KEY FINDINGS FROM THE 2018 E-COMMERCE...

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KEY FINDINGS FROM THE 2018

E-COMMERCEPERSONALIZATION

REPORT

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©Copyright 2018 Internet Retailer® (a Digital Commerce 360 brand) & Vertical Web Media LLC. All rights reserved. Data as of September 2018.2

OVERVIEW 3

RATING LEADING RETAILERS 10Account login 11

CASE STUDY 16The Vitamin Shoppe 17

CONCLUSION 19

ABOUTOur sponsors 21The authors 22Internet Retailer Research 23

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Personalization Report

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OVERVIEW

4 ©Copyright 2018 Internet Retailer® (a Digital Commerce 360 brand) & Vertical Web Media LLC. All rights reserved. Data as of September 2018.

One big issue the survey highlighted was the ability to connect customer data across touchpoints. Retailers, for example, often have shopper data stored in separate systems for their e-commerce sites, store point-of-sale systems, email marketing software and other siloes. 48% of the executives responding to the Evergage study said their companies had customer data in four or more different systems.

And putting that data together to get a single view of each customer isn’t easy. In the same survey, only 2% of executives said their companies had connected data from all channels, 11% from most and 14% from about half of their stores of data. That leaves more than 70% with fewer than half their channels connected—and a limited view of each customer’s activity means limited ability to personalize.

Personalization is important—but it’s hard. That’s the opinion of experts, and it shows up in an Internet Retailer test of the personalization capabilities of 125 leading online retailers.

Our tests of the websites, mobile sites and marketing emails of these relatively large retailers reveal a wide variety in their personalization practices. A few are customizing content at every opportunity—and in some cases letting the shopper know they’re doing it. But most are only offering personalization in some, but far from all, of the areas we tested.

The importance of personalization was underlined in a 2017 projection by Boston Consulting Group that in just three industries—retail, healthcare and financial services—there will be a revenue shift of $800 billion over a five-year period to the companies that get this right. However, the report added, only 15% of companies will get it right.

Many marketing executives recognize they have a long way to go to effectively serve customers in a personalized way. In a 2018 survey of 300 marketers by Evergage Inc., a provider of personalization software, only 6% gave their organizations a grade of A in personalization and 29% a B. The largest segment, 46%, gave themselves C’s, while 17% awarded their companies D’s and 2% F’s.

OVERVIEWHOW 300 EXECUTIVES GRADE THEIR COMPANIES ON PERSONALIZATION

A 6%B 29%C 46%D 17%F 2%

Source: Evergage Inc., 2018

©Copyright 2018 Internet Retailer® (a Digital Commerce 360 brand) & Vertical Web Media LLC. All rights reserved. Data as of September 2018.

2018 E-COMMERCE PERSONALIZATION REPORT

5

OVERVIEW

online discount retailer. Over the past year, the web-only retailer has invested in a new customer data system that enables it to adjust what it presents to each customer based on her current activity. It also upgraded its database of 25 million images and other pieces of content using machine learning to show the right content to each shopper, based on her past purchases, demographics and where she is in the shopping journey, says J.P. Knab, chief marketing officer.

Overstock initially deployed those new person-alization systems on landing pages shoppers see after clicking on Overstock ads on Facebook and Pinterest, and in emails triggered by shopper behavior, such as signing up for email or leaving an item in a shopping cart.

These systems will ultimately be used to better customize content in other ways, such as in product recommendations on Overstock.com. But Knab says Overstock first has to upgrade its testing capabilities so that it can ensure the many variations of web pages it can produce for the 6 million items it sells are generating improved results.

TECHNOLOGY CHALLENGESInflexible e-commerce platforms can keep online retailers from adding personalized features to their websites or marketing campaigns, says Kathy Kimple, senior vice president and head of the consulting practice at FitForCommerce, which advises e-retailers on technology options.

That was the case for LeSportsac Inc., a maker of totes and other bags. The e-commerce platform it had been using until last year prevented it from adding product recommendation tools and site search features that would show alternate products if the item the consumer searched for was not available, says Berly Isaak, senior director for global marketing and public relations.

