Numeric Distribution and Weighted Distribution: Revolutionizing KPIs and Shopify's Evolution

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Sep 16, 2023

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Numeric Distribution and Weighted Distribution: Revolutionizing KPIs and Shopify's Evolution

Introduction:

In the world of business, understanding distribution is crucial for success. Whether it's the availability of a product in stores or the integration of platforms, distribution plays a key role in determining market reach and profitability. In this article, we will explore two fundamental Key Performance Indicators (KPIs) related to distribution - Numeric Distribution (ND) and Weighted Distribution (WD). Additionally, we will delve into the evolution of Shopify, a platform that has revolutionized the way businesses operate and connect with customers.

Understanding Numeric Distribution and Weighted Distribution:

Numeric Distribution (ND) measures the number of outlets or stores where a product or reference is available. It considers all outlets equal in importance. To calculate ND as a percentage, it is divided by the total number of points of sale in the market. On the other hand, Weighted Distribution (WD) is the percentage of stores where a product is available, taking into account the sales contribution of each store. This means that stores with higher sales have a greater weight in the calculation. Both ND and WD are essential in assessing a product's presence and market reach.

The Importance of Digital Distribution:

In today's digital age, having a strong presence online is crucial for businesses. For innovative products, it is essential to track the evolution of ND and WD and ensure adequate digital distribution. Advertising a product that is poorly distributed and cannot be found in stores is a waste of resources. By comparing ND and WD, businesses can identify the types of stores where their product is present. If ND is lower than WD, it indicates that the product is available in a limited number of stores, but those stores contribute significantly to sales. Conversely, if ND is higher than WD, the product is available in many stores, but not necessarily in the most important ones for generating sales.

Shopify's Evolution:

Shopify, a leading e-commerce platform, has undergone significant evolution since its inception. In 2009, the Shopify App Store was launched, allowing developers to access the Shopify API and create plugins for specific functionality. This step towards vertical integration allowed Shopify to incorporate features that were previously left to partners. One such integration was Shopify Payments, later rebranded as Shop Pay in 2020. This integration provided merchants with a seamless payment solution, enhancing their overall experience on the platform.

The Power of Facebook Advertising:

Facebook has played a crucial role in the success of Shopify and the e-commerce industry as a whole. Facebook's advertising platform became the most important channel for user acquisition, particularly for games monetized with Apple's in-app purchase API. The combination of Facebook's data and developers' understanding of expected value per app install led to a significant increase in App Store revenue. This partnership between Facebook and Apple allowed both companies to benefit financially, with Apple earning a portion of the revenue generated from new users acquired through Facebook.

The Impact of Apple's App Tracking Transparency (ATT):

Apple's introduction of App Tracking Transparency (ATT) had a profound impact on Facebook's advertising collective. ATT made the Identifier for Advertisers (IDFA) opt-in, limiting the tracking capabilities of apps. Additionally, ATT banned broad data collection on e-commerce websites. This move disrupted Facebook's ability to tie ads to conversions and users, resulting in less relevant ads for users and increased costs for advertisers. However, Amazon, with its extensive data collection capabilities, remained relatively unaffected by ATT's restrictions, leading to a shift in advertising spend from Shopify to Amazon.

Shopify's Dependency on Facebook and Apple:

Shopify's dependence on Facebook for driving e-commerce is evident. Facebook's advertising platform provides Shopify merchants with a powerful tool for reaching potential customers. The shared resources and data on Facebook's platform allow advertisers to target users based on past purchases and find new customers with similar profiles. However, with the introduction of ATT and the limitations it imposed on Facebook's data collection, Shopify's reliance on the platform became more apparent. Shopify's success in the e-commerce industry is closely tied to its ability to adapt and find alternative ways to drive customer acquisition.

The Role of Shopify Fulfillment Network:

To maintain its position as an independent alternative to Amazon, Shopify has expanded its services beyond just an e-commerce platform. The evolution of the Shopify Fulfillment Network (SFN) is a significant development for the company. By building and operating warehouses, Shopify aims to streamline the fulfillment process for merchants, reducing inventory investment, and enabling faster delivery to customers. This move is in line with Amazon's fulfillment capabilities, allowing Shopify to compete more effectively in the e-commerce space.

Actionable Advice:

  • 1. Monitor Numeric Distribution and Weighted Distribution: Keep a close eye on the presence and reach of your product in different stores. Analyze the percentage of sales contribution from each store to identify areas of improvement and target the right outlets for maximum impact.
  • 2. Diversify Advertising Channels: While Facebook advertising has been a powerful tool for customer acquisition, it is essential to explore other ad platforms, such as Snap, Twitter, and search advertising. Diversifying your advertising channels can help mitigate the impact of any changes or restrictions imposed by individual platforms.
  • 3. Embrace Integration and Differentiation: In a competitive market, differentiation is key. Explore partnerships and integrations with other platforms or providers to enhance your offering and stand out from the competition. Additionally, focus on building a strong online presence and digital distribution to reach a wider audience.

Conclusion:

Numeric Distribution and Weighted Distribution are vital KPIs that businesses must monitor to assess their product's availability and market reach. Shopify's evolution as an e-commerce platform showcases the importance of adapting to changing market dynamics and finding alternative ways to drive customer acquisition. By understanding the impact of Apple's ATT and the role of Facebook and Amazon in the advertising landscape, businesses can make informed decisions and utilize actionable advice to thrive in the ever-evolving digital marketplace.

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