste and allocate inventory effectively. It’s also possible to show sample products online to test customer appetite before committing to making them, and to create benchmarks for measuring performance. This lets jewelers continuously phase out styles that don’t meet such benchmarks, and stock well-performing products in targeted brick-and-mortar locations to drive foot traffic to stores.
3. Marketing, branding and business strategy
When customer demographics, behavior and sales data are combined, the result is a clear picture of the market opportunities for your brand, and a detailed roadmap that will inform your brand positioning, production forecast and marketing strategy.
One standard metric in e-commerce, for instance, is customer lifetime value. It’s measured by multiplying the average order value of a single sale by the average number of times a customer makes a purchase over a given period, and then by the length of time a customer stays active and loyal to your brand. Optimizing any of those variables makes it possible to increase revenue substantially by growing the lifetime value of each customer. For example, you could increase the average order value of a single sale through upselling, or create a range of add-ons to core performing pieces to increase purchase frequency. Using customer data to send customers personalized promotions during key periods when they’re more likely to buy is another way to boost purchase frequency.
Say your data reveals that charm bracelets in the $500 range are a core performer for your main demographic of self-purchasing female professionals. Rather than trying to increase sales by producing 100 new designs and bearing the inventory cost for those pieces without knowing which ones will sell, you could create a focused strategy and design a limited-edition bracelet at a higher price of $800 with add-on charms that cost around $300 to $600 each. Now let’s say that every time someone puts the bracelet in her shopping cart, she’s suggested a charm as an upsell, and each year for her birthday, she receives an email about a new limited-edition birthstone charm. You’ve now increased revenue while containing inventory costs, thereby freeing up cash flow to invest in branding and growing market share.
The clarity a company can gain from using e-commerce proactively can have a huge effect on retailers of any size. Applying this resource uniformly across the jewelry industry could result in trickle-down efficiencies in manufacturing and the diamond trade. Yet while data collection and analytics show exciting promise, we cannot follow other industries blindly; the jewelry sector is like no other, and we must apply advancements with full knowledge of our industry, respect for its history, and understanding of our customers.
Jean Z. Poh is a serial entrepreneur and the founder of Swoonery. She has over a decade of experience investing in technology startups and advises luxury brands on their digital strategy and successful transition to e-commerce.
This article was first published in the December 2020 issue of Rapaport Magazine.
Image: Jean Z. Poh.
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Tags:
Coronavirus, COVID-19, e-commerce, Jean Z. Poh, online sales, retail, Swoonery
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