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Act before the market
Delivery fees across the Nordics have followed clear seasonal patterns and strategic adjustments over the past two years. Drawing on data from over100,000 webshops in Sweden, Denmark, Finland, and Norway between Q1 2024 and Q32025, we track how average consumer delivery prices (in EUR) have shifted.
This analysis zooms in on the Q4 holiday peak, highlights country-specific behaviours, and compares delivery methods in urban areas - parcel lockers, pickup points, and home delivery. The aim is to show how webshops shape their pricing strategies and how these evolve through the year.
Seasonality is a defining feature of delivery pricing in the Nordics. Q4, the peak holiday quarter, typically brings stable or higher fees rather than discounts. In late 2024, Black Friday and Christmas did not lead to cheaper delivery - instead, many webshops kept prices firm or lifted them slightly.
· Sweden: average home delivery rose from €7.60 in Q3 2024 to €8.00 in Q4, the annual peak.
· Denmark: small increases, such as parcel shop delivery at €5.89 in Q4 versus €5.83 inQ3.
· Finland: parcel shop fees jumped by around 5% in Q4 2024.
· Norway: parcel box delivery peaked during the holiday quarter.
The pattern suggests that in high-demand Q4, retailers prioritise covering fulfilment costs over cutting fees - even when running heavy sales campaigns.
This shifts in Q1, when prices correct downward. After the holiday rush, many webshops reduced or normalised fees:
This Q1 softness reflects the post-holiday slowdown in demand and renewed competition to attract consumers during a quieter season.
Q4 2024 stands out as a high point for delivery fees in several markets, corroborating that peak season surcharges and fewer free-shipping promos were in effect. In fact, during Black Week (Black Friday 2024), retailers across Noridcs reduced the prevalence of free shipping by 4% compared to 2023, opting instead to set spend thresholds or promote premium paid options (source: ingrid.com). In other words, fewer orders enjoyed “free delivery” in Q4 2024, as merchants nudged customers toward paid faster delivery or order bundling.This strategic move helped protect margins during the holiday boom – and consumers generally went along, paying for delivery when the value (speed, convenience) was clear (source: ingrid.com). The seasonal insight here is that peak demand doesn’t equal cheaper shipping; if anything, many webshops use the period to upsell premium delivery or maintain prices, rather than offer blanket free shipping.
Moving through 2025, the Q2 and Q3 2025 data show an interesting reset. By summer 2025, average delivery charges in many categories fell back to or below their levels from the previous holiday season. This sets the stage for how Q4 2025 might play out – which we’ll discuss in a moment.
Each Nordic market shows distinct pricing dynamics, shaped by competition, consumer behaviour, and delivery costs.
Swedish webshops consistently post the lowest delivery fees in the region.In early 2024, prices were modest - around €4.20 for locker delivery and €7.50 for home delivery. These rose steadily through the year, with parcel box and parcel shop deliveries more than 20% higher by Q3/Q4. Home delivery peaked at €8.00 in Q42024, reflecting inflationary pressures and webshop/carriers passing higher rates on to consumers.
In 2025, the trend reversed. By Q3 2025, parcel shop delivery had dropped from €6.57 in Q4 2024 to €5.37 (an 18% decline),while home delivery eased back to €7.59. This points to intensifying competition, with Swedish retailers willing to cut delivery prices quickly to gain an edge.
Denmark’s delivery pricing remained stable through 2024, with parcel lockers and pickup points in the mid-€5 range and home delivery around €7.80–7.90. Even in Q4, increases were marginal- for example, parcel shop delivery at €5.89 in Q4 versus €5.83 in Q3.
The shift came in 2025. By Q3, parcel lockers averaged €5.00 and parcel shops €5.11 - 10–13% lower than the prior holiday season. Home delivery also dipped to €7.30 from €7.91 in Q4 2024. This gradual decline suggests Danish webshops began competing more actively on delivery price or carriers pressed the prices further down.
Finland remains the most expensive Nordic market for delivery - especially for home delivery. In 2024, Finnish shoppers paid €12–13 for home delivery, nearly double Sweden’s average. Out-of-home methods were also high at €7+. Prices climbed steadily through 2024, with parcel shops up 12% by Q4.
