OpenBrand

Understanding How to Evaluate E-Commerce Market Share

Do you remember a time when we as consumers had to drive to a brick and mortar to buy all the things we needed? Now thanks to Al Gore and our smartphones, we conveniently shop from our sofa, the dentist’s office, the carpool line, or anywhere else with the ease of the internet. The ever-evolving e-commerce world has picked up considerable speed in the last several years with nearly $517 billion dollars spent online with U.S. Merchants in 2018, up 15 percent over the year before. While 15 percent doesn’t seem like much to most, total retail sales only grew 4.1 percent. In addition, e-commerce data reported that more than half of all retail sales growth was a result of those online sales.

This consumer-centric space is driven by customer choice and price. As a company trying to make your mark, how can you better understand your online/e-commerce market share relative to brick and mortar market share? Are you growing your online business fast enough? How do you compare to the competition?  Retailers and manufactures alike must understand, track, and identify changing e-commerce trends to help answer these questions.

The following four questions will help you evaluate e commerce market share, assessing whether you’re investing in the right areas and providing you a guideline for understanding your performance.

Question 1: What is the total Share: E-Commerce Market Share vs Brick and Mortar market share?

When clients ask ‘what’s my market share?’ it’s a loaded question. We need to look at the whole picture. To determine how your company is performing you need to understand how the business is growing both online and in-store. This means measuring or calculating your market share number for both.  The headlines might have us believe that brick and mortar is a thing of the past. But as retailers compete for customers across platforms, the experiences offered by a brick and mortar store remain the “foundation” of retail, and often helps to close the online sale

Question 2: How should you judge your own growth?

We encourage our manufacturing clients to examine online share growth for the last 3-5 years relative to the retailer's total share. Is the online share in line with overall market share or above or below? How does your organization compare to the online titan …Amazon? With online sales growth at 15 percent from 2017-2018, at what rate is your organization gaining e-commerce market share?

Case Study: Best Buy Making Strides in Consumer Electronics

As an example, let’s look at a real-life scenario. According to data released by TraQline for the 4Q Ending June 2019, Best Buy is the retail leader in market share for US Consumer Electronics (CE) with 22 percent overall share of the category. This share includes total - whether purchased online or in-store. Walmart gives Best Buy a run for their money as they made significant growth overall in market share for the category the last 3 years and working to close the competitive gap between these two CE powerhouse retailers.

Online growth for top Consumer Electronics Retailers

How do both retailers stack up when we look at only the share among those purchasing online?

Best Buy's significant share growth in online CE products is impressive, but despite that, they are far behind Amazon, who maintains the largest e-commerce market share for CE purchases with 46 percent versus Best Buy's 11 percent share; Walmart rings in at just under ten percent (Source: TraQline 4QE June 2019).

What do these numbers mean in terms of growth – where were they 5 years ago compared to today’s online space? Overall, CE online shares grew about 900 bps  since 2015 across all key retailers; Amazon grew by 1200 bps in the same time period. While Best Buy doesn’t come close to winning the category online, they did increase their share by 1300  bps, exceeding the average growth for the category (and Amazon’s growth) and ahead of its closest competitor, Walmart, who only grew 1000 bps.

The key takeaway:  to better understand the overall performance across retailers regardless of product, we suggest you examine market share for each channel separately. This will give you a better understanding of how your online growth compares against not only your competitors, but also versus changes in entire industry.

Question 3: Are there opportunities for non-traditional online categories?

When evaluating e-commerce market share many people traditionally think only about tech products being online movers and shakers. However, there are many non-traditional categories that have a high online penetration or opportunity for online growth as technology or industry shake ups change the playing field. For example, you would assume automotive tires are a product more likely sold in-store given the nature of the product – size, weight, need for installation, etc. When looking at overall channel data on TraQline, your assumption would be correct: only 8 percent of tires are being sold online. However, consumers’ increased willingness to buy products online has led tires down a new road. In-store sales of tires have experienced a significant decline in two of the last three years while those online purchases had a significant increase in units overall during the same time period.

Case Study: Walmart's online tire share growth

A deeper dive into the top tire retailer helps illustrate the point. Walmart had the highest overall share last year - 14 percent. If we break down the share by channel, we see Walmart’s tire share grew significantly from 10 percent in June 2015 to 22 percent in June 2019. The retail giant also grew in-store share, but only 400 bps for the same time frame. As online sales increase, how customers get the product is key and certainly can impact the channel of choice. Among those purchasing tires from Walmart nearly three fourths of customers ‘pick it up at the store/some other location’ instead of having it delivered. This makes sense as customers are likely getting the tires installed right at the store. It may seem obvious, but details like these can impact how online share grows and changes. Walmart making the move to sell tires online with in-store pick-up likely helped grow their tire sales overall.