After switching to the Shopify Plus e-commerce platform LeSportsac was able to add personal-ization software from Nosto Solutions, a com-pany based in Finland. In the first few months of 2018, that personalization technology was directly responsible for a 12% increase in online sales, Isaak says.

Far more advanced but still investing heavily in personalization is Overstock.com Inc., the

70% More than 70% of marketers say they have connected data from fewer than half their channels

47.6%



6

larger retailers. Here is a summary of some key results:

Just under half of the retail sites identified where the tester was coming from, although 29% only identified the country while 19% recognized the visitor’s city or ZIP code. Geolocation was particularly evident on the store locator pages of bricks-and-mortar retailers: More than 60% of those pages recognized the tester’s location.

Nearly five out of six sites showed similar items on product detail pages, but fewer than half showed testers items they had viewed as they moved to other pages on the website.

Only 37% updated product recommendations on the homepage after testers browsed products on the site during their first visit, and even fewer, 29%, adapted the recommended products shown on category pages.

Only 16% of retail sites clearly recognized the testers when they returned for a second visit, either displaying items they had viewed or their name. After they logged in, 29% of the websites remembered items the testers had previously

A MIXED BAGThe complexity online retailers like Overstock.com encounter as they seek to reach the ultimate goal of 1:1 marketing helps account for the decidedly mixed results Internet Retailer found in our study of the personalization capabilities of 125 leading online retailers.

Our testers visited each of the retailer’s desktop e-commerce sites twice, observing whether the site recognized their location before they browsed, and how the site adapted features like product recommendations after the tester navigated to product pages and searched for products. After creating an account on the initial visit, they returned a second time and observed whether the e-commerce site personalized featured items and recommendations based on their previous behavior.

They did a similar test on the retailers’ mobile sites. And they also compiled the emails they received from each retailer to gauge how effectively the merchants personalized follow-up marketing based on browsing behavior and on the items the testers abandoned in shopping carts.

The tests revealed big variations in the personalization practices of these 125

OVERVIEW

of retailers’ desktop sites recognized the location of a first-time visitor

37% 29%



7

Only 41% sent emails after shoppers viewed products on a website, created an account and then left. However, that went up to 62% after the testers put an item into a shopping cart and left the site. In both types of marketing emails, almost all the retailers highlighted the products the shopper had viewed or put into a cart.

The results will be explored in greater detail in the remainder of the report, which will also highlight retailers that are particularly advanced in various aspects of personalization. Those retailers are setting the bar that competitors will have to clear if they are to keep up in the race to offer each consumer the products and descriptive content most relevant to her shopping journey.

viewed but only 15% remembered the terms testers had entered into the search box.

Just over half of retail sites tested promoted similar or complementary products to the testers on the checkout page.

About two-thirds of mobile websites in some way recognized the location of the shopper, which was higher than for desktops and likely reflects that location is particularly important when marketing to mobile shoppers who may be near or in a retailer’s store, or a competitor’s. Once testers had browsed and logged in, nearly half personalized the homepage based on their behavior, but only 10% of retail sites tailored recommendations on category landing pages to the tester’s browsing activity.

OVERVIEW

METHODOLOGYInternet Retailer studied the personalization capabilities of 125 leading online retailers. Our testers visited each of the retailer’s desktop e-commerce sites twice, observing whether the site recognized their location before they browsed, and how the site adapted features like product recommendations after the tester navigated to product pages and searched for products. After creating an account on the initial visit, testers returned a second time and observed whether the e-commerce site personalized featured items and recommendations based on their previous behavior. They conducted a similar test on the retailers’ mobile sites and also compiled the emails they received from each retailer to gauge how effectively the merchants personalized follow-up marketing based on browsing behavior and on the items the testers abandoned in shopping carts.

of sites updated homepage recommendations after testers browsed products

Category landing page recommendations

were updated by

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What are the challenges of implementing personalization? For example, is it expensive and/or technically difficult?

Much of personalization is simply a challenge of

bandwidth and content. If you have five customer

segments, you need five versions of the same content,

which takes time. Also, marketers and merchandisers

are asked to create segments and write rules based

on business knowledge or insights from analytics.

Personalization is still a manual effort in many cases.

Other challenges include personalizing to non-

authenticated users. Tracking through a cookie is

possible, but what happens when shoppers change

devices or don’t visit the site for long periods of

time? Maintaining a unified customer profile can be

difficult in this case.

Sample size is a common problem. It takes a large

data set for machine-learning and other algorithms to

understand the signals that feed personalization. Even

with the right data, how does the business team inform

the algorithm as to which criteria are important? Many

technologies don’t allow for customization of algorithms

or guidance as to which parameters are important.

Personalization can also be confusing to define.

Many vendors claim broad-based personalization when in

reality their capabilities are limited to email and recom-

mendation engines (i.e. “others also liked’). Most vendors

focus on a specific use case, so the abundance of vendors

itself can create silos and dilute efforts.

How can personalization technology be used with landing pages and product pages?

Landing pages can be adapted based on a number of

different criteria. For example, visitors coming from a

specific social URL or email campaign can receive different

experiences or content. Landing page content can also be

adapted based on geography or previous browse behavior.

Product pages can be enhanced with product

recommendations or the components of the page can

be adapted based on a customer’s journey. For example,

a first-time visit to a product page might show celebrity

endorsements or other social verification, while a second-

time visit may show warranty information or return

information to drive toward conversion.

Why is it important to track consumers across various devices?

Customer behavior is different on different devices. Mobile

shoppers may value lower-priced items as they are hesitant

to make large purchases without more detailed product

images. However, our data shows that at certain times of

the day or during certain seasons, these shoppers may

become less price-sensitive (e.g. mobile shopping for

flowers skyrockets during the lead-up to Mother’s Day).

As mentioned earlier, one significant challenge in

personalization is building a single profile. When customers

are not logged in, this makes tracking consumers across

devices extremely important. This can be achieved with

various innovations in machine-learning.

An executive conversation with Clint Burgess,

Head of Product Marketing – Personalization, BloomReach


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RATING LEADING

RETAILERS

8.7%

38.1%


A customer who logs in makes personalization a lot easier for the retailer, as the merchant then can draw on that shopper’s previous activity, regardless of the device she is currently using. That’s particularly important now that so many consumers move from one device to another, including smartphones and tablets but also computers at home and at work. If the consumer is logged in, the retailer knows for certain who she is.

But none of the online retailers we tested required a consumer to log in before shopping. That’s not surprising given how reluctant most consumers are to try to remember another user name and password combination. Plus, it’s an added step that will inevitably keep some shoppers from completing a purchase.

“Retailers don’t want anything that creates friction between the consumer and the shopping cart,” says Kathy Kimple, senior vice president and head of the consulting practice at e-commerce consulting firm FitForCommerce. “They want the customer to browse and find what they want. The goal is to eliminate friction.”

One way e-retailers do get information about website visitors is by offering consumers the option of creating an account as they’re checking out. And on the account creation page 8.7% offer the option of staying logged in or the site remembering the consumer’s credentials.

ACCOUNT LOGIN

offer the option when consumers log in a second time

of merchants let shoppers remain logged in after creating an account on the first visit

STAY LOGGED IN?



12

RATING LEADING RETAILERS • ACCOUNT LOGIN

If the consumer opts to remain logged in the site should be able to identify him when he returns, and by the site remembering his user name and password, he won’t have to search for the password he created for that site.

It’s not clear why more retailers don’t invite consumers to stay logged in. But web merchants seem bolder on the second visit: When our testers returned a second time and logged in 38.1% of the sites offered the option to stay logged in or for the site to remember their credentials so they wouldn’t have to log in on subsequent visits.

A LEARNING OPPORTUNITYSome online retailers use the account login page to gather information about shoppers. For example, the e-commerce site of department store chain Dillard’s Inc. asks shoppers creating an account about their interests. They can check women’s, men’s, home, kids’ or “I want it all!” That information can help the e-retailer tailor future offers in a way most likely to suit a shopper’s preferences.

Similarly, PetMed Express Inc. asks consumers creating an account about the type of pet they own, the breed and its name. They can also upload a photo of the pet, which shows up, along with the pet’s name if provided, on the homepage of 1800PetMeds.com every time the consumer arrives and is logged in.