In 2025, home delivery crept even higher, peaking at €12.90 in Q2. But by Q3, parcel locker and shop fees had fallen sharply - down about 10% from Q2, back to early-2024 levels. Home delivery stabilised around€12.50.
Norway experienced the most pronounced swings. In 2024, home delivery peaked at €10.08 in Q2, while parcel lockers (€8.21) and parcel shops (€9.16) hit highs in Q3. Interestingly, Q4 home delivery was lower than earlier in the year at €9.55.
By 2025, Norwegian webshops had cut prices heavily, especially for out-of-home delivery. Parcel lockers fell from over €8in late 2024 to €6.64 by Q3 2025- a 20% year-on-year drop. Parcel shop delivery followed a similar pattern, down about €1.20 on average versus Q4 2024. Home delivery also eased slightly to €9.25 by Q3.
The widening price gap between home and pickup options suggests a deliberate push to shift volume to more cost-efficient methods. For carriers, Norway highlights how quickly competitive conditions can change - and the need to adjust pricing strategies in real time.
To summarize the country trends, Table 1 highlights how delivery fees in Q3 2025 compare to the last peak season (Q42024). Most markets saw notable declines in that period, especially for out-of-home deliveries:
Data clearly shows that out-of-home delivery is significantly cheaper for consumers in urban areas – a natural effect when carriers can deliver 5–10 times more parcels per driver compared with home delivery.
Parcel box (locker) delivery
· Cheapest option across all markets by 2025(~€5–6.5).
· Prices spiked in 2024 (e.g. Norway €6.6 → €8.3)but dropped back sharply in 2025.
· Volatility suggests retailers test price sensitivity, then reset as competition kicks in.
Parcel shop(pickup point) delivery
· Typically a few cents above lockers, but fell notably in 2025.
· Norway: from ~€9 in 2024 to €7.2 by Q3 2025.
· Pricing gap with home delivery widened, creating strong incentives for consumers to choose pickup.
Home delivery
· Premium service, consistently the most expensive.
· Held steady through 2024–25: ~€7.5 in SE/DK,~€9.3 in NO, ~€12.5 in FI.
· Only small price drops, with Sweden (-13% YoY)the exception.
· Discounts remain rare and tied to high order values.
Out-of-home delivery became cheaper in 2025, while home delivery kept its premium. This reflects a conscious decision: steer demand towards lockers and pickup points to cut last-mile costs and ease peak-season pressure. Black Week 2024 showed the effect in practice - locker usage rose by four percentage points and delivery times improved as shoppers embraced flexible collection (source: ingrid.com).
For logistics providers and retailers, aggressive pricing on out-of-home delivery seems to become a core lever: it nudges cost-conscious consumers, reduces operational strain, while keeping satisfaction high. But the gap has limits - home delivery still anchors convenience expectations and remains a profit lever. The real challenge is balance: keeping lockers and pickups highly attractive without eroding the value or accessibility of home delivery.
Collaboration between retailers and logistics providers is key here, ensuring service levels meet expectations as more customers choose out-of-home - seen clearly during Black Week, when lockers not only gained share but also delivered faster on average (source: ingrid.com).
To keep the forecast transparent, we applied a simple model: for each country × delivery method, we took the Q4-over-Q3 seasonal change from 2024 and applied that ratio to Q3 2025 levels. Where 2025 trended lower than 2024, we also include a conservative midpoint between Q3 2025 and that baseline.
· Parcel box(lockers): €5.6–6.0
· Parcel shop(pickup): €6.1–6.3
· Home delivery: €9.0–9.2
Seasonal lift from Q3 to Q4 looks modest. Home delivery remains the premium option, while lockers and parcel shops stay clearly cheaper.
· Sweden: home ~€8.0 (flat vs last year); parcel shop ~€5.3 and lockers ~€5.0 (well below last year).
· Denmark: home ~€7.4; parcel shop ~€5.2; lockers ~€5.1 (all lower than last year).
· Finland: home ~€12.5 (still high); parcel shop ~€7.3; lockers ~€6.4 (both down year-on-year).
· Norway: home ~€9.25 (slightly below last year); parcel shop ~€7.1; lockers ~€6.7 (~20%down year-on-year).
Nordic delivery prices have eased through 2025 after peaking in late 2024, especially for out-of-home options (parcel box and parcel shop). Applying last year’s Q4-over-Q3 seasonality to current Q3 levels points to only small Q4 uplifts: lockers and pickups remain the low-cost choices, while home delivery stays premium and broadly flat.
Country patterns matter. Sweden and Denmark have lower 2025 bases and limited room for Q4 increases. Finland remains structurally high - especially on home delivery - so stability is more likely than hikes. Norway has corrected sharply this year, with retailers continuing to nudge volume toward cheaper lockers and pickups.
The underlying pricing strategies are clear:
· Continued shift to out-of-home delivery. Lower pricing here is deliberate - directing volume away from costly home delivery and easing last-mile strain.
· Home delivery as a premium anchor. Price cuts are modest; competition is about service quality (slots, ETAs, first-attempt success) rather than cents.
· Seasonal resets. After Christmas, prices ease in Q1—a cycle webshops use to stay competitive in slower months.
Finally, weigh this outlook against external factors that can quickly shift the picture: capacity constraints and consumer sentiment. If sentiment weakens, retailers may lean harder on thresholds and targeted incentives.
For most companies, two questions matter when looking at the e-commerce market: which webshops will grow and how large they are today. These are not easy to answer. Financial accounts are published once a year and often with long delays. Website traffic tools vary in accuracy. Sales input can be useful, but it is not consistent across markets.
Tembi approaches the problem differently. We track over 800.000 webshops in 22 European markets, visiting them every two weeks, and we convert that activity into a clear view of current size and likely growth.
From this data, we produce two measures.
Together, these outputs give a comparable and timely view of the market that has not been available before.
What makes this possible is the breadth of signals we collect. Every webshop is assessed on seven main areas:
It is the combination of these factors, updated every two weeks, that produces a reliable picture of both size and growth.
Older approaches depend on delayed filings, unstable traffic estimates, or anecdotal sales input. They describe the past, not the present. By contrast, Tembi provides a structured, repeatable model that updates with the market itself. A Danish fashion webshop and a Spanish electronics retailer can be measured on the same scale, and shifts in momentum can be detected months before they appear in official reports.
This is not prediction for prediction’s sake. It is about replacing guesswork with evidence that is current, structured and comparable.
Tembi provides a way to see the market as it develops — which webshops are growing, how large they are, and where categories are shifting. It offers the clarity needed to make decisions with confidence, based on how the market is moving today.
Growth predictions and Size estimation are available on all markets Tembi has been active on for more then three months.
Our recent analysis of aggregated data from webshops in selected European countries confirms two straightforward insights about cross-border selling: webshops typically target neighbouring countries or seek out larger markets to grow their potential customer base. While these findings may seem intuitive, the data illustrates clearly how consistently webshops employ these strategies - particularly when supported by strong partnerships with local logistics providers and prioritised investments in localisation.
The obvious role of proximity
Webshops in Denmark primarily target Sweden (18.9%) and Germany (18%), reflecting straightforward cross-border logistics and cultural familiarity. Similarly, Dutch webshops predominantly sell to Belgium (17.4%) and Germany (13.5%), confirming that short distances and established regional logistics make neighbouring countries natural first choices. Swedish webshops follow the same logic, favouring close neighbours Denmark (17.2%) and Finland (15.9%).
Targeting larger markets beyond proximity
Webshops strategically pursue larger markets with robust consumer bases, such as Germany and France, regardless of direct proximity. For instance, Italian webshops commonly sell to Germany (14.2%) and France (14.1%), driven significantly by the size and high purchasing power of these markets, alongside geographical closeness.
Distinctive patterns in Eastern Europe
Webshops in Hungary display notably low cross-border priority: only 4.4% offer shipping options to Germany, Slovakia, and Romania. This cautious approach likely reflects specific economic calculations, infrastructural limitations, or less developed cross-border logistics partnerships, rather than purely geographical factors.
Latvian webshops clearly illustrate the proximity factor again, heavily targeting neighbouring Lithuania (16.8%) and Estonia (15.9%), highlighting ease of trade through geographic and cultural closeness.
Notable differences in cross-border engagement levels
A significant finding from the data is the variation in how actively webshops pursue international markets. Factors driving these differences include the maturity of the domestic e-commerce market, logistical infrastructure, consumer purchasing power, and particularly the level of investment into localisation and logistics solutions. Engagement levels notably decline with increasing distance, indicating logistical complexity and higher costs likely deter webshops from extensive international expansion beyond neighbouring or well-established larger markets.
Concluding remarks
Our aggregated data confirms proximity and market size as primary drivers for cross-border e-commerce decisions. However, the diverse patterns and varying engagement levels suggest that webshop decisions are influenced by more complex strategic factors, including infrastructural readiness, economic conditions, logistical capabilities, and the willingness to invest in localised consumer experiences. These factors ultimately shape cross-border success far more than geographical closeness alone.
hen we talk about e-commerce opportunity, the conversation often starts, and ends, with the size of a market. How many webshops are there? Which countries have the highest absolute numbers?
At Tembi, we believe that raw totals only tell part of the story. To really understand where e-commerce is thriving, and where it’s just starting to take hold, you need to look at density, digital integration, and market readiness.
We recently analysed data across 20+ European countries, looking not only at total webshop numbers but how they compare to population size and national business ecosystems.
Some of the results are surprising:
Knowing how many webshops exist per capita or per company tells us more than just the size of the e-commerce sector. It signals how deeply online sales are embedded into the economy.
For commercial teams, this is essential context. Are you entering a market where most companies already sell online? Or one where there’s room to help businesses go digital? Are you facing established competitors, or discovering a still-fragmented field?
This kind of intelligence can shape your go-to-market plan, sales motions, and even your product localisation strategy.
In short: don’t just look at the number of webshops. Look at who they serve, how they scale, and how densely they operate within the economy. Because the future of e-commerce isn’t just about growth -it’s about depth, integration, and staying power.
n commercial real estate, having the right insights can lead to valuable opportunities. Tembi's new report, "Netherlands Relocation Data & Predictions 2025," offers practical understanding and insights into upcoming shifts in the commercial real estate space.
Tembi’s AI-driven analytics blend market dynamics, employment patterns, and historical data to deliver accurate and reliable market forecasts.
Our analysis highlights 9,993 companies in the Netherlands likely to relocate during 2025, potentially affecting over 222,000 employees. Another 21,532 companies might also move offices within the next year, impacting nearly 700,000 employees.
Showing a clear understanding of local trends can enhance your credibility with clients. Our report details areas gaining or losing businesses, like Utrecht, Amsterdam-Duivendrecht, and Rotterdam. This information can help you deliver pitches that clearly match your clients' strategic interests.
Download the report today to stay informed about relocation trends, helping you anticipate market changes, uncover new opportunities, and stay ahead in your field.
Get the full report: Netherlands Relocation Data & Predictions 2025
Are you interested in getting more data and see how Tembi can you help you grow, talk to our sales team.
hen starting a webshop, you have two options: build a custom site from scratch or choose a ready-to-go commerce platform to manage inventory and sell products or services online. Given that webshops have existed since the early days of the internet, there are now numerous providers catering to both entrepreneurs and established businesses.
A variety of commerce platforms power European webshops, from large international providers like Shopify and WooCommerce to smaller local specialists such as Dandomain in Denmark and Voog in Estonia. Larger platforms often offer the benefits of scale, while local providers might offer specialized solutions and compliance with regional regulations that enhance scalability.
Choosing the right platform is not just important for those building webshops, but also for the ecosystem surrounding commerce platforms. Not all plug-ins and solutions are compatible with every framework, and understanding a platform’s market penetration can be a strong indicator of its success and investment in that region.
In this article, we take a deep dive into the most widely used commerce platforms across 10 European markets, examining which solutions are the most popular. It’s likely no surprise that Shopify and WordPress’s open-source WooCommerce plugin dominate, but who are the other key players?
Looking at Switzerland, The Netherlands, Slovakia, Denmark, Finland, Sweden, Norway, Lithuania, Latvia and Estonia we’ve identified a total of 242.061 active webshops. With over 100.479 webshops, or 32%, Shopify is trailing behind WooCommerce with 9%. Looking at these 10 markets, WooCommerce is today the preferred e-commerce platform with around 129.480 webshops.
