Personalization and recommendations: The future of e-commerce

Commerce has evolved over the span of 100 years. Over the century, it went from being driven by demographics in the 1890s – with retail catalogs offering a limited product selection to being driven by brands in 1990s – with stores and malls offering a rising product selection. With the advent of the world wide web, commerce was driven utility – with the rise of now e-commerce giants eBay and Amazon. In the 2010s, data began taking over as the driving trend.

The current trend

An indication of data-driven e-commerce are personalized e-commerce offering, curated product discovery and 24/7 recommendations. Many e-commerce and retail companies now have incorporated some level of personalization whilst engaging with their customers.

 The best examples can be seen with websites like Netflix – from the time a customer watches their first movie or show, Netflix’s algorithm starts working. They have been so successful at tracking customer preferences that they are spending almost 8 million dollars to keep up with the demand. They’re even using e-commerce personalization to affect the graphics for their shows.  Customers can get to see one of many different graphics of a show based on their preferences that Netflix knows about.

Another example on the other spectrum would be Subscription boxes like Stitch Fix, a personalized style service. Using the preferences provided by the user, Stitch Fix would deliver the best 5 items to suit them in the comfort of their own homes. Based on what customers keep and what they return, they personalize the clothes even further.

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Personalisation completely relies on data gathering to be effective, which depends on the customers as they have to be willing to trust and share their information with a brand. The brand can then, enhance their experience and engagement using this data. It becomes a win-win situation when carried out efficiently, the use of data will correlate positively with customer satisfaction.

While this is the current scenario of how companies are using some elements of personalization today, here are some predictions about how personalization will play a more substantial role in the near future.

The rise in Subscription services

Customers are slowly evolving from product purchases to subscribing. This is due to the rise in personalization – the leading factors driving the growth of subscription-based services. There is plenty of evidence suggesting that subscription services are the future of e-commerce or at least a big portion of it.   

Digital subscription services such as Netflix, Amazon Prime or even Spotify are now the driving our entertainment consumption, while retail subscription services like Birchbox, Dollar Shave Club and Stitch Fix have started becoming more and more popular among consumers.

We have already demonstrated with Netflix, how personalization is breaking ground, another example could be Spotify, with their paid subscribers rose from 0% in 2008 at its launch to 45% in 2017. In other words, if a service is available for free, yet its paid counterpart is providing a better and compelling experience, consumers will not hesitate to invest.

wooden box with bath supplies

Spotify uses personalization to effectively nurture its recommendation engine – which provides daily discoveries of music based on a user’s preference of songs, artists, genres, etc. This has not only increased the app preference amongst users but also increased the exposure of new artists enlisting their albums & singles on the platform.

Automation to support omnichannel marketing

Automation and personalization largely go hand in hand.In the next few years, automation will play a massive role especially with the growth of omnichannel marketing. A study conducted by The Harvard Business Review among 46,000 shoppers in the span of a year stated that only 7% of that group solely shopped online, 20% shopped solely in stores and a whopping 73% shopped using multiple channels.

Omnichannel marketing has challenges yet tremendous opportunities that companies will be able to leverage to utilize automation in the near future and the companies that would be able to leverage it would only be those that can efficiently utilize automation so as to offer personalization across all channels.

Personalised deals and pricing

Shoppers today not only differ on what they want to buy but also on what they would be willing to pay for. Traditionally, companies had to study different price ranges so they would pick on what would give them the most profit, even if this meant that they’d turn down potential customers.

This is now slowly changing. Personalisation is giving way for companies to charge individual shoppers. For instance, Orbitz used to charge Mac users more – based on the assumption that that demographic tended to have more spending power. Hence, it stood to reason that they were willing to pay more.

With the advent of AI and machine learning, companies in the future will easily be able to get into the granular details. This, in turn, will enable more people to get the products and services that they require at an accurate price point based on their past buying decisions. This approach will help e-commerce companies to build attractive bundles or tailor-made promotions for individuals.

AI and Machine Learning

Leveraging AI and machine learning, personalization can scale new heights by anticipating customer support needs before they even have them.

Furthermore, machine learning will also change the language that websites use based on the visitors it gets. In a scenario where a user needs help, machine learning would allow the site to find the best answers based on the information instead of the standard replies that most websites give now.

If the site knows that a returning shopper is looking for some products with respect to a previous purchase, they will be able to recommend the best products but also further provide them with relevant content that would help them make the purchase.

Looking ahead

E-commerce personalization is already here, so if retail or e-commerce businesses have not utilized it yet, they must start now. With more and more innovations coming in, the horizons are widening day by day. These predictions can ensure that your business is on the right path towards personalization.

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