The takeaway: We should not make assumptions on the best channel for the product. Let the data lead you – it might make sense to carry only some products in-store, or online or both. Understanding the change overtime can provide you that landscape as you navigate the e-commerce highway.

Question 4: How do prices impact shopping online versus in-store?

Some might argue that due to the “endless aisle” of both higher- and lower-priced products, shopping online offers more opportunity to spend less. However, that assumption can be misleading. Average Price Paid (APP) provides key insight into differences in online buying behavior that varies by product category. In some cases, examining APP can indicate that consumers are willing to spend more online than at a physical retail store. Understanding the nuances of online pricing can help you ensure that you have the right assortment and that you’re promoting the right products online.

Case Study: Average Price Paid for Tires

For the last 5 years, the APP has been higher among those buying tires online versus in store. In the past year alone, the APP for those buying online averaged $47 more than those buying in-store.

Looking at the consumers who paid the the top 20 percent of prices at Walmart shows that 17 percent purchased at Walmart.com compared to 8 percent purchasing in-store.

That said, each category may behave differently. In the case of CE products, we see the APP was about $38 more when purchasing in-store.

The takeaway: It’s important to understand how much your consumer is willing to pay when shopping in different channels. If you know that consumers are willing to spend a little more when buying online versus in-store, you can highlight and emphasize products that match what the average consumer likes to purchase.

Determining where your products will be positioned best is both an art and a science. Using consumer data to determine where your customer is comfortable shopping and what prices they are willing to pay will help you make decisions about how you sell online. In some cases, as in CE, online sales have become standard, and choosing to not sell online could cost you your target customer. In other cases, as in tires, there are opportunities to grow, but perhaps not all your products need to be represented in the never-ending scroll of a website. Understanding how to evaluate e-commerce market share will help you navigate successfully in the online space. Tools like TraQline will help you evaluate your options and make data-driven decisions.

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by OpenBrand

Four Simple Tips for Conducting a Competitor Analysis

Ten years ago we didn’t have Uber or Lyft. Five years ago, no Apple Watch. And just in the past year we witnessed the long-awaited introduction of Heinz’s Mayocue. No matter what your industry, it’s changing, we guarantee it. New players come into the market, players leave, distribution channels change, and new technology drives features. If you are not regularly conducting a competitor analysis, you run a serious risk of being late to adopt an industry trend or innovation that could be the difference between success and failure. To help ensure that you and your company are on top of your game, make sure you do your research. Here are a few key tips that you should consider when conducting a competitor analysis.

1. Identify the Players

Conducting a competitor analysis doesn’t work unless you understand who your competitors are. Whether you are a brand or a retailer you must take two factors into account:

A. Identifying current major players

Utilizing market share to identify the current competition will help you narrow your list down to the largest competitors you compete against. Identify the top players in the industry, build a competitive matrix, and list them. There are some helpful key considerations in this workbook on unraveling your competitor’s strategy here.

B. Identifying future players

Be sure to keep your focus not only on your competitors now, but also which competitors pose a threat as industry disruptors. For instance, if you were a payphone provider in the United States in the 90s and you focused only on other payphone providers, you would have had quite a shock as cellphones gained near 100 percent penetration. Utilizing market share to identify upcoming competitors can be a powerful tool for trying to head off threats before they overtake your position. Or, if you do not yet have a position, can provide a way for a more agile company to capitalize on a successful model. To identify these future competitors, look for players that are small, but demonstrate rapid share gains in the market, for example: Amazon’s share in small appliances jumped from 5 percent to 8 percent in just 2 years. For help in understanding what type of share gains are “normal” over time, contact your TraQline rep.

2. Emerging Trends - Identify what's new in the industry

Disruption seems to be the norm today, particularly in tech. Without keeping your finger on the pulse of your industry, you can easily be lost to what trends are emerging in the market today. There are many different ways you can stay on top of what’s new.

A. Create it

If R&D is your thing, then you can be the inspiration for new innovations in the industry. This gives you first-to-market advantages (and disadvantages!), but can be a more expensive road. Creating a feature or choosing to partner (particularly common when private labeling) with someone who has already developed the technology may help grow the industry in ways that have yet to be taken advantage of.

B. Partner

Rather than investing in a new technology, retailers (via private labeling or exclusives) and manufacturers (new feature introduction) can create innovation and growth. For example, the partnership of Nike and Apple leveraged the two first strengths to create apps and products that benefit the consumer. Partnerships function by identifying a need and working with a partner who has complimentary resources, allowing you to create a trend that consumers will love.

C. Watch the trends

3. Understand your strengths (and their weaknesses)

Entire books have been written about understanding your strengths and their weaknesses. A few old-school books such as Good to Great and Blue Ocean Strategy give you a framework for identifying your key strengths. But what does identifying your own strengths have to do with performing a competitor analysis? You’re looking for the overlaps and the gaps in the two. It’s easiest to start with your own strengths, create a matrix with your strengths listed on the side, and list yourself and your competitors across the top. Start listing key strategic and tactical strengths. It is ok to have too many at first. You can delete the mundane or duplicates later. Once you have yours finished, move on to your key competitors that you identified in #1. Note, the list may be long at first, but you’ll realize that some strengths can be deleted as everyone shares them (thus it’s not really a strength, but a common feature). Focus not only on product/service features like unique colors or product durability, but also intangible strengths, such as “quality customer relationships” or a “strong distribution network”.

Once you have your list of strengths, fill out the matrix by indicating with a 1,2, or 3 (3=high, 1=low) in each cell to indicate which competitors have which strengths. This will help you to identify areas where you are stronger than your competition and areas where your competition is stronger than you. Having this understanding helps fill in some of the most important elements of a competitor analysis – where you have your unique selling proposition. Identifying the reasons that customers choose a particular product or service — and reasons that they do not select another — can go a long way toward helping you understand why and when those successes occur.

4. Who are your competitors targeting?

A. Age brackets

Your marketing may be focusing on a particular age group or generation. If your competitors concentrate elsewhere, your preliminary research may show that they are missing a key segment. Alternatively, this may suggest that you have a substantial opportunity to fill a market gap—or that you are putting your resources in the wrong place.

B. Gender differences

Do your competitors sell more to men or women? These distinctions can significantly impact how you should direct your efforts and your messaging.

C. Income levels

Some products or services fit better with different income levels. This may be a matter of pricing strategy or social norms but understanding the relative affluence of your customers as well as your competitors’ customers helps you drive toward those most likely to purchase. Combining the income level of the consumers purchasing with your price point data in Element #1 will help you optimize mix of pricing and demographics.

D. Online or brick and mortar

Having your product in a physical store carries higher costs as it relates to distribution, POP, etc. but it may be the price of entry into your market. It may also be a key strength! Understand where your competitors are selling, and you may find additional opportunities and revenue streams.

Using these steps as a starting point, there are multiple ways you can continue your competitor analysis. Different types of market data, like the consumer data provided within TraQline, will be invaluable as you identify where and how you can best succeed within the market. If you are uncertain what additional data will help you build out your analysis, you can reach out to one of our TraQline representatives. They are always prepared to help you get the most out of the tools we have available.

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by OpenBrand

CHOOSING PANEL VENDORS

CHOOSING THE RIGHT SAMPLE PANEL VENDOR

We know that a study is only as good as the data it produces – garbage in, garbage out. One of the best ways to ensure you receive quality data is to assess the level of respondent quality provided by your sample panel vendor. Below you will find the key questions we ask any potential vendor prior to panel selection. These questions help us determine what type of quality controls have been implemented by vendors when selecting and securing their panel.

Did you build your panel by purchasing other lists?

First, it is important to understand how sample companies have built their lists. These lists are built by either purchasing other existing panels and merging them into a larger one or building a list from the ground up. Depending on how the lists were built, we conduct a follow-up discussion with more clarifying questions.

If the vendor acquired their sample by purchasing other lists, it is important to know how they are managing those lists. For example: Are there duplicate panelists who signed up across multiple panels? Is our supplier merging the lists into one large panel? Or are they keeping the panels they purchased separate? We want to ensure they reconcile all the profiles and data points across the different panels they have acquired, as well as providing relevant IDs for digital fingerprinting. Additionally, we want to know what steps have been implemented to confirm panelists are real people; our preference would include methods like pre-verification or ‘TrueSample’. Also, we need to understand how the panel vendor routinely re-validates the data points collected – what process is used, and how often the re-validation is performed.

Did you build your panel yourself?