The fact that we only identified 6.682 custom-built webshops (2,1% of the dataset), shows just how powerful commerce platforms are today, where both large and small webshops can benefit from the platform's investments in technology and solutions that make it easy, and possible, to operate and grow a business online.
Before diving into the specifics of each market’s platform penetration, let’s quickly explain how we gather and maintain the quality of this data.
Monitoring hundreds of thousands of webshops on an ongoing basis demands a robust validation process to maintain high-quality data. At Tembi, we automatically filter out inactive webshops, businesses in bankruptcy, and webshops not registered as official companies, and we can only to this by actually visiting the webshops and analyze their operations continuously. We’re not B2B lead list generation company per se, but our data is used by many companies to improve sales and help identify business opportunities.
Once the validation process is complete, and we’ve analyized the webshops products, our system categorizes each webshop into a product category and enriches the data with for example website traffic data and company data.
If you're interested in learning more about how our technology works, be sure to check out our article: Insights from every Webshop on the Market
Having looked how the distribution looks over 10 European countries, let’s examine which E-Commerce platforms are popular in each country and see what insights we can uncover into regional preferences and market trends.
In Denmark, we can find a total of 32.720 webshops. We have identified that 13.567 webshops are built using WooCommerce, and 11.703 are built with Shopify. Just as it also shows in the picture of the ten European markets, WooCommerce and Shopify power the majority of the webshops. The remaining 24% (7.450 webshops) utilize various other providers. With 2.164 webshops, Dandomain stands as the third most used platform in Denmark, likely due to its local roots and strong integration with popular hosting services in the country.
Estonia has a total of 8.568 webshops, with WooCommerce as the clear market leader. WooCommerce is used by 5.846 webshops, representing 68% of all Estonian market. In second place, like in most markets, Shopify follows, but with only 9% of the market, totaling 739 webshops. WooCommerce’s strong presence in Estonia gives it the highest market share in the group of the analysed countries. In third place we find the local e-commerce platform, Estonian Voog, powering 570 webshops. Voog offers native language support and is perfect for small to medium-sized companies, which could also explain why WooCommerce owns such a big portion of the market.
The remaining 23% of E-Commerces, without the ones using WooCommerce and Shopify, are built using various other providers (1.983 webshops).
Finland has a total of 15.092 webshops, with WooCommerce and Shopify being the market leaders. 6.953 webshops in Finland use WooCommerce (45% of the Finnish market), while Shopify is used by 4.014 webshops, accounting for a 26% market share.
The remaining 28% (4,125 webshops) utilize various other providers. Notably, 644 webshops (5% of the market) are custom-built, highlighting a segment of businesses opting for fully tailored E-Commerce solution. With a strong tech and design culture, Finnish businesses likely leverage local expertise to create bespoke solutions cater directly to their target market. MyCashFlow, a Finnish E-Commerce Platform, is the third most used one in the country, accounting with 1.327 webshops, a 9% of the total.
There are 4.903 webshops in Latvia. Of this number, 1.841 webshops are built with WooCommerce (37% of Latvian webshops) and 1.201 webshops are built with Shopify (24%). The other 1.861 webshops (38%) use different providers.
Lithuania has a total of 12.077 webshops, with WooCommerce as the most popular platform, powering 6.568 stores, or 55% of the market. Shopify is the second most used (2.198 webshops) making up 18% of Lithuanian online stores. The remaining 26% (3.311 webshops) use various other providers, with PrestaShop ranking third, supporting 1.506 webshops and capturing 12% of the market. As we can see, PrestaShop ranks very closely to Shopify. We see how two Lithuanian E-Commerce platforms, such as Shopiteka and Verskis, are too the most used ones.
The Netherlands have a highly developed E-Commerce market with 81.224 webshops. WooCommerce has by far most clients, powering 38,316 stores, or 46% of all online shops. Shopify follows with 21,534 webshops, accounting for 26% of the market. The remaining 27%, or 21.374 stores, are distributed across various other providers.
