Advertisements

The Migration of Web Techniques to In-Store Retail Practices

Via ralphbijker on Flickr

Via ralphbijker on Flickr

Think about the companies doing the most technologically advanced stuff. Amazon. Google.

Grocery stores.

Say what…? The place where oranges sit in piles in the produce section. Boxes of cereal lines the aisles. The frigid ice cream aisle.

Well, they’re not in the league of Google and Amazon. But grocers are more than those aisles of food and ceilings of fluorescent lights you see. Two trends in the industry borrow heavily from the advancements on the Web:

  1. Website optimization
  2. Recommendations

I’m not talking about monitors with web pages inside stores. I mean the shopping experience has been affected by these developments. Here’s how.

Website Optimization => Store Layout and Merchandising

E-commerce sites live and die by their conversion rates. A key piece of the conversion rate puzzle is effective navigation and presentation of items to site visitors. One company that helps with that isĀ  Tealeaf, which records and analyzes visitor behavior to help site owners optimize conversions and return visits.

In a physical space, you can’t record people’s clicks and actions. Or can you?

As reported in a recent Economist article, retailers are starting to video record shoppers’ behavior in the aisles. For instance, here’s how one supermarket used technology provided VideoMining to understand visitor behavior in its juice section:

Another study in a supermarket some 12% of people spent 90 seconds looking at juices, studying the labels but not selecting any. In supermarket decision-making time, that is forever. This implies that shoppers are very interested in juices as a healthy alternative to carbonated drinks, but are not sure which to buy. So there is a lot of scope for persuasion.

These are exactly the kind of metrics that e-commerce sites track to improve their conversion rates. Use of cameras in-store to do the same thing is analogous to tracking visitors to your website.

Personalized Recommendations

Amazon.com really led the movement to provide effective recommendations to existing customers. One report I’ve seen says that Amazon derives 35% of its sales from these recommendations. Amazon’s recommendations are generated from your shopping history, compared to others via collaborative filtering. The success of these recommendations has inspired others to build recommendation engine services, including Aggregate Knowledge, Baynote, MyBuys, RichRelevance and others.

The same thing is happening in-store as well. You know that loyalty card you present to your grocer to get discounts? It’s used to record your shopping history. Historically, grocers have done little with that information. It was more of a device to keep you coming back to the store.

But in the past few years, grocers have been getting hip to the idea that their customers’ shopping history can be used to personalize the shopping experience.

Once, I was product manager for just such a system, called SmartShop. Pay By Touch’s SmartShop used a Bayesian model to compare your purchases against those of other shoppers, and determine whether you exhibited stronger or weaker preferences for a category or product than the overall average. A set of 10 personalized item discounts were then selected for you based on your specific purchase preferences.

On a website, returning customers are presented with a set of recommendations as they shop. In-store, what’s the analog? Kiosks. Kiosks are the in-store interaction basis with customers. SmartShop notified you of discounts via a print-out from a kiosk at the front of the store. This was key – get you the discounts right at the point of decision, when you’re shopping. Not unlike e-commerce recommendations.

Prior to Pay By Touch’s demise, SmartShop was getting good traction among grocers, who were looking for ways to increase basket size, increase loyalty and differentiate themselves. And it wasn’t just SmartShop. Price Chopper and Ukrops use a recommendation system from Entry Point Communications. UK-based Tesco is the granddaddy of personalized recommendations, provided through Dunnhumby.

Teaching Old Dogs New Tricks

While e-commerce benefits from being all-digital and various identification mechanisms, grocery historically lacked these. But that’s changing. Retailer have picked up the best practices of their online brethren. Things are now much more measurable and personalization is no longer the province of the online players.

Looking forward to grocers introducing Twitter into the shopping experience…

*****

For reference, here’s a white paper I wrote about SmartShop when I was at Pay By Touch:

*****

See this post on FriendFeed: http://friendfeed.com/search?q=%22The+Migration+of+Web+Techniques+to+In-Store+Retail+Practices%22&who=everyone

Advertisements

Facebook Beacon Is Dead. Long Live Amazon Grapevine.

Amazon has just come out with two new Facebook apps, as reported by Erick Schonfeld on TechCrunch. One is Amazon Giver, which lets friends share wish lists. The other is Amazon Grapevine, which lets you broadcast your activities on Amazon back to the Facebook newsfeed.

Pardon me…but isn’t that the basis of Facebook Beacon? Well, sort of. There are a few differences.

Amazon made this completely opt-in, which differs from the opt-out philosophy of Beacon. Also, product purchases are not included in Grapevine, but they were an important part of Beacon.

Personally, Beacon doesn’t bother me that much. I did not experience the early versions of Beacon with the too-fast notice that popped up on e-tailers’ sites. No accidentally revealing an engagement ring purchase. But there are times a purchase says something about you.

In fact, I think the idea of sharing your purchases with your friends has a lot of interesting potential. I can think of three different reasons people would share purchase information with friends and check out what their friends have purchased:

  1. Self-expression
  2. Product discovery
  3. Friends’ reviews

I’ve mapped those reasons to several different retail sectors.

  • Apparel = self-expression
  • Computer Hardware/Software = friends’ reviews
  • Consumer Electronics = friends’ reviews, self-expression
  • Home & Garden = self-expression, friends’ reviews
  • Sporting Goods = self-expression, friends’ reviews
  • Baby Products = product discovery, friends’ reviews

For instance, I think broadcasting your Apparel purchases is more a form of self-expression. People’s fashion tastes are an extension of themselves. Participation in some sort of Beacon-like program for Consumer Electronics, on the other hand, would be a chance to provide reviews to friends and read the reviews of your friends. And Baby Products would have a lot of discovery and reviews. See what your friends have purchased for their infants. Anyone who is a first-time parent knows the challenges of figuring out what to buy.

But, Beacon is still controversial, and Amazon doesn’t go as far as broadcasting purchases. So for now, we broadcast our ratings and reviews. This is pretty good. I can learn a lot from that.

The only problem is, the opportunities to share this way are still quite limited. Not too many e-tailers are doing this yet. However, Amazon has a rich history of driving innovation in e-tail. It was the early leader in e-tail. It was among the first to set up an affiliate program (Amazon Associates). It pioneered product recommendations.

So now it’s experimenting with the sharing of product-related information on social networks. Probably won’t be long before other e-tailers get on board.