4 Developments Set to Define Data-Driven E-Commerce in 2024
In this year, we’ve witnessed significant transformations within the e-commerce landscape.
The rise of AI programs alongside the challenges posed by the partial disintegration of third-party cookies has brought both opportunities and challenges. However, a tentative rebound from inflation has led to cautious spending among customers. With a new year looming, it’s crucial to anticipate the fresh set of challenges and opportunities that 2024 will bring.
AI Goes Mainstream
You might ponder: hasn’t AI already made significant strides? Contrary to this belief, trends indicate that we’ve merely scratched the surface of AI’s potential. Projections anticipate AI-driven e-commerce solutions to constitute a market worth $16.8 billion by 2030, exhibiting a Compound Annual Growth Rate (CAGR) of 15.7% over the next eight years. Additionally, Forrester’s prediction suggests that ‘AI will permanently disrupt the agency landscape in 2024.’
This growth is propelled by technologies such as:
AI-Powered Personalization
AI-Powered Personalization is poised to revolutionize marketing and User Experience (UX), reshaping them significantly. It will create tailored advertisements and content, establish dynamic pricing and offers, and employ AI-driven chatbots. According to McKinsey’s research, omnichannel personalization of this nature has the potential to elevate retention and revenue by as much as 15%. Furthermore, it can yield cost savings of up to 30% and enhance customer acquisition by up to 5%.
AI-Powered Search Engines
These evolving search engines are reshaping the landscape of search queries, influencing the content that gets featured or excluded. As these engines become more proficient, their influence is poised to increase further. Consequently, the dominance of SEO (Search Engine Optimization) might diminish relative to other channels. This shift could potentially impact overall e-commerce sales, as customers gain enhanced efficiency in finding the products they seek.
AI Prediction Technologies
AI prediction technologies leverage first-party data to optimize User Experience (UX), guiding customers precisely to their intended destinations while eliminating distractions. The increasing prominence of predictive analytics relying on first-party data in recent years indicates a likely surge in 2024. This growth is propelled by the necessity to replace prior methods reliant on intrusive tracking. This transformation empowers retailers to forecast customer behavior more accurately, facilitating improved management of their online stores and enabling tailored promotions and recommendations.
E-Commerce Gets Serious About Compliance
Authorities have shown a heightened interest in enforcing data privacy regulations such as the EU’s GDPR and California’s CCPA, with additional U.S. states following suit with similar legislation. For medium to large e-commerce enterprises, disregarding data protection and privacy requirements is no longer viable.
The e-commerce boom in recent years has outpaced regulatory adjustments, but the tide is turning. In 2024, expect a heightened emphasis on Governance, Risk, and Compliance (GRC) within e-commerce, sparked by significant litigation against several major companies in late 2023. Companies will be under scrutiny for their practices in collecting and utilizing customer Personally Identifiable Information (PII), including aspects like informed consent and enabling effective opt-out from tracking.
Moreover, specific marketing technologies, such as targeted ads reliant on third-party cookies and the sale of third-party information, will require reassessment or cessation due to evolving privacy norms. In essence, the unregulated frontier of e-commerce is undergoing a transformation, prompting sellers to promptly align their operations with emerging regulations before enforcement actions intensify.
Attribution Models Become More Sophisticated
In recent years, the prevalence of digital channels has established last-touch attribution as the go-to standard for many performance marketing teams. However, the landscape of tracking has become more challenging, affecting not only last-touch but also first-touch and multi-touch attribution models.
There’s a growing consensus that these attribution models are too confined in their approach to measuring marketing efforts. They tend to fragment the intricate customer journeys and the multitude of factors influencing purchasing decisions. Research indicates that only 60% of marketers feel confident in proving marketing ROI, with a mere 23% expressing “very confident” sentiments regarding the measurement of appropriate Key Performance Indicators (KPIs).
In 2024, an emerging trend is the adoption of a broader spectrum of attribution techniques like media mix modeling and incrementality. While these methods necessitate more extensive investments in data and analytics, their combination with last-touch attribution can offer a highly accurate means of evaluating the effectiveness of diverse marketing channels.
Understanding the comprehensive impact of measurable elements, such as browser extensions, can further empower retailers to gain a more comprehensive understanding of their customer base and store performance.
Retail Media Networks On The Rise
Retail media network advertising, exemplified by Walmart Sponsored Search and Amazon Ads, is poised to amplify its significance, especially in anticipation of the conclusion of the third-party cookie era slated for late 2024. This shift is foreseen as an enduring trend, with projections indicating that the revenue from these networks will outstrip that of television by 2028, surging to an estimated $126 billion by the close of 2023. A primary reason for this surge is the adaptability of these advertisements, which leverage first-party data encompassing purchase history, device preferences, geographic location, and an array of other factors to precisely target individual customers.
Distinguishing itself from various other advertising platforms, these ads engage consumers while they are actively shopping, thus capitalizing on their inclination toward purchasing. Furthermore, considering that a mere four companies oversee 50% of U.S. e-commerce, retailers find themselves unable to disregard these channels. As these marketplaces evolve, they are expected to introduce an expanded array of data-driven advertising options and third-party solutions, empowering retailers to make more informed decisions within these thriving ecosystems.
A Brave New World
Preparing for the upcoming year promises substantial transformations, from the accelerated advancement of AI technology to an array of alterations that demand adaptation from e-commerce practitioners. These shifts will define success for some while posing challenges for others. My counsel is to assess how best to integrate AI into your organizational framework effectively, leveraging first-party data and expanding your attribution model repertoire to stay ahead.