Norway has an E-Commerce market with 13.469 webshops. WooCommerce leads the way, powering 5.346 webshops, or 39% of the market. Shopify is a close second, used by 4.931 webshops, making up 36% of the market. The remaining 24%, or 3.192 webshops, utilize various other providers. The competition between Shopify and WooCommerce is tight in Norway, with only 415 webshops more (a 3%) built with the latter. The third one is MyStore, an E-Commerce provider created in Norway.
There are 15.429 webshops in Slovakia. WooCommerce leads the market, powering 6.399 of these webshops, accounting for 41%. Shoptet follows with 3.502 webshops, making up 22% of the market. The remaining 36%, or 5.528 webshops, are built using a variety of other providers. Slovakia’s case is specially interesting, as Shopify is not the second choice. In its place we find Shoptet, a Czech platform that offers marketplace integrations to the Central European market. This can be relevant for companies looking to increase visibility and brand recognition in the region.
Sweden's E-Commerce landscape is strong, with a total of 31.588 webshops. WooCommerce has a solid position on the market, powering 13.293 of these stores, or 39%, showcasing its popularity among Swedish businesses. Shopify isn’t far behind, with 11.354 webshops, making up 34% of the market. The other 6.941 webshops, representing 26%, use a variety of different providers. We find similar data in Norway, the competition between WooCommerce and Shopify is close, with only a 4% market share of difference (roughly 2.000 webshops).
Switzerland is home to 26.991 webshops, with WooCommerce and Shopify leading the market. 12.168 of these webshops are built with WooCommerce (45% market share), making it the most popular E-Commerce platform in the country. Shopify follows closely, with 9.841 webshops, representing 36% of the market. The remaining 19% (4.739 webshops) are built using different providers. Of the most used platforms in Switzerland, only PepperShop is Swiss company.
The data from analyzing 242.061 webshops confirms that WooCommerce and Shopify hold a dominant position, commanding 73% of the market share. Breaking this dominance is no easy task, as it would not only require mass migration but also new solutions that offer greater value than the globally leading commerce platforms.
However, despite the dominance of these major providers, there are still over 80.000 webshops using other frameworks. For instance, with over 15,000 webshops on PrestaShop and more than 13,000 using Magento, there remains a significant opportunity to develop plug-ins and solutions for these platforms.
Whether you're developing plug-ins or building software reliant on specific frameworks, understanding your total addressable market (TAM) is a key indicator of potential and helps determine if an investment is worthwhile. Additionally, knowing how different markets are penetrated provides insights into where to focus future sales and marketing efforts. The more data you have, the better informed your decisions will be.
If you’re interested in more data around the webshops, don’t hesitate to contact us on hello@tembi.io. We are adding more countries continuously so sign up for our newsletter to get the latest updates.
he Nordic eCommerce report dives into the eCommerce market in Sweden, Finland, Norway and Denmark. The report is free and available for download here.
Looking into data from 79.000 online retailers that sell physical goods we analysed what type of commerce platforms are popular, which payment providers are mostly used as well as delivery methods and product categories.
Interested in knowing more about our data, or are you looking to reach a specific type of webshops? Contact our sales here for a short intro.
Baltic E-Commerce Market Intelligence Report (Published January 2024)
Nordic e-commerce Market Intelligence Report (Published October 2023)
he amounts of available data is growing in an overwhelming speed, on one hand presenting an increased difficulty to collect and access the data, on the other hand an increased opportunity to better understand markets and competitors.
With continuously increased computing power and a steadily growing democratisation of access to advanced analytics, the way we approach decision-making is evolving. What has been historically a process of intuition and experience is now increasingly guided by data-driven insights. This transformation is enabling companies to not only understand past and present trends but also to predict and shape future outcomes.
Let’s dive into how data and analytics are reshaping business decision-making, from traditional methods to the advanced analytics techniques of the future.
Traditionally, business decisions were often made based on intuition, experience, and a limited set of data. Executives relied heavily on their gut feelings or the historical knowledge of their industry. While this approach worked in the past, it more than often led to suboptimal outcomes due to the lack of comprehensive information and understanding of the market.
The emergence of data-driven decision-making marked a significant shift in this process. Businesses began to collect and analyse large internal and external datasets, to inform their strategies and tactics. A development that has been rapidly accelerated by the introduction of BI software. Decisions were no longer solely based on instinct but were supported by quantitative evidence.
