Decoding E-commerce: The Confidence Index Revolutionising Agency Strategies

If you are involved in E commerce and if you run an agency or frankly if you're on the client side, you may be wondering what's been happening to the market the last year or so and you may want to know what's happening in the next year to two years so that you can plan. And if you're living a little bit of a bubble and you're maybe looking at social media to see what's going on. Well, I've got a solution for you today and that is a new industry index that's being compiled by my guest. So we're going to talk to Raul Galera who is the growth manager at a company called Referral Candy and he's taking the initiative to start an index which is really a comprehensive and global report which will help you to find out what is happening in E commerce. Raul Ola, welcome. You're joining us from Spain, aren't you? From Cadiz. So welcome to the show.

I am Ola. Thanks. Thanks for having me.

Well, it's lovely to have you back because Raoul came on the show to introduce Referral Candy about two years ago now, wasn't it? And we talked about how you're helping E commerce and now mobile commerce as well, companies to incentivize their customers to get referrals. Right. It's based out of Singapore, doing great work. But you've now moved up in terms of thought leadership from a marketing point of view. Raoul, by actually initiating this index, you can help us to understand some of the key trends, some standout points. You're also going to make the report available, aren't you, at the end. So people must stay around to get the link to the report. Raoul, first of all, tell us, you know about this report, how many agencies have been involved, why did you start it and what can we look forward to when we start to read this report?

Yeah, absolutely. So I think we need to maybe go back to 2023. So last year, so last year was a tough year for E Commerce. I mean, it was a tough year for tech in general. But E commerce was kind of part of that industry that got a little bit of a hit. And it was mostly a hit that was pretty much related to maybe the whole industry kind of going back to normal, quote, unquote normal after Covid. So Covid obviously made E Commerce Fast forward probably 10 years. What was expected to be done in 10 years? It did it in six months or probably less. And so there was a lot of money that got poured into E Commerce. Lots of new companies Lots of money available again, same as what happened in tech in general. And so after that, after pretty much all this restrictions when it comes to Covid and everything and life came back to 100% normal, which was probably towards the end of 2022 when we fully, fully, fully went back to normal. Well, E commerce started to reduce its share a little bit to retail again. People started spending money on other stuff, travel, know, whatnot. So again, it was, you know, you could have said that it was expected that people were going to, you know, again, reduce the amount of money that we're spending on E commerce to spend it on other stuff. And so that affected E commerce companies when it comes to, you know, brands that had to do layoffs, tech companies in the E commerce space had to do layoffs and even agencies as well. So, you know, I remember just in 2023, I remember being kind of obsessed with looking into trends because I wanted to see where we were. Like, like 2023 was probably a flat year at best for a lot of people, for a lot of, a lot of E commerce brands. And we serve E commerce brands so we want to make sure that they're, you know, they're as healthy as possible because that's, you know, if ecommerce brands are healthy, you know, us as a company, we're going to be healthy as well. And so I remember just, you know, keep looking at, you know, confidence reports when it comes to either retail or E commerce. And at the same time I was having a lot of conversations with agency owners, E commerce agency owners. And just because it's part of my job, I run the partner program. So I have these regular conversations with them. And I remember, you know, sharing their struggles with me in terms of, you know, so like client cutting budgets and like having, having trouble maybe closing new clients or like, you know, retainers were being negotiated. And one thing that I was, that I kind of realized is that they were sort of wondering how other agencies were doing, but they didn't really know. They didn't really know for sure. And obviously they had friends in the industry and they could share, but in a lot of cases they're kind of competitors. So you don't really want to reveal all of your cards. So that's kind of how the E Commerce agency confidence index came up. I thought, well, what if I ask a bunch of agencies a series of questions every month and I compile it into an anonymous survey and anonymous index and then I can share that with. Initially it was just to be shared with the rest of the agencies. But you know, later on you know, they were sharing it themselves and you know, they thought it was interesting. So we decided to open it up to anybody. So that's kind of where we are right now.

Yeah, that's wonderful. What a great initiative to help the industry. And as you say everyone needs some anonymity but they also need some ubiquity, don't they? You know, so that's a great way to solve that, especially as referral candy. You play really amongst all of them, don't you? And so there's no favoritism at all. So how many agencies did you survey? Where did they come from? And then that'll help us to understand the context, role. I know that referral candies out of Singapore, but you've got clients globally and then let's look at some of the trends that you've noticed.

Yeah, so there's about 100 agencies in the index at the moment. The split is about half of them are in North America, about 30% in Europe and then Australia, Asia and Latam are the rest. So like, you know, between like 5 and 7% each. So it's kind of heavily on North America at the moment. That's also kind of where our customer base is mostly located. So that's kind of like the, the, the initial agencies that I reach out to, most of them are in their area but, but I would say North America, Europe and then the rest is yeah, Asia, Australia and Latam.

Okay. But it still makes it fairly. Well it makes it a global and, and the first index of its kind. So let's look at some of the key findings. Raul, if someone is there running an agency, maybe questioning what happened to them and what's going to happen next, what have you found? Have been some common trends.

So I would say that. Well, so we've been asking the same questions every month for the past, well since December last year. So it's been like eight or nine months now. And so we've been asking the same questions because we wanted to aggregate them and then being able to compare every month, compare kind of like year to date with the latest month just to see if there were any big changes. And so the questions that we ask first of all are marketing budgets. So every agency wants to know if other agencies are seeing an increase or a decrease in their clients marketing budgets because if they decrease the marketing budgets it means less work for the agency and you know, kind of like less, less revenue for the agency. We also ask if, if there's any sort of change in how much money brands are spending on. On apps. E commerce app apps are also kind of part of the partner ecosystem for agencies. We're pretty heavily connected, so that's also kind of a good indicator. And then after that, we also asked them about one of the questions that in my opinion, it's the most interesting one, actually. Two. So one of them, we asked them if they feel like their customers are more or less likely to go in house or to keep outsourcing to agencies. So that means am I going to have more work in the future or are my clients hiring people for jobs that I can do myself as an agency? Right. So does that mean that my retainer is gonna go down? And then the other one is, oh yeah, price. Price sensitivity. So are clients more sensitive to increases in pricing from agencies? And that's particularly important because, you know, with inflation, everybody, I mean, all the agencies now have to raise their costs just to be able to keep up with kind of like the same level of costs that we're having before because employees have to make more, you know, things have more expensive in general, so they have to charge more. But are brands reacting to that increase in price or not? So those are probably. Those are kind of like two my favorite questions to ask. And then at the end we ask two questions that I feel like that's something we can probably talk about at the end because it's pretty surprising. We asked them about like their overall feeling about the health of the industry.

So yeah, and I think we can come onto the sort of interesting takeaways at the end there. But let's talk then about some of the trends that you've noticed. A guy called Daniel Burris who's a futurologist, he talks about soft trends and hard trends. Soft trends are short term and are sometimes misunderstood as being sort of fundamental shifts in the way that an economy or a society moves. And hard trends, for example, the move towards mobility and video and wi fi and online shopping are hard trends. Right. So what would be some of the hard trends, Raoul, that you've got from this eight months worth of data so far.

So one thing that I would say is that probably the most solid type of budget in a brand is the money they're spending on apps, which is. It's interesting. One of the conclusions that I take out of this report is that if agencies need a particular app that's gonna do well for their client and they wanna push a particular app because they think, hey, this is the best solution and it's gonna give you the Results, the client's likely not going to push back on price. We see that it's not a type of budget that brands are going to fight. So that's a good, that's a good, you know, a good, good news I guess, for, for agencies. Because if you want to run, you know, email marketing or fraud program or whatever it is, and you believe that there's one particular tool that it's gonna work well for the client, you know, you can be fairly sure that the client's not necessarily going to look at the price and say, well, you know, can we find a cheaper option like day one? Like as long as they can provide good roi, they're going to go for it. Marketing budgets are, sorry when it comes to ads, for example, they're way more volatile. So what I've seen is that at the beginning of the year, like the first, I would say like four or five months of the year, the budgets were lower. So like brands were spending less. And sometimes agencies get paid based on the ad spend from the clients. So if they spend less on ads, then obviously the agencies are making less. But we're starting to see, especially now in the latest report that we've published in August, an increase in marketing budgets also probably because, and it's more like a short term thing, probably because they're preparing for Black Friday and Cyber Monday already. But I expect that number two to keep growing. So those are probably the main two type of changes that I've seen.

Great. And for anyone that's interested in viewing this on YouTube, we're doing some screen sharing. And for those of you still listening, you can also have Raoul just give you some talk through Raoul, just take us through here because you've shown that the, you know, in December 2023, the, I guess it's the, the confidence index was at 268, so pretty high. There isn't a ceiling necessarily. It's not out of 100, is it? It's sort of, that's the 500. So there's still, still room in March went down to 237. Yep. So it really looks like it's on a sort of a kamikaze route there. But then it comes back in May to 257 and we're back to 258, sort of July. I mean, I'm sure in August you'll be coming out with the, with the latest figures as well. So to what do you attribute this rise? Because you've talked about a couple of big events like the Black Friday, but in a way, those are sort of market driven, aren't they? And maybe not necessarily surprising for the agency, but confidence is more than just revenue, isn't it?

Yes.

So what's giving them more hope?

I think it's so I think the reason why the first result was the highest that we've had ever, it's because they just came off of Black Friday and the holiday season. So when we asked in December. Sorry, when we asked in. Actually the survey was done in January with the December data. So we asked them what was it like in December essentially. And they had just come off of Black Friday and so it was, you know, record numbers for Shopify. There's. There's also kind of like a caveat to like, you know, some people argue that a lot of the numbers that were achieved in, in Black Friday were driven by consumer debt, which it's. It's an option. We'll have to wait, you know, to see what happens since this, this Black Friday and Cyber Monday. But there was a lot of like, buy now payload apps that had record numbers. And so, you know, you kind of have to take it with a grain of salt. But we saw. But pretty much every one of their customers had a really good year when it comes to Black Fridays, Harmony and Black Friday and Cyber Monday pretty much fixed the year. Fixed a flat year like would have been otherwise a flat year. So everybody had a level of confidence that it hasn't repeated yet. And I feel like once we complete the first run around the sun in the index, we're going to be able to see a similar number. Either in December or in January, we're going to see a similar number, I'm pretty sure because everybody's kind of like building up to that point of Black Friday, Cyber Monday. We're thinking about it already and it's, you know, at the end of August, we were talking about Black Friday Cyber Monday already, so.

Right, yeah. Because in, in the report for anyone looking at YouTube, but for those of you that are not that are going to be able to get the report at the end of the show, Raoul's going to give you the link to get this. But, you know, it says here that most e commerce agencies believe their revenue increase in Q4 will be higher. So people have confident. Right. Do you think that the election in America is also making a difference? Is there a political dimension as well, do you think, Raul?

That's actually something we're going to ask in the next report. So we've been asking the same questions throughout pretty much the whole year, but I'm going to add this additional question. So one of the things I'm going to start adding from now on are questions about, like, specific events. And so obviously the, the elections. As we go into the elections, I want to see, you know, three months, two months, one month into the election, what's the level of confidence and how that's going to affect. Is it going to be a positive event, a negative event or neutral event? So I'm, I'm looking forward to see what the results are. Like I said, three months before the elections, two and one and all that.

And that will start to help people to look at what Daniel Burris would call the soft trends. Right. So these micro events that make a difference in the short term to your revenue, but are not something that you can plan on for the next year necessarily. Raoul, let's look at regional variations. You've mentioned, you know, maybe half of the survey was America, but that's balanced out by the other half being other parts of the world. Any standout thoughts there around differences in the region or is it a fairly uniform picture?

I think it's pretty uniform. One of the best ways that I have to see that is that when we write the actual report, um, I always. So that, like I said, the responses are anonymous. So, you know, there's no way for us to know like, who presented that. Because we wanted, we want agencies to be able to, you know, feel confident, like sharing their solace. So if they're, if they think that their agency's revenue is going to drop, we want to, we want them to be able to share that anonymously without us saying, oh, look at what's happening with this agency. Right. So I don't even know what agencies individually are reporting. So I just see the aggregated data. But what I, what I do know is, so we ask agencies if they want to, they can provide a quote for the report for when we write the report. We can include that as an analysis of why they think that agencies are, you know, like, so. So they can give like, quantitative but also quality data. And the responses are always pretty uniform. You know, we have agencies in Australia and the US In Europe, in Latin America and Asia, like, giving pretty much the same analysis. So I feel like at this point there's a lot of agencies that work with companies overseas and the other way around. So I think it's pretty uniform. I don't think there's a particularly regional type of change in E Commerce, at least nothing noticeable, in my opinion.

Yes, that's interesting. And do you have any quotes that you'd like to pick out? I found one on your website in the report, which I think is quite interesting. But do you have anything, Raul? Because what that will give us then is some, some specific insights that you can share for our listeners. Any particular, if you like, pieces of wisdom that have come from the report through these quotes, which are more contextual, aren't they, rather than sort of index and analytical. So what would you say one or two of those would be?

