Investor Piece: Why Analysing Customer Data Makes Good Investment Sense

E­commerce in Indonesia is booming. Ardent Capital’s estimates put the B2C e­commerce market at US$2.6 billion, while CNBC believes that the sector’s total market revenue will surpass US$4 billion by 2016. Everyone wants a piece of this success, and investors interested in cultivating the next Amazon or eBay have enabled businesses like Tokopedia to raise hundreds of millions of dollars in funding. The future looks bright, but there’s no such thing as asure­win bet, and a major concern for investors is ensuring your capital is being spent wisely. Too many Silicon Valley start­ups take a “scale first, sustainability later” approach, and a majority of Indonesian online platforms seem to be following suit, much to their detriment. The plan may seem workable, but it’s neither viable nor effective as a long­term strategy. There are smarter ways to success, and as an investor you have the power to motivate companies to take a forward looking approach. A deep analysis of customer data will help maximise a company’s capital and raise sustainable returns.

All e­commerce businesses with any sense are undertaking data tracking and analysis, but too much effort is being spent on superficial projects that measure growth statistics only in the broadest of strokes. Companies basing their decisions on these analyses are only capable of making knee jerk reactions, and will require a constant stream of spending in order to maintain their strategy. Silicon Valley alumni Sam Altman recounted seeing companies burning through millions of dollars a month on customer acquisition, but not concerning themselves with attracting the right customers. With no long­term view on building customer loyalty nor increasing their returns on investment, these start­ups crashed and burned as a result. Similar scenes are playing out in Indonesia, where more than $800 million will be spent on digital ads in Indonesia this year. How much of this is being wasted? The marketplace is highly competitive, but that’s not a good reason to lose sight of future viability. Most dot­com entrepreneurs in Indonesia are young and know their product, but may be less aware of the wider business landscape, so savvier investors ought to help them pivot from a reactive stance to cultivating a long­term strategy.

Building a foundation of business longevity from the start is completely doable for any e­commerce company that makes it a point to truly understand their customer data. There is so much more that can be done with it beyond collecting it as a means of demonstrating growth. Analysing an audience’s behaviour and habits can help e­commerce businesses in so many ways. For instance, customer acquisition costs can be reduced through identifying the platforms where marketing efforts have brought in the largest number of large order sizes or repeat customers, resulting in more targeted and cost­effective spending. Being able to take the pulse of what customers want and need will also help e­commerce platforms improve on their product and service offerings, thereby generating greater customer loyalty. And with so many e­commerce customers doing their shopping on the go while stuck in traffic, being able to provide a smooth user experience can also enables businesses to gain a greater foothold in the market. Sound data analysis provides insights that pave the way for sound business decisions.

For too many companies, performing such data analytics is often seen as a daunting task, one they leave as a last step, or perform only after they reach a certain size. Such thinking overlooks the fact that early adopters of data analysis will have a better understanding of the market than anyone else, and the ability to be much more strategic about their investments from the start. Point this out to the e­commerce companies you have invested in, and motivate them to take this important step. Incorporating data analysis to an e­commerce business doesn’t always mean a dramatic overhaul of the company ­ it can be done in small and manageable increments. The most crucial part is finding a no­nonsense data analytics consultancy who will take the time to understand the unique needs of the business and recommend only the most suitable tools. The best consultancies can not only provide actionable insights through conducting meaningful analyses of a company’s current business health, but also empower companies to perform future analyses on their own, through structured training programmes that will educate existing employees. Done well, data analysis can help a company streamline operations, drive sales and increase their manoeuvrability through the good times and bad. Which has to be good news for any investor.

Aleetza Senn

Managing Partner & Co-Founder

Sparkline