E-Commerce Trends: Owned Marketing and Consumer De-Anonymization

Klaviyo was founded on the principle of “customer-firstness” and an unwavering commitment to empowering its customers, primarily digitally native brands, to own their growth. The Summit team followed Klaviyo’s growth from its early days, and since our initial investment in 2019, we’ve watched the concept of owned marketing accelerate as a defining trend in the e-commerce space. In 2021, Klaviyo announced a $320 million Series D investment to further build capabilities designed to give brands ownership and agency over communications and relationships with consumers.

Read on to learn more about the importance of personalizing the consumer experience, the tenants of owned marketing and how COVID is amplifying the need for both.

Personalizing the Consumer Experience: Insights from Andrew Bialecki, CEO of Summit-backed Klaviyo

“There are two major shifts in e-commerce. The first is, obviously, that we’re buying more online but the second is the de-anonymization of the consumer. When you walk into a retail or a department store, typically, no one would know if it was your first trip or your hundredth. When we buy online, all of a sudden, that business knows who we are and has the ability to personalize our experience going forward. We think as e-commerce accelerates, that actually makes it easier for brands and businesses – whether they’re online or offline – to make the experiences they deliver to customers more personal.”

Over the course of the last several years, we have witnessed a transformation in the consumer landscape. E-commerce growth has continued to dramatically outpace total retail sales growth, driven in part by the success of digitally native “challenger” brands who understand well the power of personalization – building direct connections with consumers. Delivering this experience, however, is often easier said than done. The typical structure of online consumer marketing puts power in the hands of a small handful of companies in search and social, making it difficult for brands to determine their own destiny. The Klaviyo platform is designed to empower brands to regain control, leveraging their own data to create more impactful consumer relationships through “owned marketing channels” and improve marketing performance. We believe owned marketing is an increasingly important pillar of successful e-commerce brands, a trend that has only been further accelerated by the COVID-19 pandemic.

Owned Marketing: The Key to Customizing the Consumer Journey

To recap, owned marketing is the practice of leveraging data from email, website and mobile – the channels a company “owns” – to build and maintain direct customer relationships and reduce dependence on third-party channels or marketplaces that, while important and often productive, are not entirely in your control.

Many e-commerce brands prioritize the creative process and product development function; fewer understand and fully leverage customer data and owned channels to fuel their marketing. We have seen many brands rise and then quickly fall again when their customer acquisition and go-to-market strategies are overly dependent upon third-party channels, fail to incorporate data or are upended by algorithm changes.

Strengthening your customer acquisition efforts with data-driven insights and orienting around owned marketing channels helps you to:

Reduce dependency on channels and lead sources that you do not control
Collect the right information that will allow you to learn from and communicate directly with your customers
Build relationships that drive loyalty and advocacy.

In our experience – and underscored by Klaviyo’s company mission – when you own your marketing channels you can own your growth.

COVID Fallout: The Heightened Importance of Owned Marketing

The impact of the COVID-19 pandemic on the e-commerce landscape has been widely discussed and documented. With offline alternatives temporarily shuttered, brands and businesses that typically would not have considered selling online set up digital storefronts to stay afloat. In parallel, consumers grew more comfortable with digital purchasing experiences. But beyond the obvious acceleration, COVID also created some notable disruption in the e-commerce industry, further underscoring the importance of owned marketing in building strong customer relationships and navigating rapid shifts in supply and demand – trends that only served to reinforce our enthusiasm for the Klaviyo mission.

First, the influx of new brands aiming to sell online has resulted in more competition and driven significant increases in CAC (customer acquisition costs). With low barriers to entry and readily available software solutions supporting the process for brands without a lot of technology experience, competition has naturally grown.

Further, new efforts by platform companies including Apple, Google and Facebook to heighten user privacy, increases the likelihood of unexpected changes. Platform changes are often unpredictable and can result in restricted access to consumer data, leaving marketers to worry about finding new ways to connect with their target audience, which we believe will result, once again, in higher acquisition costs. Notably, the iOS14.5 update – which now requires iOS apps to prompt users to opt in or out of tracking when they first (re)open an app – throws a wrench in marketing measurement and targeting capabilities, and drives further increases in CAC since iOS accounts for such a large percentage of ad inventory. This shift in data capture reaffirms the importance of owned marketing and reducing your brand’s reliance on third-party platforms to gather and store consumer information.

While the e-commerce landscape is constantly evolving, we’ve seen the following best practices increasingly and consistently drive brand success: (1) creating personalized consumers experiences (2) leveraging owned marketing channels (3) developing agility to better react to the unexpected. With more than 25 investments in the e-commerce sector, Summit is working with numerous brands that are seeking to seize new opportunities in the shifting e-commerce landscape – and backing the technologies that are supporting their growth.