By Barley Laing, the UK Managing Director at Melissa
Many retailers are finding it harder to turn a profit in the face of intense price competition, combined with increasing operational costs. It’s something that’s not been helped by escalating global tariffs, such as the 10% tariff from the US that’s now in place.
It has been estimated that pure play ecommerce retailers operate on pre-tax profit margins of around 1.4%; tighter than those experienced by multi-channel retailers who are also experiencing shrinking margins in an increasingly competitive marketplace.
This is due to rising operational costs for staffing, technology, logistics and fulfilment, as well as returns handling. Then there’s the investment required for customer acquisition and retention. The cumulative effect is a growing risk that retailers may sell at a loss and go out of business.
Focus on delivering customer contact data quality
One of the best ways to increase profitability is to improve customer contact data quality. With clean, accurate and appropriately formatted customer data, not only are logistics and fulfilment fast and efficient – with costly failed deliveries and redeliveries few and far between – but marketing efforts are improved with correct customer data informing effective personalisation and upselling. Overall, this approach to ensuring clean customer data helps to deliver a standout customer experience and repeat purchases.
In retail, the costs related to logistics and deliveries are some of the highest they face, typically accounting for an estimated 12% to 20% of e-commerce revenue. This means putting processes in place to ensure accurate customer address data must be near the top of the list when it comes to protecting valuable margin. Particularly with data on customer databases declining rapidly with customer contact data lacking regular intervention degrading at 25% a year as people move home, die and get divorced. Furthermore, 20% of addresses entered online contain errors, including spelling mistakes, incorrect house numbers and invalid postcodes.
Therefore, put contact data verification, in particular address verification processes in place at the point of data capture, and when cleaning held data in batch. This typically involves simple and cost-effective changes to existing procedures.
Onboarding with address lookup or autocomplete
Using an address lookup or autocomplete service works well at the customer onboarding stage. These tools automatically provide the correct address as customers begin typing theirs, enabling them to select an option that is accurate, easily recognisable, and properly formatted for their country location.
By taking this approach, there’s no danger of errors caused by fat finger syndrome, and there’s a reduction in the number of keystrokes required when typing an address by up to 81%. This speeds up the journey to checkout and reduces the risk of basket abandonment, helping to secure the sale, while aiding the delivery of a standout customer experience online.
Similar technology enables real-time verification of email and phone data at first contact, strengthening critical datasets.
Deduplicate customer records
With data duplication rates of 10 – 30% on the customer databases of many retailers, duplicate records are a big issue. It commonly occurs when errors in contact data collection take place at different touchpoints, the merging of databases after a new business acquisition, and when two departments combine their customer datasets. Duplication can have negative implications for marketing, particularly with printed communications. For example, sending the same letter to a customer twice not only wastes money on printing and distribution, but it can also harm the retailer’s reputation.
To remove duplicate data use an advanced fuzzy matching tool. Services such as these can merge and purge the most complex records to create a ‘single user record’, which delivers an optimum single customer view (SCV) from which insights can be made to enhance personalisation and support upselling.
Data cleansing or suppression
Data cleansing or suppression is an important part of the data cleaning process, because these services highlight those customers who have moved or are no longer at the address on file. Having access to the National Change of Address (NCOA) database is a crucial part of this process, because it highlights those who have moved and provides their new address. It’s accessible in the UK, US and some other countries.
In addition to removing inaccurate addresses, cleansing services can include deceased flagging to stop mail and other communications being sent to individuals who have passed away, and thereby help to avoid distress to their friends and relatives. Overall, adopting suppression strategies enables retailers to cut costs, maintain trust and combat fraud.
Improve last-mile delivery with geocoding
Geocoding technology is an important consideration when it comes to enhancing efforts in last-mile delivery, due to the latitude and longitude (rooftop level) coordinates it provides. This is essential in cases where multiple properties share the same address, such as a plot of land or the entrance to a driveway.
With different conventions for address formats around the world, converting correct addresses into geocodes is critical when it comes to global deliveries. For example, while the UK uses city, street and house numbers, in Japan buildings are referenced by the number of the block they belong to, and within each block buildings are numbered as well. Sometimes numbering is assigned based on the order of construction, meaning the numbers don’t always run sequentially.
In summary
With inflationary pressures and increasing global tariffs putting severe strain on the very tight margins in retail, the difference between a profitable business and a loss-making one is becoming tiny. Investing wisely in ensuring customer data quality is a big step towards improving profit margins due to the benefits it delivers in logistics and deliveries, as well as in marketing and the personalisation of communications to existing customers. It’s an approach that also supports the provision of a standout customer experience, further boosting sales and profitability.
