Retail Personalization: Most Chains Are Bad At It
(Bloomberg Gadfly) -- Since your technology doesn’t seem to get it, Amazon, let me offer you a hint: I don’t live in a dorm.
For more than a month now, when I open Amazon.com Inc.'s mobile app, I’ve seen frequent messaging that suggests the e-commerce giant thinks I am settling in for a semester of sleeping on a bunk bed and cramming for final exams.
The app has served up a module showing me "off to college electronics" and options to "organize & clean for college" that included Arm & Hammer laundry detergent and Method cleaning spray. There was an “off to college collegiate gear” banner showing me a red bomber jacket, and a “dorm décor essentials” feature that tried to sell me on a shag rug.
Listen, Amazon, I'm flattered. But my dorm days are long over. I graduated from college in 2006.
And that's not the only way Amazon doesn’t quite cater to me. Not long ago, in a section of the app called “Deals of the Day,” it presented me with a discount on a Greenworks lawnmower. But I live in a dense urban neighborhood in Washington, D.C. In a condo. On the third floor.
Amazon is far from the only shop that doesn’t exactly offer the hyper-tailored experience the retail industry has promised for years. But it is generally at the leading edge of e-commerce, and in a consumer survey published in December, respondents said Amazon was the best of any digital business at providing personalization.
So if this is how things look at the company that is considered the gold standard, then you can draw some conclusions about how poorly individualized marketing and merchandising is shaping up in the rest of the retail business.
Chains have long touted personalization as a cornerstone of their digital futures, making lofty pronouncements about how it will let them reach out to customers with previously unseen precision. But so far, they’re doing a lousy job at it. And they’re leaving money on the table by not pushing harder and faster to get this right.
There are many reasons why the personalization efforts we see in the wild are rudimentary compared to the innovative possibilities talked up by the industry.
For one, retailers are often deploying this strategy in a limited or siloed way. It is common to personalize an e-mail campaign, but less so a website or mobile app.
And there are other snags. Often the software powering a retailer’s website is not linked up with its point-of-sale system. This explains why an ad for a certain dress might chase you around the Internet long after you’ve added it to your closet. If you browsed it online and later purchased it in a store, the company often hasn’t set up its systems to connect those dots.
Also, retailers simply have more data than they know how to use. When trying to personalize shopping, many marketers consider broad attributes such as location. Fewer take into account more granular information, such as shopper behavior on previous visits to a store's website:
So why is the industry coming up short on something it claims to make a priority? Recent research by consultancy Boston Consulting Group offers some hints:
BCG’s survey was not limited to companies in the retail sector. But it suggests some businesses just don't seem to be serious about investing in the talent or building the battle plan needed for this kind of work. In other words: Despite all the talk, there's not a lot of action.
Of course, legacy retail chains have a long to-do list lately. With fickle consumer tastes and waning mall traffic weighing on their sales, many may have chosen to set personalization aside while they put money and human capital toward manufacturing or logistics improvements.
But they can’t afford to put it on the back burner much longer. Companies such as Netflix Inc. and Spotify Ltd. are getting quite good at churning out individualized recommendations and playlists, and that is training consumers to expect such treatment in other digital realms.
And, frankly, doing better at personalization seems like fairly low-hanging fruit. It was back in 2012 that jaws dropped over a report about complex data analysis at Target Corp. that predicted when female shoppers might be pregnant.
How is it possible that several years and many technological innovations later, some retailers are still marketing based on such unrefined portraits of their consumers? Often, their recommendations appear no more sophisticated than, “You ordered face cream from this brand before. Now here are other beauty products from the same line.”
There’s evidence retailers are missing out by not getting better at this. Consultants at McKinsey & Co. have found personalization in marketing can lift sales by as much as 15 percent. BCG’s research found it can boost revenue by 6 to 10 percent. BCG says some companies surveyed in the apparel, grocery and wholesale club businesses expected sales increases of 10 percent or more from personalization.
At a time when many retailers are scraping for every dollar, it is mystifying that they aren't racing faster to deliver a truly one-to-one shopping experience. There is good reason to believe doing so could make a big difference in a tough market.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Sarah Halzack is a Bloomberg Gadfly columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.