What’s Next for Personalization and Digitization in E-Commerce

We’ll see the evolution of two major e-commerce trends in 2022.

First, e-commerce retailers will work to make their digital homes less of a copy of every other e-commerce site and more of a destination that users want to spend time at. Second, the line between brick-and-mortar and digital is going to become fuzzier and less defined.

Enabling all of this will be technology that’s actually purpose-built for retailers and not just retrofitted for their needs after it’s already built.

Trend 1: Leaning into Uniqueness

Retailers will use new technology to focus less on minutiae like A/B testing the color of a button and more on reconsidering the fundamentals of why users should shop with a retailer at all. If a retailer’s site looks just like every other e-commerce site online, why should users go to it instead of Amazon? Or instead of buying via rapidly growing retail technology on a social channel the user is already on, like Instagram and Snapchat?

The answer is retailers finding unique reasons shoppers should come and spend time in their digital channels. Sephora’s pioneering virtual make-up try-on app is a good example of this. Another good example is sites with customer-benefit-focused personalization that make the customer experience feel like it’s improving every time customers return to it.

As Amazon continues to grow in just about every segment, and social channels and partners like Instacart seek to take ownership of customer relationships, traditional retailers and brands are going to need to find reasons customers should shop specifically with them at their digital storefronts. The brands and retailers who figure this out in 2022 are going to be the big winners of the coming years. Others will need to cede customer relationships more and more to their channel partners.

One of the big areas of opportunity here is personalization. Too much of today’s personalization is done for the wrong reasons. It’s not done to improve the user experience; it’s done to make an extra buck at the user’s expense. It drives short-term revenue but long-term user hate. That kind of user-abusive personalization is the reason increasing privacy regulations exist. Privacy laws aren’t designed to combat something like Netflix that wants to find you a better movie based on your tastes. They’re designed to combat Facebook selling your data to advertisers personalizing annoying ads that follow you around the internet.

The personalization that will win out long term is personalization that has the user’s best interests at heart and works to improve the user experience. That’s the kind of personalization I’m excited to see more of in 2022, and that’s the kind of personalization that will eventually come to the forefront. The good news is that there’s tons of room to innovate there, and the retailers who figure this out fastest today are going to be shoppers’ favorite destinations tomorrow.

Trend 2: Hybrid Shopping Experiences

The second trend is really the counterpart to some of the technology that took off during Covid. Over the last two years especially, we’ve seen the rise of curbside pickup that lets people complete part of their purchase digitally and another part in a physical store. What we’re going to see more of going forward is digital technology that aids the product discovery journey within physical stores.

For example, the idea of needing to walk around looking for a store employee, interrupt them from whatever they’re doing, and ask them for help finding a product when that product’s information is already held in a digital system somewhere is an obviously inefficient and poor experience for everyone involved. