Conversations at industry event Shoptalk reveal a committed but confused industry
The retail landscape is as diverse as the collection of people that make up the industry. At times, however, it can feel like we’re so focused on our own narrow corner of the market that we lose sight of that fact. Different businesses have wildly different models and different strategies to meet the needs of their customers and clients.
Recently, I was given the opportunity to speak to a wide cross-section of the retail spectrum at Shoptalk, an industry event that “provides a platform for large retailers and branded manufacturers, startups, tech companies, investors, media and analysts to learn, network, collaborate and evolve.” The insights I was able to uncover from these conversations were invaluable, proving that while there are certain conventional wisdoms in retail, each side of the industry interprets what those wisdoms are differently.
I went in with a thesis: in retail, if there are customers willing to pay full price for a product, why does the market continue to offer blanket discounts to accommodate only those that are motivated by discounted pricing?
Through conversations with 19 industry experts with positions ranging from VPs of merchandising to product managers, 100 percent expressed a strong opinion on the value of personalization in retail; a sentiment best summed up by Priya Shenoy, E-Commerce Leader for Nestle Waters.
“Personalization strategy is here to stay,” she said. “We are becoming a one-to-one consumer world.”
While it was clear that taking a personalized approach to retail was imperative for everyone I spoke to, the reality was that there wasn’t one definition of personalization. Rather, it was the parable of blind men describing an elephant: each conversation led to a different description of personalization, and when taken as a whole, offered a clearer picture of where the industry writ large stands on the strategy, and perhaps how we can move further towards creating singular experiences for customers that more thoughtfully considers a business’ bottom line.
In general, the definition of personalization fell into two buckets: marketing and promotion. On the marketing side, personalization means offering customers something that speaks to them on a human level.
“Personalization done properly is what [retailers] owe; or what their consumers deserve,” said Erica Meagher, Digital and Retail Business Development Manager for Elanco. “They know that they will get a better lifetime value from the consumers that they treat properly and offer a more personalized experience to.”
Yet that definition of personalization also carries a weight as retailers, many of whom are shifting their strategies in a post-pandemic world to more digital offerings, navigate how to connect with customers without overstepping their strategy.
“We have to stay in business and we have to offer customers this amazing product at a really good discount that’s also personalized to them,” said Jonathan Strupek, Marketing Manager for Beer Nuts. “There’s also the conversation of what is too personalized; what is too creepy. And that is the line that we’re starting to learn to walk.”
When discussing personalization from the promotional standpoint, subjects had an even more diverse range of opinions. While many saw opportunity in personalized promotions, others expressed concern over a “race to the bottom” mentality when it came to discounting.
“It’s often perceived as a slippery slope,” said one senior director of national accounts. “Once you open the door to a discount conversation you oftentimes tend to train a consumer that they should wait for that every time, and then you become reliant on a really small window of time to do a large portion of your sales.”
Those that saw opportunity in personalized promotion tended to view the strategy through the lens of loyalty. If consumers can be siloed off by their purchasing habits, they can be given special promotional pricing not offered to other customers. And, by that reward system, they build brand loyalty while simultaneously boosting sales. This strategy also presented the issue of “cannibalizing” profit; giving loyal customers deals when they would be buying the same product at full price. By tailoring the offering, however, retailers can find value where perhaps it didn’t exist before.
“Say you’re a traditional apparel retailer,” said Joe Megibow, CEO of Purple Innovation. “If you’ve got someone who’s only buying bottoms from you, and they buy like clockwork once or twice a year—but you’ve got this amazing tops business—giving that customer 50 [percent] off to try a top once is likely not cannibalistic, and potentially a creator for the long-term because you’re giving an incentive for someone you know hasn’t been buying that category a reason to buy without in any way distorting for someone else who is potentially an active tops buyer.”
The definition of personalization may vary, but the overwhelming impression was that retailers see this type of strategy in both its forms, marketing and promotion, as essential for driving sales and building loyalty over time. With many large retailers that previously focused on consumer packaged goods (CPG) as their primary revenue source shifting to a mixed direct-to-consumer and CPG model, new players are entering a new frontier of personalization for their customers.
“Talk is big, action is low,” said Megibow. “Everyone wants to; I don’t think people understand the amount of work.”
To answer my original thesis: the desire to offer personalization while considering a business’ bottom line exists. The only question is identifying barriers that prevent this strategy, and overcoming them. Join us in part two of our Shoptalk series where we’ll discuss the way forward for retailers looking to create a more personalized experience for their customers.
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