The relationship between consumers and retailers continues to strengthen with the advent of personalized shopping, but are both parties meeting the demands of the other? “Personalized” shopping has been talked about for more than a few years now and we’re starting to see challenges arise for both omnichannel and in-store retailers who want to meet customer demands.
In a perfect personalized shopping experience, retailers provide each customer a unique experience tailored to their needs. Companies like Amazon and Stitch Fix were early adopters of the shopping model and have made personalization a part of every aspect of a shopper’s journey.
Other retailers still have room to grow, but when a majority of today’s customers expect a personalized experience while online shopping, up-and-coming businesses will need to adapt to the current climate.
Without ties to a particular brand, consumers jump from retailer to retailer knowing that there’s always a better deal out there. Giving out discounts is one way to bring customers back, but more companies are finding success using highly personalized customer experiences.
In many cases, this means using proprietary data as a means to tailor options for customers that competitors wouldn’t have access to.
Customer expectations are met with personalization
Thanks to retail giants like Amazon, consumers have grown to expect personalized experiences during virtually every step of the purchasing process.
In 2018, Epsilor and GBH Insights interviewed 1,000 adults and found that 80% were more likely to make a purchase when brands offer personalized experiences.
And that doesn’t mean retailers can get away with providing a personalized experience solely at the point of purchase. No—customers want personalization embedded within an entire experience with a retailer.
When put to practice, a thorough personalized experience puts the customer in dialogue with the retailer while leveraging their data to create one-one personalization.
Products, sales, and communication pathways can then be offered to customers at an individual level rather than a segmented one. In some cases, companies become so hyper-personalized that customers take it for granted.
If Netflix all of a sudden stopped showcasing recommended titles, undoubtedly there would be backlash.
What we can learn from giants like Amazon
What does it look like to implement personalization at scale? Amazon and a select few have built infrastructure perfect for tailored shopping experiences since e-commerce took ship in the late 90s.
At the most basic level, Amazon shows us how useful product bundling is and how far recommended items go towards bringing in more revenue—but they continue to raise the bar.
In the last couple of years, Amazon unveiled Prime Wardrobe, which lets Prime members input personal styles and preferences for a team of stylists to make personalized recommendations on.
Even if Amazon continues to dominate the online shopping space, retailers small and large will have opportunities to set new standards for personalization.
Looking at success stories from both omnichannel and in-store retailers can open doors for brands that want to encourage customer loyalty through personalization.
The peak of personalization
These days Nike is synonymous with personalization. They cater to the individual customer by promoting unique configurations of their clothes and shoes and have recently gone as far as launching a 3-D sneaker-customization platform.
Nike’s physical locations further drive home their commitment to a personalized, omnichannel shopping experience through a series of benefits offered to those who take part in their loyalty program.
First, NikePlus members at the company’s NYC flagship store receive access to tailored, data-driven “NYC favorites” from their Nike Speed Shop.
Second, members can reserve and store products within pickup lockers, scan items using QR-codes to determine store availability, and request alternative products be delivered to a particular dressing room.
Lastly, members are given the opportunity to book one-on-one appointments with Nike clothing and footwear experts to build silhouettes of items uniquely fitted to the customer’s specifications.
Another success story comes from Sephora, whose omnichannel strategy led to more personalized experiences than many of its competitors.
The company prioritized the development of a mobile app that allows customers to book clothing consultations and makeovers, try on products virtually, receive clothing recommendations using AI, and find items in-store that they’ve sampled.
Customers who use the app are given loyalty points, which can be used to try new products, receive invitations to exclusive events, and any number of other benefits. Sephora is targeting its most loyal customers, and for good reason.
Behind each loyalty point is data on the customer, their shopping history, purchasing patterns, and even interactions with clerks within a store.
The result? Sephora’s loyalty program has brought in more than 25 million members and in 2018, members accounted for 80% of the company’s total purchases. Nike’s on the right path too, as the company looks to continue making large acquisitions like Zodiac, a leader in the data analytics space.
The meeting ground for personalization and privacy
Taken to their ends, the data-driven solutions Nike and Sephora have built over the last few years introduced a whirlwind of privacy challenges.
Consumers seemingly rejoice over algorithms that promote personalized experiences, but few have proposed a fine line between relevant customer information and unequivocally intrusive data.
Traditionally, personalized e-commerce solutions were built on Personally Identifiable Information, or PII. The data collected included a customer’s name, age, gender, location, and even their email and credit card details.
When put to use, PII connects all this data with a consumer’s online history to get as rounded a picture of an individual as possible.
Unfortunately for some, PII is on its way out due to restrictions put in place after the 2016 Cambridge Analytica scandal and the creation of the General Data Protection Regulation, or GDPR.
Further, Google made it clear earlier this year that advertisers must evolve their privacy permissions and preserve anonymity as they withdrew support for third-party cookies on Chrome.
These sweeping changes to consumer privacy are certainly warranted, but they create numerous challenges for businesses that need data to create personalized experiences.
What’s the solution? Many are pushing for less-intrusive data-collection strategies such as gamification, improved transparency around data usage, and a zero-party data solution.
The zero-party data solution
A fairly new term—”zero-party data” allows businesses to collect data directly from customers instead of taking it intrusively. Rather than using third-party cookies or tracked individual consumer behaviors, retailers will need to capitalize on surveys or psychographic data provided by customers themselves.
Zero-party data is emerging quickly, but as of today roughly 80% of marketers and agencies have yet to use this personalization technique.
Significantly, this data suggests a great opportunity for retailers to gain a competitive edge while maximizing brand loyalty, content offers, and most importantly—a personalized experience.
Retailers will need to redefine the “personalized experience”
No doubt, retailers will need to find ways of connecting with customers in a one-to-one manner that respects the customers’ privacy. Reducing their reliance on cookies and third-party data will come first, but where does that leave the future of personalization?
Embedded in the idea of the “personalized experience” is not the true identity of an individual, but their name, age, location, purchasing habits, and socioeconomic background as they relate to brand loyalty and conversion rates.
A path forward that includes solutions such as zero-party data puts the individual consumer at the front of the equation rather than data itself.
In this system, retailers will not be allowed to go through back-doors to track customer data, they’ll have to get it with consent from the public. If successful, we can expect a clear value exchange between retailers and their customers.
The bottom line
For many, providing a fully personalized experience from the point-of-entry to the point-of-purchase is the difference between surviving and thriving as a retailer. Loyal customers become even more loyal and conversion rates go up across the board.
Nike and Sephora are primary examples of AI, data analytics, and loyalty programs all working together to create a perfectly choreographed personalized experience, but when data collection strategies overlook new and improving privacy measures, backup solutions need to be in place.
Personal privacy does not mean a personalized experience is on its way out—rather, companies will need to make an effort to ask customers directly for their psychographic data in exchange for personalized offers. To put the individual consumer at the forefront of personalization is to treat them as an autonomous human who should be listened to and understood.
The bottom line? Retailers will need to foster connections with customers rather than relying on traditional data-tracking methods.