If a supplier has built a list on their own, there are a separate set of questions asked. For example, we want to know how they have attracted panelists. Historically, posting banner ads on reputable websites has yielded the best results. This allows the panel vendor to vet where they receive panelists from and what kind of panel they want to build. Vendors with top panelists providing referrals to friends and family members also allows for an additional measure of quality control and has proved successful.

Other methods vendors might use to build their panels include “River Sampling”—where visitors on specific sites are invited to take a survey on a different site. River Sampling tends to be convenient and cost effective for panel vendors but lacks certainty respondents are truly qualified to participate.

Additionally, we want to know the process for confirming panelists are interested in joining the panel. More specifically, are they using a double opt-in method when recruiting panelists? During panel recruiting, what type of profiles or data points are they asking for? The panel vendor might collect info on one or more characteristics – census, panelists’ interests, or even whether they have pets. All of these will help provide you with panelists who are well suited for your surveys. We also want to know how the panel vendor keeps its panelists engaged-such as asking for feedback, communicating with them regularly, etc.

The final piece we need to understand when working with our panel vendors—how panelists are incented to respond. We believe in a balance between providing an incentive good enough to get the panelists interested in responding, but not too good that they become “professional” survey takers.

How does your panel compare to census data?

The best samples are those that are most representative of the overall population. It is just as important to ask the “right people” your questions as the questions themselves. A representative sample is critical for gathering responses that will help you make data-driven decisions. That said, it is impossible for any one survey to completely match census data. A good sample vendor is going to be aware of how their panel compares to the census overall. For example, they may be aware that their lists tend to skew female, or to a younger demographic. Also, they may have lower numbers from a geographic region or a specific income level. Understanding the differences between the panel and the national averages prior to fielding the study will allow you to determine if you will need to weight the data to adjust for those differences. For example, if a specific region is understated on the panel relative to the overall population you will need to provide a weight to keep the comparison apples-to-apples per se.

How do you manage quality control?

Beyond how panels are built and how representative they are to the rest of the country; it is important to know the quality of data you are receiving has been thoroughly checked. Below we have highlighted those questions we always ask to ensure the panel is maintaining a quality control process that will provide us and our clients with quality data.

How do you handle low responders?

It is important to understand how panel vendors handle low response rates from their panelists. Unfortunately, not all panelists are going to be fully engaged and low response rates can lead to longer time in the field overall for surveys and, in turn, driving up costs beyond the scope of the project. Does the panel vendor routinely cull panelists that are not engaged? Do they find some other way to work with their responders to increase engagement? If they are not actively working on increasing response rates it could mean more out-of-pocket costs for you and your client.

How do you  handle “fake” responses?

Some panelists may be taking surveys just for the incentives – shocking, I know. With modern technology, some panelists might decide to cheat the system, by taking multiple surveys at a time, or perhaps just “straight lining” their responses; giving the same answer to every question, regardless of their actual opinions. It is important that sample vendors conduct due diligence and check for irregularities in the data before sending to researchers. We also need to understand the consequences for panelists cheating the system so we can eliminate their participation in the future.

Is your sample base a blend of panels from an Automated Programming Interface?

One trend we are starting to see among panel vendors is programmatic sampling. This is where panelists are selected from more than one panel. We have realized that it is important to know whether your sample vendor is using Automated Programming Interfaces for a few reasons. First, not all panels are created equal and if you have had a negative experience with one previously, you likely do not want to work with them again. Additionally, it may introduce a new level of uncertainty into your study. For example, it may be difficult to discern if your results are being influenced by the mix of different panels.

Overall, choosing the right sample vendor is as critical to the success of your project as the questionnaire itself. Without a representative sample, you put the level of data quality at risk for your study and/or one those you are managing for a client.

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by OpenBrand

What is Market Share?

What is Market Share?

Market share is a brand or retailer’s percentage of products and/or services sold in the marketplace over a given time period. While there are many tools to calculate market share, there are two types of share metrics typically used: Dollar Share (brand/retailer’s dollars sold divided by the total dollars spent) and Unit Share (brand/retailer’s number of units sold divided by the total number of units sold).

Why is Market Share Important?

Market share helps to measure the performance of a company relative to the rest of the market. It is important when you need to understand how the market is changing relative to your increase or decrease in sales. If you only analyze sales numbers and there is an increase of 5% over the last year, but the size of the market increased 10%, then you are growing slower than the rest of the market (ROM) and competitors are gaining share.

