Market measurement is king in today’s increasingly competitive and dynamic retail environment. Continuous monitoring of market data alongside brand performance will show you when your business is on track to achieve or exceed its goals and will also flag any ‘hiccups’ so you can jump in and take action. However, with access to more data than ever before, and an infinite set of metrics to choose from, which are the most critical to achieving sustainable brand growth?
ClearCut believes that it’s imperative for brands to first turn to eCommerce data, where consumer trends can be spotted years in advance of those in-store and where brands can supercharge their strategies with powerful, ahead-of-the-curve insights to succeed.
Read on to learn about the top 3 eCommerce metrics brands should prioritize monitoring:
1. Total Category Sales & Year-Over-Year Growth
Today, most CPG brands have eyes on their category revenue online, but have a blind spot for total category revenue – or the aggregate sales of every single brand in a particular category.
Understanding total category sales are critical. It enables your brand to gain a true sense of its market position online, as well as lay a strong foundation for goal-setting and strategic growth. As a simple example, if your brand brought in $3MM in annual category revenue, would your strategy change if the category was sized at $10MM versus $100MM in total annual sales? The answer is most likely, YES!
Once total category sales are known, the next and logical step is to define the category’s year-over-year (YoY) growth rate.
YoY growth rate is a rapid comparison of the current 12-month period of total category revenue to the previous 12-month period of total category revenue, and it is defined as a percent. For example, when analyzing the collagen category, we see a YoY growth rate of 59% online.
Here are some reasons why it’s important to have YoY growth rates in your data toolkit:
- When a YoY growth rate is positive, this tends to demonstrate increased demand from consumers. When a YoY growth rate is negative, this tends to demonstrate a decline in demand from consumers. Though the insight is straightforward, it can be an influential asset for business forecasting, product development, and more.
- YoY growth rate is additionally an important barometer for how your brand is performing within a category. Generally, your brand is performing well if you are growing at a similar or faster pace than the overall category, or not as well if you are growing at a slower pace than the overall category. Empowered with this insight, your brand may decide to adjust its strategy accordingly.
2. Product Attribute Sales & Year-Over-Year Growth
It’s one thing to define that a category is growing or declining YoY, and it’s another thing to understand what’s driving that change. This is where product attribute analysis comes in.
Attributes are the numerous product characteristics, such as flavor, dosage, ingredient, or delivery method, that allow your brand to drill down deeper into what’s driving consumers’ purchasing decisions at the digital shelf.
We believe this can best be explained by an example: Take the collagen category. As mentioned previously, as of May 2021, the category grew by 59% YoY online. When drilling down further by sales of the product attribute “Delivery Method,” we can gather the following insights about what may be contributing to category growth:
- Delivery options vary in the collagen category, but one thing is for sure, powder holds majority of the market share at 85% on Amazon, growing at a rate of 59% YoY.
- Capsules capture a smaller share of the market, or 10%, but are growing at a slightly faster rate than powder.
3. % Market Share of the Top Brands & # of New Brand Entrants
Another level of detail you’ll want to track as soon as possible is your competition. Can you answer basic questions, such as: who are the top competitors online? Are there emerging brands to keep a close eye on? How does the competition online compare to in-store?
To better illuminate and measure the competitive environment on eCommerce, we recommend tracking the market share of the top 10 brands (%), as well as the number of new brand entrants into the top brands, as a starting point. Here’s why:
The market share of the top brands is the sum of category revenue captured by the top 10 brands, divided by the total category sales in the current 12-month period, and expressed as a percent (%).
As a rule of thumb, if this is above 50%, it could tell us that few brands command a category, and thus, it may be challenging to penetrate and compete as a late joiner to the party on eCommerce. On the other hand, if this number is lower than 50%, it could tell us that there are more dispersed sales in the category across brands, consumers are diversifying their brand loyalty, and there may be more room for new brands to enter the category and compete. Of course, that’s not to say that this ‘rule of thumb’ tells the whole story, but should give your brand a strong starting point for investigating more questions, such as:
- Has the percent market share of the top brands changed year-over-year, making the category more or less penetrable?
- Which brands hold the top spots? What is their annual revenue and year-over-year growth rates?
- Are the top brands the same competitors we see in-store? Are any competitors digitally native, or not found in-store at all yet? If so, how are they achieving their success?
Take a look at the % market share of the top 10 collagen brands on Amazon, as of May 2021. What types of insights do you gather from this chart?
Another logical question that may stem from an analysis of the top 10 brands is: how many brands have edged their way into the top 10 in the past 12 months? At ClearCut, we call these “new brand entrants.”
New brand entrants are important for a few key reasons.
- First, any new entrant should be immediately flagged and analyzed. Ask yourself: what is positioning this brand for success? Should our brand be a “fast-follower,” emulating some of these best practices to appeal to consumers?
- Second, the number of new brand entrants may be directionally helpful for deciding to enter a new category (or not). If new brand entrants are common in a category, for example, this may tell us that there is ample opportunity for brands to enter, introducing new products and having success. However, if new brand entrants are rare, particularly for an extended period of time, this may indicate that a category is challenging to penetrate and may require a robust strategy or more resources to successfully compete.
Want to know if there are any new brand entrants in the collagen category? Download this infographic.
Are any of these data points a blind spot for your brand today? If you’d like to learn more about how to improve your visibility into this information, and create actionable retail strategies, contact ClearCut today.