One way retailers can incent consumers to log into websites is by offering a free loyalty program

PetMed Express personalized the tester’s account by prompting her to upload a photo of her cat and asking for the pet’s name, gender, age and weight plus a medical history including allergies, medications and conditions. This data helped the retailer tailor products to her needs.

that offers discounts and other perks based on how much shoppers’ buy. Shoppers want those retailers to know who they are so they can receive credit for their purchases.

J. Crew Group Inc. in summer 2018 opened its loyalty program to all consumers—not just to those who own a J. Crew-branded credit card—and added free shipping as a feature of the program along with a $5 discount for every $200 in purchases.

At least a half-dozen other Internet Retailer Top 1000 merchants include free shipping as

65%



13

an incentive to join their loyalty programs. They include Dell Inc., Columbia Sportswear Co., Michael Kors Holdings Ltd., Christopher Banks & Co., The Men’s Wearhouse and Musician’s Friend Inc.

Competition from the likes of Amazon and its Prime “free shipping” program (it costs $119 a year to join, making it something other than free) is forcing more e-retailers to ship orders at no charge to the consumer. The combination of Prime and competitors matching Amazon’s free shipping offer led to 65% of orders shipping free during the 2017 holiday period, according to digital data gatherer comScore Inc. By offering free shipping as part of a loyalty program, the retailer at least gets a marketing benefit to offset the shipping cost: more information about the shopper that makes possible more personalized offers via email and on future website visits.

PERSONALIZATION PROPETMED EXPRESSThe online pet pharmacy asks consumers creating an account about their pet and encourages them to upload a photo of the furry friend that the site displays when the pet owner returns to the site.

RATING LEADING RETAILERS • ACCOUNT LOGIN

of e-commerce orders shipped free during the 2017 holiday period

CASE STUDY


TESTS PROVE PERSONALIZED EMAIL PRODUCES PEPPIER RESULTSLike many top online retailers, multichannel vitamins and supplements retailer The Vitamin Shoppe Inc. has run triggered email campaigns for years. Those go out automatically to individual consumers reminding them about specific items they had browsed on VitaminShoppe.com or added to their cart, but never purchased.

Still, the vast majority of its daily email campaigns are so-called “batch-and-blast” messages sent to its full email list, announcing a sale or new product launch. Until last year, in these daily, scheduled email campaigns, Vitamin Shoppe had no way of showing products to each customer based on what he had already searched for on Vitamin Shoppe’s website, or had in some other way expressed interest in.

To change this, the retailer, working with email marketing firm Movable Ink, began in 2017 to generate mass messages tailored to buying or browsing behaviors of its customers. To use the service, Vitamin Shoppe still sent one campaign, but the email was automatically personalized to thousands of recipients based on the types of products they had either bought, searched for or added to their cart in the past.

THE VITAMIN SHOPPE

A mass email from The Vitamin Shoppe is personalized to each customer with four recommended products based on prior on-site behavior.

271%



18

CASE STUDY • THE VITAMIN SHOPPE

For example, in one test, Vitamin Shoppe ran an email campaign celebrating its 40-year anniversary that featured a bar in the middle of the email message displaying four products—each personalized to what customers had browsed but not purchased—with the headline: “We saved these just for you.”

Vitamin Shoppe tested that email with person-alized product recommendations against the same message but with products not personal-ized based on each customer’s search history. The personalized email showed strong results: a 271% lift in click-through rate and an 8% lift in revenue.

Making use of data it has on what consumers search for on its site was especially helpful for Vitamin Shoppe, as 65% of consumers that visit VitaminShoppe.com use the site search box, a Vitamin Shoppe spokesman says. “This was a huge win for us to dynamically populate product imagery based on what the consumer has searched for. Our communications are a lot more relevant now.”