How to Calculate Market Share

The two main types of Market Share metrics are:

• Dollar share (your dollars sold / total dollars spent)
• Unit share (your # units sold / total # units sold)

Dollar share metrics are especially useful when you are calculating share for a category containing many price points. For example, if you are measuring lumber, it’s difficult to drill down into the dimensions of each stick of lumber sold. Measuring lumber shares have the additional complication of quantity sold. In this case, it may be best to determine the total spent on the category and calculate share for all lumber. This ensures that a $100 structural beam is not equivalent to a $2 two-by-four.

Measuring unit share is valuable when you are primarily interested in the number of units sold. For example, if you are interested in measuring total volume or the number of units for your product across retailers, focusing on unit share makes the most sense.

What is an Example of Market Share?

Since market share is a calculation of total industry volume divided by the volume of the brand or store, calculations are fairly straightforward once you have the numbers. The following provides and example of market share:

• Industry volume – 2,000,000 units sold in the year 2018
• Retailer X volume – 500,000 units sold in the year 2018
• Retailer X market share = 500,000/2,000,000 =  25% share of units in 2019

If you’re looking to measure dollar shares, the volume is measured in dollars sold for both the industry and that brand or store

• Industry volume – $200,000,000 spent in the year 2018
• Retailer X volume – $40,000,000 spent in the year 2018
• Retailer X market share = 40,000,000/200,000,000 =  20% share of dollars in 2018

Notice that the unit share (25%) is higher than the dollar share (20%). Assuming you have included the dollars for every unit in the unit share calculation, this discrepancy is caused by one of two phenomena:

• The mix of products sold is different for this brand or store. That is, if you are measuring share for refrigerators, perhaps the mix of bottom mount refrigerators (which sell at a higher price) for this brand/store is lower than the industry. This brings that brand or retailer’s average price down. Since the average price is lower, their share of dollars for the industry is lower.
• That brand or store is selling the same product at a lower price.

In all likelihood, the unit share and dollar share will not match because of a combination of the above factors.

How to Collect Market Share Data

There are 2 metrics needed to calculate market share: 1) Sales of the company you’re calculating and 2) total industry sales. If you are calculating your own shares, you know sales of the company. Calculating total industry sales may be a bit more challenging. There are four sources for industry sales, each may have its own strengths.

• Consumer Data
• POS / EDI data
• Government data
• Association data

Consumer Data is a reliable source that bridges consumer characteristics and behavior to sales. When used to extrapolate to the entire industry, consumer data must be representative of the entire US population. A high quality consumer panel and sophisticated weighting must be used to ensure the data is valid. When collected well, consumer data can also be used to sample the population to determine where a population spends its money. Using this source, it is not necessary to have data from the company being measured.

Point of Sale Data If point of sale data is comprehensive, it can serve as an invaluable resource for marketing by showing which features and SKUs are selling best and at what price point. A common weakness of point of sale data is in its representation. To be representative of the entire market, the majority of the market must contribute to a point of sale system. Without adequate representation, one may attempt to calculate share based on an unrepresentative subset of the market.

Government Data is a crucial resource because it provides sales information by retailers of different types, sales to non-residential construction, producer and consumer price indices, housing permits, housing starts and completions. A major drawback to government data is its timeliness and would not be uncommon for some sources to be published years after being collected. Additionally, due to privacy, government data may be too high-level for some analysts.

Industry Association Data is sales information collected from member companies and aggregated into an estimation of total industry sales. This data measures sales in terms of shipments from manufacturers to their customers on yearly, monthly and weekly bases. Industry association data is valuable in the same way that Point of Sale data is – when it is representative, it is an excellent source of the size of the industry.

How Can I Gain Market Share?

Gaining market share is the ultimate goal for most companies. Since it is directly related to company revenues (the more you sell, the more revenue coming in), companies measure their program successes on market share gains. There are two main ways companies can gain share:

• Take sales from competition – Perhaps one of the most challenging ways to gain market share in a developed market is to steal share from competition.
• Grow the existing market – While technically growing the existing market won’t grow your share, growing the market and capturing a greater percentage of it than you currently have in existing markets will gain share (e.g. if current share of market is 10%, and share of new market is 15%, then you're seeing share growth)

Staying focused on goals is key to growing your market share. Many companies read share on a quarterly or semi-annual basis to ensure they are not overlooking some key competitive threat or overestimating the impact of a key initiative.  Regardless of how you measure your market share, make sure it’s consistent, measurable, and ongoing. Need more information? We’re the market share experts, and we’re here to help.

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by OpenBrand