So this is from Stefan from Backlog, because like I said, one of the questions that we ask is price sensitivity. So how are merchants reacting to again, changes in pricing from agencies? And he mentioned, so with marketing budgets under the microscope, many of our clients are getting more price conscious and looking to get more ROI without spending more. Obviously that makes sense. Right. And so, but this is the interesting thing. They're moving from high cost acquisition strategies to more long term approaches like content marketing and SEO. So this is more reallocation of resources to grow while being cost efficient. We help them navigate this change. And so this is really interesting because I remember when I first started in e Commerce in 2016, all you needed was Facebook ads. Like that's all you needed to grow your business. And you could do it with very little money. You could see results with, you know, a couple hundred dollars. You could make a change in your tiny brand new store. That's definitely not the case now, but there's still a lot of brands out there that are really depending on, on ads. And so when, and it gets to the point that it's. This is actually something I talked to an agency about last year and I found fascinating that when there are events that take people's attention from ads, they buy less. So for example, you could tie, I think in the UK there were UK elections last year. You could tie it to the Olympics, you could tie it to the World Cup. There was some kind of major events that people are not necessarily looking at their phones that much. They're looking at. Or they might be looking at the news. Oh, actually, for example, the Titanic submarine, that was like there was a drop like some agencies told me that they saw a drop in their client sales during those few days in which, you know, that whole thing was what's going on. So again, there's just like a lot of things that, you know, if you drive, if something drives the attention off of their phones and you depend on those ads to be able to make, you know, essentially sell and keep the lights on, then, you know, essentially you're dependent on, on ads. And so a lot of, a lot of companies unfortunately are still in that situation. And so what Stefan was saying is that brands are looking a little bit more long term. And so they're saying, okay, look, it's going to be more difficult, it's going to be expensive now, but we believe it's going to pay off in the future by kind of focusing on SEO and content marketing. Even though SEO right now it's a little bit weird because we don't know what's going to happen with ChatGPT and like the way that we search for stuff compared to like with it last year. Right. So, but it's, but it's interesting that brands are like, okay, let's stop thinking short term. Let's try to cut our ad spend and invest in something that it will pay off in the future. So that's interesting.

Yeah. And in a way, of course, that is part of the definition of a brand. It is that it's, it's a long term value proposition as opposed to a short term tactical advert. And interesting. You talk about Inbound, which of course HubSpot has been pioneering, but this idea that people will have to generate authentic content.

Yeah.

And that is going to be what customers are looking for. And there's another quote from Stephen Moorman, actually. Who, the same person you've just quoted, I'm afraid. But he talks about mobile and advanced e commerce solutions. But he also says that people want to, that customers are trying to improve the experience through personalized and frictionless online transactions and personalization at scale, which of course is enabled through not just AI, but technology. I mean, I had a chap called Sanda Nachtal on the show who has a product called Unless based out of Holland and they serve a unique page depending on who the person is. So it's an amazing content management system. And frictionless, of course, is what Apple's been teaching us about. The technology becomes transparent. Did you have any examples of what either one of those, either personalized or the frictionless e commerce is looking like from the report?

That's very interesting. I feel like when it comes to frictionless. So one of the agencies that I. That's in the report, actually, I don't know if they, I think there's a quote from them, but one of the things that they share with me, again kind of privately in a private conversation is that they have shifted from kind of like just doing what I would call like regular agency work to focusing specifically on optimization. And so what he noticed is that he had a few clients that as soon as he started working with them, he made some changes to the product pages to check out somewhat minor changes, and their conversion rate doubled. It went from 1.5 to 3. Something like that's insane because that makes a huge difference in the bottom line of the store. And so he realized that like, you know, again, brands might be thinking about like these, you know, it's strategies in terms of like, you know, where should I advertise? Like, what should my channels be, you know, like what, you know, should I invest more on SEO or content marketing? Stuff like that. But sometimes their answer is like right in front of them. And so when it comes to maybe necessarily personalization, but making it more seamless. So if you're making your product pages easier to understand, you're making it more frictionless and you're getting more sales and if you're making your checkout experience super simple, I mean, there is a reason why Shopify for a long time has kept the checkout page, like pretty intact because they don't want people messing up on that page because that's also where Shopify gets part of the revenue. So there's a reason for that. You can mess with your theme, with your template, but don't touch the checkout. And now you can make extensions. There's some, some stuff you can do to the checkout, but it's still limited. But yeah, but there's stuff that you can do to improve your bottom line without necessarily doing major changes. And what this agency was telling me is that they're pretty much now just focusing on that. They will get brands to work with them and say, look, we're going to probably double your conversion rate, but whatever, give us what was. Give us your biggest conversion rate that you've had to date. And then whatever we can get you up to that, we'll get up a tiny cut of that. And that's how we get paid. So when it comes to also pricing, which I think there was another quote like that about agencies that they need to get a little bit more flexible when it comes to pricing and retainers. If you make it performance based, you'll have more brands that want to work with you, but you gotta deliver.