As technology advanced, so did the decision-making process. We have now entered an era of analytics-driven decisions, where businesses use sophisticated analytical tools to forecast future trends (predictive analytics) and even prescribe specific actions to achieve desired outcomes (prescriptive analytics). For instance, Amazon uses predictive analytics to manage inventory, ensuring that products are in stock when customers want them while minimising storage costs. Our company, Tembi, has developed a beta product that uses prescriptive analytics to recommend development and construction companies what to build in certain locations to reach full capacity. And this is the only beginning of how data and analytics will assist us in making better decisions.
To understand the full impact of analytics on decision-making, it’s essential to explore the concept of the Analytics Value Escalator developed by Gartner. This model describes the progression of analytical methods, each offering increasing value and complexity.
1. Descriptive Analytics
Descriptive analytics answers the question, “What happened?” It involves summarising historical data to understand past performance. For example, sales reports, web analytics, and financial statements fall into this category. While descriptive analytics provides valuable insights, it is often limited to hindsight and does not explain the reasons behind the data.
2. Diagnostic Analytics
Diagnostic analytics delves deeper, addressing the question, “Why did it happen?” By identifying correlations and patterns within the data, businesses can uncover the root causes of specific outcomes. This method is more powerful than descriptive analytics but still focuses on past events.
3. Predictive Analytics
Moving up the escalator, predictive analytics answers the question, “What is likely to happen?” It uses historical data, machine learning algorithms, and statistical models to forecast future trends and behaviors. For example, retailers might use predictive analytics to anticipate customer demand or optimise inventory levels.
4. Prescriptive Analytics
At the top of the escalator is prescriptive analytics, which addresses the question, “What should we do?” This advanced method not only predicts future outcomes but also recommends specific actions to achieve the best possible results. For instance, a logistics company might use prescriptive analytics to determine the most efficient delivery routes, considering variables like traffic, weather, and fuel costs.
No matter how advanced the analytics methods are, their effectiveness is fundamentally dependent on the quality of the data they analyse. Poor quality data or analytics conducted on incomplete data-sets can lead to misleading conclusions and can hence create unreliable insights.
Common data issues include data silos, where information is trapped in isolated systems; inconsistent data formats; and incomplete or outdated data.
To ensure data quality, businesses must adopt best practices such as regular data cleaning, integration across departments, and robust data governance policies.
For instance, Procter & Gamble invested in a comprehensive data governance framework to ensure consistency and accuracy across its global operations, which has been crucial in maintaining the integrity of their analytics initiatives.
“We’re also now able to take our data analytics and AI to the next level because we have a solid, reliable base of product data that can be matched with external consumer data. That possibility gets our business leaders really excited!”
Laura Becker, President of Global Business Services at Procter & Gamble
Generative AI, a cutting-edge technology that enables machines to create new and original content, has revolutionised various industries by producing text, images, music, and even complex data patterns. Its ability to generate content that mimics human creativity has opened up exciting possibilities in fields like marketing, design, entertainment, and more. However, despite its remarkable capabilities, generative AI faces notable limitations, particularly in the context of business decision-making.
In business environments, decision-making often requires a deep understanding of nuanced contexts, the ability to interpret complex and sometimes ambiguous data, and the capacity to foresee the broader implications of certain choices. While generative AI can assist by providing insights, generating scenarios, or offering creative solutions, it lacks the human intuition and judgment needed to fully comprehend the strategic, ethical, and long-term consequences of business decisions.
Another significant limitation is the lack of transparency in how generative AI models arrive at their outputs. These models often function as "black boxes," where the decision-making processes are not easily interpretable or understandable, even to those with technical expertise. This opacity can be problematic in business settings, where leaders need to understand the rationale behind decisions and recommendations. Without transparency, it becomes challenging to trust and validate the AI's outputs, increasing the risk of relying on potentially flawed or biased information. For example, in finance, where decisions can have significant consequences, the lack of transparency in generative AI’s recommendations might lead to regulatory concerns.
