David Selinger, an expert in the field of e-commerce data analytics and personalisation explains why retailers without a personalisation strategy are leaving money on the proverbial table

David Selinger, an expert in the field of e-commerce data analytics and personalisation explains why retailers without a personalisation strategy are leaving money on the proverbial table

For the past 10 years, e-commerce has been a strong growth channel for UK retailers but research indicates this growth will slow significantly as online shopping reaches a saturation point, according to David Selinger, chief executive and co-founder of RichRelevance, which delivers merchandising and personalised recommendations to e-commerce sites.

Nonetheless, online shopping behaviour continues to have enormous impact on consumer decision-making. Given this forecast, Selinger said it is imperative for retailers to tune-in to consumer behaviour to keep shoppers onsite, build trust and strengthen relationships that encourage both sales and loyalty.

Web savvy consumer instinct

“Consider today’s consumer,” he said. “UK shoppers are savvier and more empowered than ever. They frequently compare stores, brands and products using the web, mobile devices and physical stores before they buy. Through all of these channels, consumers are using tools to support their decisions and are specifically seeking recommendations from both retailers and their peers. A recent study my firm conducted with Forrester Research in concert with Bazaarvoice underscores this trend. Six out of 10 UK shoppers have not decided on the brand they will purchase before buying a product online.

“In bricks-and-mortar stores, complementary products are displayed next to each other. Online, product recommendations fill this role. Both retailers and consumers benefit when an online store establishes a personalisation strategy that includes product recommendations. Forrester Research reported a 13% increase in frequency of shopping sessions and almost a 15% increase in revenue per user among shoppers who are exposed to recommendations versus those who are not.”

Selinger argues that, if a retail brand is not yet personalising the shopping experience, it is leaving money on the table. He cited the example of US-based Wine.com, which is a leading online wine merchant that faces competition from physical stores who employ wine experts and can provide buyers with advice. After establishing a personalisation strategy, recommendations drove a 15% increase in average order value for Wine.com – as high as 26% some weeks. “A successful personalisation initiative can generate millions in sales attributable to your personalisation strategy,” he said.

More choosy and fickle online

“Now take a look at the flip side,” Selinger continued. “A shopper not being tempted by enticing product recommendations may click away.” In fact, according to further research by Forrester, 82% of UK consumers visit more than one website before they buy and 17% visit as many as four. Forrester also estimated that customer defections and abandoned purchases, as a result of poor customer experiences, lose UK businesses €15 billion in sales each year.

He explained: “Each visitor arrives at your site with an agenda, whether they’ve clicked through a link on a search engine, were directed via an email campaign or came to browse before making a purchase instore. Based on each visitor’s individual frame of reference, retailers can begin personalising the site experience. By providing content that is wholly and uniquely relevant to consumers, you can begin to build a deeper relationship with them that will keep them onsite and buying, instead of jumping to a competitor.

“E-commerce personalisation has evolved beyond suggestions based on the wisdom of the crowd (customers who purchased X also purchased Y).” He said personalisation is now a broad category with solutions that vary greatly in their approach, including:

Collaborative filtering – offering recommendations to users based on the activity of users with similar histories.

Recent behaviour pattern matching – analysing real-time user behaviour in order to choose products to recommend.

Visual similarity – using the similarities of digital images to recommend similar products.

Neural network modelling – a more general approach designed to learn patterns in any kind of data.

Selinger again turned to the example of Wine.com: “Its personalisation approach takes into account multiple data points, including each shopper’s current browsing behaviour and geographical location, as well as trends from the Wine.com community, to expose shoppers to relevant products they might otherwise not have considered. Recommendations such as ‘customers who viewed this item ultimately purchased’ draw upon the community, helping first time shoppers to hone in on ideal wines; whereas a recommendation like ‘$80 (£49) and above top sellers’ accounts for a return shopper’s penchant for pricier bestsellers. In addition, a shopper’s past preference and purchase patterns are acknowledged through recommendations such as ‘available vintages of wine that you’ve purchased previously’.

Potentially more responsive than instore

“In this manner, the online shopping experience transcends the instore experience, offering recommendations based not just on general trends, but also on individual affinities for pricing, varietal, territory and other attributes – quickly helping a customer connect with his or her perfect item.”

Finally, Selinger said consumer transparency plays an important role in any personalisation strategy. “When you recommend products to a customer and are explicit about why you’re placing that product in front of them, you’re able to build trust, and your recommendations are truly in service to the consumer’s need. Blindly serving up suggestions without context can make a shopper question your agenda – are you simply trying to move last season’s merchandise? In my experience over the years, I’ve consistently seen that recommendations that lack transparency may actually work against you.”

He concluded: “Establishing a personalisation strategy should be one of your top priorities in 2011. Today’s savvy shoppers are coming to expect – and quite frankly deserve – a personalised experience. Without providing personalisation, you’re literally handing millions of pounds in revenue to your competitors.”