So, yeah, so some interesting challenges, Raoul, and your index sounds like it's going to give a huge amount of insight. We've just really just opened the lid and started to dig, haven't we? The more, the more months that go by, the more context that you're going to get. And also these wonderful quotes that you're getting from the agencies. Let's just ask you from the client side. What would you say is one implication that you would draw for the clients from this report?

So, I mean, I think this report can be useful for brands because at the end of the day for them, it's kind of like seeing aggregate data. If there's like 100 agencies or the report pretty much it, they're probably seeing data from like several hundred brands aggregating to this. Because when you ask one agency, have your clients increase or decrease their marketing budgets, have your clients outsource more work to you, or have they hire in house? What they're actually telling us is my dozens or tens of clients, this is what they've done. And so brands can look at this report and get an idea of. Okay, if, you know, a few dozen agencies are telling me this, it means that there's an even bigger number of brands that are, you know, that are. They're like essentially the data that these agencies are, you know, answering on behalf of. So I think it, I mean, this was not my intention when we launched that we wanted to focus it on agencies, but they're so correlated to brands that at the end of the day, a lot of the data that we're getting is essentially data from hundreds or maybe thousands actually of stores. So I feel like For Brands is also a good aggregator of. Okay, well, if other brands are brands that work with agencies, which you can assume that they're brands that are. They have money to spend, you know, they're doing well. They're not necessarily starting startups or tiny stores. If these brands are outsourcing more than hiring in house, then maybe I should consider that. Maybe I should consider working with an agency. There must be, you know, if maybe that can help them also kind of pull the trigger on hiring an agency.

Yeah. Make some decisions. So rel, if you want to get hold of this E Commerce Index report, where can they go?

So we have it on our website. So we have. It's on referralcandy.com eaci from e commerce agency confidence index. So, yeah, eaci. And there they can see kind of like the main graph with the overall index and then at the bottom we have the latest reports, the last three reports that we've published. And we're going to keep publishing them every month. Like I said, we're going to add more questions. So that will be interesting.

Raul Galera, you know, there is one final question I'm going to ask you, and that is a podcast or a Book because you've obviously been busy with your e commerce agency Confidence Index, but in your spare time, if you had any, what have you been listening to or reading?

So I've been reading. Well, I probably spend more time reading than or actively reading than actively listening to podcasts. I mostly put on podcasts for while I'm at work. But there's one book in particular that I really liked and I think it can really make a difference, which is called the Tipping Point by Malcolm Gladwell. Yes, I had to look up because I always forget the last name. It's very interesting about how, like, tiny changes can make big differences. It kind of remind me a little bit of if any of your listeners have read any of the books from Nassim Taleb. He always talks about, you know, antifragility and like, you know, how small changes can have huge consequences. This is sort of like in the marketing world. Well, actually there's more examples than just marketing, but, like, how small changes can make a huge difference. And again, this, in my opinion, like, the confidence index kind of resonates with that a little bit. We, we started it and I promise to you, we started this report just as a way of kind of like get education on agencies and kind of like give back a little bit to our partner agencies. But, you know, it's led to some interesting opportunities out of that. So, yeah, sometimes, you know, like, again, like, little things that you might not think much about, they end up opening.

Doors and being a tipping point. Raul Galera joining me from Cadiz in Spain. It's lovely to have you back on the show. Thanks for taking the time to come back and share your latest initiative. If you want to get hold of you specifically Raoul, where can they do that?

So my email probably so raulefalcandy.com and yeah, I just encourage everybody to go check out the report on our website.

Great. We will do. Raul, I'm gonna say muchas gr.

Yes, thanks for having me.

Prego and hasta lago. So that's the extent of my schoolboy Spanish. But I will of course put a link to Raoul's report in the show notes. If you're an agency, then go get it. If you are on the client side, you might well, you will find insights because what the agencies are thinking is the other half of the equation that you're working with. And if you've enjoyed this show, do please share it with a fellow unnoticed entrepreneur. Because, you know, we don't want anyone to go unnoticed. And until we meet again, I just encourage you to keep on communicating.