Are retailers falling behind on personalisation?

  • Opinion
  • June 10, 2015
  • Antony Ede
Are retailers falling behind on personalisation?

More and more, consumers are coming to expect a brand to be relevant for them. They take it for granted that when the brand has access to information about them, it is used in their interactions. They think, "Don't email me about back-to-school, I don't buy stuff for kids!"

Today’s leading brands are doing this well. Google personalises search results based on what you have searched for and clicked on in the past. eBay personalises their entire homepage with things they think you might like based on what you've bought in the past. Netflix, though, are the reigning champions of personalisation; altering the experience so significantly based on the viewer that Joris Evers, Netflix’s director of global communications, likes to say in reference to the total number of subscribers, “There are 33 million different versions of Netflix.”

This trend of so-called ‘mass customisation’ isn't just limited to digital goods. Physical goods too are undergoing the same level of personalisation. Australian shoe retailer Shoes of Prey allows customers to design a custom pair of women's shoes on their website and have it made and delivered to their door. The number of possible combinations is nearly infinite (over 190 trillion be exact!), allowing for an unprecedented degree of personalisation.

Two significant developments have laid the foundation for this change, the full implications of which we are still years, if not decades, away from experiencing.

The first of these is the democratisation of the tools of production and the movement away from large-batch to small-batch manufacturing. It used to be the case that there was a significant cost advantage to producing the same generic product for all consumers. Whether this product was in the form of media and this was due to the cost of changing over print equipment, or in the form of physical goods and the cost of retooling inflexible manufacturing equipment. Now however, both in physical and digital products, the cost advantage of large batches is eroding due to the digitisation of media and more versatile manufacturing equipment. As an example of this, Instagram was able to serve up a user-specific experience on its platform, supporting 30 million users, with just 13 employees at the time of its acquisition by Facebook.

In parallel with this unprecedented increased in our ability to deliver more personalised products, data analytics has allowed us to understand more about what each consumer actually wants. At its most basic level this is as simple as assigning customers to different segments and providing a differentiated experience of the brand based on these segments. This is not true personalisation though; that involves understanding each customer across potentially hundreds of different dimensions and tailoring every aspect of the experience around this.

The combination of these two factors puts us at an inflection point for brands. The tools are well established, the knowledge of how to do it has been created and leading brands like Shoes of Prey, eBay and Netflix have proved the concept. Despite all of these stars aligning for the first time in history, retailers in New Zealand have been slow to move on the opportunity.

Today mass customisation presents an opportunity for strategic advantage but tomorrow it will be just another hygiene factor. Why then are retailers in New Zealand missing the boat? Is it that they see this as being only the purview of the online mega-retailers? How is it that they came to be mega-retailers in the first place?

This story was originally published in NZ Retail magazine issue 737, April/May 2015.

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