Data silos in e-commerce: Why they are a problem and how you can solve it

The definition of data silos

The term "data silo" is based on the "silo" we know from agriculture. Different departments within an organization tend to store their respective data and information in different locations. A collection of data that is not easily accessible to everyone within a company and is stored in different locations is referred to as a data silo.

The emergence of data silos

Data silos develop over time in almost every company. Each department within a company collects its own data and often stores it in different locations. In doing so, they usually fail to consider that the data collected could also be of great benefit to other departments. The most common causes of information silos are:

• The separation of individual areas within a company leads to data silos. This is the case when individual departments collect, analyze, and store data separately from each other in different locations. For example, the marketing department has its own folder in which the findings and data from all campaigns are stored. Meanwhile, the sales department also maintains its own storage location and fills it with information it has gathered itself. If sales employees now have no or only difficult access to the marketing department's storage location, a data silo has been created. This means that not all departments can exploit the potential of the data.
• Data silos can occur when individual companies merge. When one company is acquired by another, decentralized data management often occurs. This happens, among other things, through the use of different IT systems.
• A lack of communication can also lead to data not being stored centrally in a way that is accessible to everyone. In most cases, individual departments are not even aware that their data could also be of great use to employees in other areas. As a result, they do not consider it necessary to store their information in a way that is findable and accessible to everyone.
• Data storage in tools can also be responsible for data silos. It often happens that employees only view and store data in individual tools. Since the data is not stored in a central location, anyone who does not have access to the respective tool has no way of using the data.

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Why decentralized data storage is problematic for e-commerce companies

Data silos, whether created unintentionally or deliberately, pose problems for online retailers in many areas. To make the best use of all your data, you should fix them.

• Data integrity cannot be guaranteed in the case of data silos. If you store data in different locations or in different systems, this can lead to discrepancies or incomplete content. This is particularly problematic when it comes to personalization in your online store, as you need as comprehensive data as possible for this. Learn more about why using different software providers can be a problem when it comes to personalization in e-commerce.
• Storing data twice or three times also means more administrative work. In addition, decentralized storage of information usually requires more resources for data storage.
• Data silos make it difficult to analyze data. Since you need to compile all available data for a complete analysis, this means more work. In addition, there is a risk that the information used for analysis is incomplete, which can lead to incorrect assessments and evaluations. In our article, we reveal how to handle big data in e-commerce correctly and perform targeted analyses. You can also find out how to use data to make your e-commerce business a success.

Data silos and personalization

As already indicated, data silos pose a major problem, especially in relation to 1:1 personalization in e-commerce. This is because you can only achieve holistic personalization and thus 1:1 communication with your customer if all information from the various touchpoints is used consistently. For technical and organizational reasons, it is often the case that only individual touchpoints are personalized rather than the entire customer journey. Depending on the size of the company, individual project managers or entire departments collect and manage the data from the individual touchpoints separately, resulting in silos. If the individual touchpoints are also personalized separately, it is not possible to respond fully to the customer.

Example: A customer is looking for a T-shirt. To do this, they use faceted navigation, select their size, and filter by their favorite color. They then click on a suitable result. If suitable alternatives are now suggested on the product detail page, you should also take the information obtained from the search into account for the recommendations. This allows you to achieve the highest possible relevance. However, if the two services (search and recommendations) are not aware of each other, product recommendations may be made that appear relevant but are not precise enough to ultimately trigger a purchase. In addition, disappointment may arise if, for example, T-shirt alternatives are suggested that the customer likes but are not available in the size they previously filtered for.

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Communication between the individual touchpoints and the various teams is therefore crucial here. The knowledge base forms the foundation for holistic personalization. This is where all information about customer behavior is collected so that it can be used at all touchpoints within the customer journey.

All collected data and information converge in the knowledge base. (Source: Own representation)

Identify and break down silos

In most cases, shop operators are unaware that data silos exist within their organization. This makes it all the more important to identify and break them down.

Conclusion: Breaking down data silos for greater efficiency in e-commerce

Data silos can quickly creep into a company. In the area of personalization in particular, online retailers depend on a uniform knowledge base and communication between the individual touchpoints. Otherwise, data silos will prevent you from fully responding to customers and their purchasing intentions. Centralized data management allows you to leverage the full potential of your data and increase the success of your company.

Source: ¹ SAP

Frequently asked questions about data silos