Introduction to Data Warehouses for E-commerce

Elena Prokopets
B2B Freelance Writer

A shopping cart next to a laptop

By 2025, over 175 ZB of data will be produced globally and nearly 30% of new insights will be generated in real-time. Such a staunch growth of the data sphere presents major opportunities for retailers. Big data in retail can be used to optimize costs at every stage of the operational lifecycle, as well as empower business leaders with better customer insights. 

But the question is where will this data be stored and how retailers could access it? The concept of data warehousing isn’t new as such systems were part of proprietary BI solutions for decades. However, thanks to recent advances in cloud computing and big data analytics, data warehousing has re-entered mainstream attention. 

What is a Data Warehouse?

A data warehouse is a technical system that aggregates business data from different sources into a centralized secure, homogenous repository. 

You can infuse your analytics systems with data coming from: 

  • Customer relationship management (CRM) platforms
  • Enterprise resource planning (ERM) solutions
  • Relational on-premise and cloud-based databases 
  • Third-party logistics (3PL) partners 
  • External public sources — ranging from public statistics to geospatial data 

Individually or combined, these data sources can serve as a backbone for advanced retail analytics scenarios, ranging from inventory demand forecasts to personalized dynamic prices for individual buyers. 

Why E-tailers Need Better Data Storage and Analytics Capabilities 

For 97% of business leaders improving online user experience is a top priority in 2021. However, 71% don’t know where to begin when it comes to understanding the customers’ behaviors. 

Indeed, during the past year, consumer behaviors changed drastically. Spending across product categories and purchase channels remains in flux. What is certain, however, is that E-commerce sales volumes will retain a strong momentum in 2021 as Accenture’s latest data suggests.

Most retailers are already recognizing the tectonic shifts in consumer behaviors. But the rapid migration from offline to online spending left many with limited purview into consumers’ actions. 

First-party consumer data — insights collected directly from your audience — remains siloed in different systems and departments, and thus unused. For instance, to achieve cost transparency across the organization, multi-brand retailers need to access different data sources at the SKU and store levels. These include:

  • Stock levels
  • Average profit margins
  • All cost components across sales channels
  • Planned promotions
  • Personalized discounts
  • Shipping quantities and costs. 

In most cases, these often originate from different parties, including external ones. Consequently, you must first aggregate this information to make it available for analytics. a centralized data repository. That’s what a data warehouse is for.  Apart from ensuring consistent access to internal information for marketing, data warehouses can be configured to host analysis-ready data for:

  • Business continuity scenarios development 
  • Logistics and last-mile delivery optimization 
  • Real-time personalization and product recommendations 
  • Supply chain management and optimization 
  • Advanced shopper behavior modeling 
  • Demand and purchase trends predictions 
  • Process optimization scenarios to gain cost agility 

Ultimately, a data warehouse is a technological gateway for E-commerce retailers to better plan, predict, and act on emerging customer demands and market trends. 

The Benefits of Data Warehouses for E-commerce 

First, and foremost, a data warehouse is a technical pillar for consolidating data and ensuring its consistency. In the absence of such a system, you will never be able to deploy advanced analytics and gain operational insights from BI tools. 

Other benefits include:

  • Access to historical and real-time insights: Unlike traditional databases, data warehouses were designed to accommodate storage and easy retrieval of historic information — integral for building forecasts and predictive models. 
  • Faster access to data: Data warehouse is an analytical database layer, designed to ensure consistency, conformity, and quality of all data, obtained from other sources. Such standardization provides quick access to a variety of insights that can be immediately used for reporting and analytics.
  • Enhanced compliance: Retailers are bound by regulations when it comes to collecting, storing, and processing personally identifiable information (PII) — full name, customer payment details, personal addresses, and more. Data warehousing helps filter out such insights from creeping into analytics, plus puts extra safeguards for protecting all stored assets. 
  • Better interoperability: Data warehouses can be hosted both on-premises, in the cloud, or in multi-cloud environments. With the latter, you get best-in-class analytics tools and competitive pricing from IaaS cloud vendors. What’s more, cloud-based data warehouses can be effectively integrated with other company’s infrastructure and business systems to support two-way data exchanges. 

Moving Forward with Data Warehousing 

When it comes to data warehousing adoption, E-commerce companies have two options:

  • Use a proprietary SaaS-based solution 
  • Or create a custom data warehouse 

The first option comes with a shorter timeline and a faster adoption curve. Yet, the major trade-offs of faster access to the technology are vendor lock-in, limited support of desired data source, and greater reliance on the technology vendor when it comes to data security and compliance. 

Custom data warehouse development, on the other hand, enables you to build a scalable solution, fully customized to your business needs and operation type. You can mesh together different storage types, infrastructure management tools, and analytics services without any constraints, plus retain full control over data security. This option, however, requires engineering expertise and technological advisory. 

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About The Author

Elena Elena Prokopets

Elena is a freelance B2B tech writer for software companies and their technology partners.