Solving eCommerce’s Fifth Funnel Friction: Identifying Unknown Shoppers – Part 2
Written by
Rajesh Jain
Rajesh Jain
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Solving eCommerce’s Fifth Funnel Friction: Identifying Unknown Shoppers – Part 2

Published : November 8, 2023 | Updated : May 23, 2024

In the first part of this series, I talked about poor profitability and its impact on the eCommerce business. I also discussed the four funnel frictions and how they can be effectively addressed. In this second part, I will discuss the fifth friction, the Identity Gap, and how it hampers a brand’s marketing efficiency and impacts profitability.

The Identity Gap

A fifth friction has emerged as eCommerce companies struggle with the four funnel frictions – Attention Retention, Red Journeys, Dormancy and Churn, and Adtech AdWaste. The anonymity of customers is a significant hurdle for eCommerce companies looking to build sustainable relationships with them. Unidentified shoppers appear in diverse forms across multiple channels, making this challenge multifaceted and complex.

This emerging challenge, which I call Anon-to-Known, involves getting unidentified shoppers to identify themselves to the brands. Identifying shoppers would allow brands to build and nurture direct relationships with them.

The first segment of unidentified customers consists of those who visit eCommerce websites but do not register or provide contact information. These customers browse products, compare prices, read reviews, and add items to their cart. However, they do not complete a purchase or leave any contact information, leaving them untraceable.

The emergence of marketplaces has introduced another layer of unidentified customers. Marketplaces are platforms where sellers can reach a large and diverse audience. Examples of such marketplaces are Amazon, Flipkart, and Nykaa. They offer brands access to a broad customer base while keeping customer information hidden. The brands selling on such platforms have limited access to customer data, hindering direct relationships and targeted marketing initiatives.

The third type of unidentified shopper is found in physical stores. As the surge in online shopping stabilizes, Direct-to-Consumer (D2C) brands are setting up brick-and-mortar outlets. While this strategy offers customers tangible experiences, it also presents a new set of anonymous customers who shop in stores but do not engage with the brand digitally. These customers seem elusive for brands used to the data-rich world of eCommerce.

There are additional sources of unidentified shoppers, further complicating the issue.

  • Social media platforms: Brands increasingly leverage social media platforms such as Facebook, Instagram, Pinterest, and TikTok to advertise and sell products. Users who engage with these posts may remain anonymous if they do not click through to the brand’s website or leave any identification.
  • App installation anonymity: App-centric brands often fail to collect identity information when users install the app. If the app gets uninstalled, brands cannot re-establish contact with these users.
  • Guest checkouts: eCommerce websites offer a ‘guest checkout’ option to expedite purchasing. While this increases conversion rates, it also results in customers remaining unidentified. This is because they don’t need to create an account or provide information, making retargeting these customers almost impossible.
  • Third-party retailers: Brands distributing products through third-party retailers, both online and offline, often lack access to the end consumers’ data. This distribution model makes it challenging for brands to establish a direct relationship with customers.

The inability to identify shoppers hampers the brand’s marketing efficiency and impacts profitability. When brands can’t identify their customers, they fail to personalize their offerings and market communications. They also cannot adequately measure and analyze customer behavior to form strategic decisions. Unidentified shoppers contribute to increased transaction costs and reduced marketing effectiveness, eating into profits.

Creating an ‘Anon-to-Known’ solution is imperative for eCommerce brands. But what actions can brands take against the Identity Gap friction?

The problem of anonymous shoppers

Before we look at possible solutions for the Identity Gap friction, let’s look at a collection of commentary on the problem of anonymous shoppers.

eCommerce Fastlane

“You don’t know most of your site visitors because 80% are anonymous. This anonymous group makes up 84% of all site visits. This is nothing to be discouraged about because a closer look reveals something interesting – you know more about these unidentified visitors than you think.”

“Not all anonymous shoppers are alike. You can analyze acquisition sources on your buyers to optimize your traffic. You can also look at specific engagements with the shopper to learn more. Engagement history helps divide anonymous shoppers into two groups: those making a single visit and those making multiple visits. To convert this recognition into a relationship, you must give shoppers a reason to identify themselves to you.”

Chemiz Katz

“Chemiz Katz identifies three types of online anonymity: not logged in, cookie blockers, and those who opt out of tracking. He adds: “Your shoppers, while anonymous, leave behind a veritable treasure trove of non-PII data. This includes location, pages viewed, network speed, number of tabs open, and the browser extensions they have installed.”

“While using these minor data points in a rule-based system is complex, machine learning can help find correlations and identify patterns in shoppers’ behavior. As more data is collected, you can classify shoppers into segments and predict their on-site behavior.”

Retail Dive

“An anonymous shopper can be a new visitor or a returning user. However, unless they log into an existing account and declare their identity, retailers won’t know they have an account holder visiting their site. Debjani Deb, CEO of ZineOne, says that approximately 90% of any site’s traffic is anonymous.”

“According to Deb, you must have a solution enabling value-add to that population, focusing on results rather than identification. A better way to address anonymous shoppers in light of today’s privacy restrictions is to use in-session marketing to think and strategize. In-session marketing applies real-time marketing tactics to address active users on your retail site by synthesizing their micro behaviors.”

Braze

“A Braze study conducted between November 2019 and February 2021 revealed that up to 86% of users visiting your website may be anonymous. Braze observed 2.5 billion active users, of which only 14% were known. However, anonymous users do not just browse and bounce. Often, they take action and spend money.”

“Nearly all web users (92%) are anonymous, and 12% of users who make a purchase are anonymous. Anonymous users are also 58% more likely to make a purchase within their first week of visiting a company’s website or app than known users. Ignore these customers at your peril.”

Dynamic Yield

“The average website sees 97% to 98% anonymous users. These could be first-time site users or returning users who are still not part of your CRM. However, brands can fill in the blanks and reduce the number of truly anonymous users through several techniques. These include cookie-matching, browsing activity tracking, reverse IP identification, data onboarding, and contextual targeting.”

“Brands can facilitate relevant and timely personalization as more data is collected over multiple visits and actions. By connecting, matching, and syncing the contextual data to anonymous visitors, the bucket of ‘unknown unknowns’ becomes smaller and smaller.”

Summary

Most traffic on eCommerce brands is from anonymous users, who make up between 80-90% of all site visits. This is a significant challenge for businesses looking to build direct customer relationships. The same applies to in-store traffic, where only customers who have signed up for a loyalty program or those who self-identify are known. Brands must devise a plan to reduce the number of truly anonymous users.

Continued in Part 3

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Written By: Rajesh Jain
Rajesh Jain
Founder and Group MD, Netcore Cloud