Vitamin Shoppe also has used Movable Ink’s product recommendations technology to show consumers via email other items similar to those they’ve already purchased or browsed. And it promotes in-store shopping with a feature that shows a consumer when she opens an email a map with the location of the store closest to her.

increase in click-through rate, as compared to the same message without personalized recommendations

A Vitamin Shoppe test email with personalized product recommendations yielded a

CONCLUSION


And those retailers, like Overstock.com Inc., that have connected disparate databases and implemented machine-learning systems that can customize web pages in practically an infinite variety of combinations, find that they then have to add testing capabilities. After all, as Overstock’s J.P. Knab points out, you have to verify that the recommendations made by the automated systems do in fact lead to more conversions.

Given that each retailer has its own combination of e-commerce technology and systems for storing customer and product data—some of it built in-house in many cases and other pieces licensed from technology providers—there is no one road map to advanced personalization. But some online retailers are getting there.

The primary takeaway from our study of 125 leading online retailers was this: There is a big variation in the extent to which even the largest e-retailers have mastered personalization.

Fewer than half, for example, demonstrate that they recognize a web shopper’s location based on her IP address. While the big majority show similar items on product pages, most don’t remind consumers of items they previously have viewed as they move around the website. And while most show recommended items on the homepage, nearly two-thirds don’t update those recommendations based on what the shopper views on the site.

Returning shoppers—even those who had previously created an account—don’t get recognized by most of the retail sites we tested. And site search personalization is the exception rather than the rule.

There are good reasons for these uneven re-sults. Effective personalization means drawing on a variety of stores of customer and product data and being aware of the profit margins of different products and their inventory levels. That integration can limit personalization, especially when a retailer’s e-commerce plat-form lacks the flexibility to easily connect to other resources or to vendors’ personalization of email marketing systems.

CONCLUSION

There is no one road map to advanced personalization. But some online retailers are getting there.

©Copyright 2018 Internet Retailer® (a Digital Commerce 360 brand) & Vertical Web Media LLC. All rights reserved. Data as of September 2018.21

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INTERNET RETAILER RESEARCHFAREEHA ALIDirector of Research Strategyfareeha@verticalwebmedia com312-946-2048

JESSICA YOUNGResearch Analystjessica@verticalwebmedia com312-362-0104

LAURA BERRIGANProject Manager, Researchlaura@verticalwebmedia com312-572-6261

JONATHAN LOVEAssociate Data Analystjon@verticalwebmedia com312-262-0069

JAMES RISLEYResearch Analystjrisley@verticalwebmedia com312-572-7005

JOEL SMITHData Assistantjoel@verticalwebmedia com312-362-0273

Don Davis is editor at large at Internet Retailer, where he’s worked since 2007. Before joining Internet Retailer, he was group editor in the payments group of SourceMedia. He also has held reporting and editing positions at Manufacturing Systems magazine, The Associated Press and The Springfield Union daily newspaper in Springfield, Mass. He is a magna cum laude graduate of Yale with a degree in political science and economics.

ABOUT THE AUTHORSJessica Young is a research analyst and business reporter at Internet Retailer. She specializes in data collection methodology, and her analyses of merchant performance in various categories, consumer survey responses and shopper demographics help to anchor the team’s research reports. Jessica also has covered topics including personalization, seasonal holiday online shopping, fraud and payment security, cross-border e-commerce and quarterly earnings of online retailers. Jessica has a Bachelor and Master of Science from the Medill School of Journalism at Northwestern University.

Don DavisEditor at large, Internet [email protected]

Jessica YoungResearch [email protected]



23

ABOUT INTERNET RETAILER RESEARCHAt Internet Retailer Research our goal is to provide data and information about e-commerce that helps retail companies, investors and technology providers prosper.

The team tracks hundreds of metrics on roughly 6,000 online retail companies around the world, including such sought-after data points as web sales and traffic, conversion rates, average order value and key technology partners used to power their e-commerce businesses. We sell this data in its raw format in our multiple online databases, and we dig deeply into these numbers to help inform our 30+ exclusive analysis reports we publish each year on key e-commerce topics, including online marketplaces, cross-border e-commerce and omnichannel retailing. In-depth, data-focused reports are also available on key categories of online retail like apparel, housewares, food and luxury. We also have a robust custom research department, which provides tailored research products—in-depth reports, exclusive surveys, raw data pulls and other products—for top retail companies, consultants, financial analysts and technology companies.

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