Personalization has failed e-commerce

March 6, 2017

As consumer purchasing patterns have evolved and the importance of e-commerce as a channel for retailers has increased, a great number of tools, services and solutions that provide personalization to the e-commerce experience for consumers have appeared. These solutions promise to help retailers to provide a unique, customized e-commerce experience for their shoppers by identifying patterns of behaviour the consumer exhibits on-site and enabling retailers to promote products to customers based on those patterns.

E-commerce personalization is important. In fact, it’s imperative. Making your shoppers feel like you understand what they are looking for, what might appeal to them and help them find products that they are looking for is an integral part of serving your customers online and something that no retailer should ignore. When implemented correctly, personalization in e-commerce can lead to significant increases in e-commerce conversion, increased trust between you as a retailer and your customers as well as increased retention for you as a retailer.

In this sense, personalization of your e-commerce experience can be compared to staffing your physical stores. By having sales associates present across your brick-and-mortar stores, you’re able to help customers find what they are looking for and suggest products for each individual customer. The know-how, expertise and ability to serve customers of your sales associates is crucial to your success offline. The ability of your personalization to do the same online is equally so.

Unfortunately, today’s personalization solutions have failed e-commerce retailers. The vast majority of these solutions that provide recommendations based on users’ on-site behaviour suffer from diminishing returns for the retailer. The longer one of these on-site behaviour-based personalization solutions is present on your site, the smaller the incremental revenue it drives for you and the less your consumers respond to the product suggestions and other action recommendations it provides. The simple reason for these diminishing returns lies with your customers, the consumers.

As consumers, we’re fairly specific in the way shop and behave in any e-commerce store. Providing us with something that might interest us for the first time through behaviour that is monitored in the e-commerce store for the first time may be extremely relevant. But the more we shop in an e-commerce store, the more our shopping habits tend to follow similar patterns, and the less relevant, exciting and interesting these suggestions provided by personalization technology become. In addition, the more we as consumers understand about the choices available to us in any individual product category, the less knowledgeable personalization solutions seem.

So how can we overcome these diminishing returns and ensure that much needed personalization of the online shopping experience continues to provide value to consumers and drive revenue for e-commerce retailers?

The answer lies in specialization. Just like your women’s department in-store sales associate cannot and should not be an expert in beauty products, jewellery, home appliances and electronics, your online personalization tools cannot be either. And as a consumer, you wouldn’t trust the person selling you home electronics to sell you skincare in a physical store, would you? But you do trust the specialized in-store beauty consultant. The situation is no different online.

Only by employing category-specific personalization tools that specialize in helping your consumers in product discovery, conversion and retention in specific product categories are you able to provide your consumers with long-lasting value that keeps generating revenue and providing retention for your e-commerce store. Only through using category-specific solutions are you able uphold the trust between your customers and your e-commerce store and ensure that you remain to be perceived as the expert who understands what your customers are looking for online. Since if that’s not what you are perceived to be online, your competing on price alone. And we all know what that does to your profitability.