Moreover, generative AI relies heavily on the quality and scope of the data it has been trained on. If the training data is biased, incomplete, or not representative of the current environment, the AI’s output may be flawed or misleading. This can be particularly problematic in business, where decisions based on inaccurate or biased data can lead to significant financial losses, reputational damage, or other unintended negative outcomes.
Looking ahead, prescriptive analytics is set to further transform how businesses make decisions, enabling them to be more proactive and confident in their choices. By processing large amounts of data—both historical and real-time—using advanced algorithms, prescriptive analytics not only analyses past events and predicts future trends but also recommends the best actions to take. This empowers everyone in an organisation, from managers to frontline employees, to make quicker and more informed decisions.
For example, industries like healthcare, finance, and supply chain management are already beginning to harness the power of prescriptive analytics. In healthcare, it can optimize treatment plans for patients by analyzing a wide range of factors, from medical history to genetic data. The Mayo Clinic is one institution exploring how prescriptive analytics can personalise treatments that hopefully can lead to better patient outcomes and reduced costs. By using simulations, companies can test different strategies in a virtual environment before implementing them, ensuring that decisions are more likely to lead to successful outcomes.
A key advantage of prescriptive analytics is its ability to combine internal data with external market intelligence. By integrating data from sources like customer feedback, industry trends, and competitive analysis, businesses can gain a more comprehensive view of the environment in which they operate. This broader perspective allows companies to better understand market dynamics, customer needs, and emerging opportunities. When internal data is enriched with external insights, businesses can make more informed decisions about where to allocate resources, how to optimise operations, and where to focus strategic efforts. This combination of internal and external data enhances the ability to deploy resources effectively, ensuring that efforts are aligned with both internal capabilities and market demands.
However, not every company will immediately or fully adopt prescriptive analytics. The extent to which businesses can leverage this technology depends on the quality of their data, the sophistication of their existing analytical capabilities, and their willingness to embrace advanced analytics. Companies with strong internal data and analytical resources will be the first to take full advantage of prescriptive analytics. In contrast, smaller businesses or those with less advanced data strategies may begin with specific applications and gradually expand its use. Alternatively, they can utilise Intelligence-as-a-Service providers such as Tembi to gain access to market data, analytics, and actionable insights, allowing them to benefit from advanced analytics without the need for extensive in-house capabilities.
The success of prescriptive analytics also hinges on the quality of internal data and the company’s analytical skills. To implement it effectively, businesses need to ensure their data is accurate, comprehensive, and up-to-date, requiring investment in data management and infrastructure. Skilled data scientists and analysts are essential for developing and maintaining the models that drive prescriptive analytics. Moreover, fostering a data-driven culture within the organisation is crucial, so that decision-makers understand and trust the recommendations provided by these tools.
As prescriptive analytics becomes more widespread, companies must also consider the ethical implications of relying on these advanced technologies. The potential for algorithmic bias, the need for transparency in decision-making processes, and concerns around data privacy and security are all critical issues, especially in industries handling sensitive information. Businesses will need to strike a balance between leveraging the capabilities of prescriptive analytics and maintaining human oversight to ensure responsible and effective decision-making.
The journey from traditional decision-making to an analytics-driven approach represents an important evolution in the business world. As data and analytics continue to advance, businesses are better equipped than ever to make informed, strategic decisions. However, the effectiveness of these decisions depends on the quality of the data, the appropriate use of analytical methods, and a clear understanding of the limitations of emerging technologies like generative AI.
To navigate this new landscape, businesses should consider the following steps:
Audit your data quality: Ensure that your data is clean, integrated, and well-governed.
Invest in analytics training: Equip your team with the skills needed to leverage advanced analytics tools.
Balance AI with human judgment: Use AI tools like generative AI and prescriptive analytics wisely, keeping human oversight in place.
As we look to the future, prescriptive analytics offers a promising glimpse into how businesses can navigate an increasingly complex world with confidence and foresight. By embracing these tools and strategies, companies can stay ahead of the curve and achieve sustained success in a data-driven world.
For further reading, consider exploring the ethical challenges of AI in business or case studies on successful data-driven decision-making in various industries.
Invitation for Discussion: How are you incorporating analytics into your decision-making process? What challenges or successes have you experienced? Share your thoughts with us at mbu@tembi.io.
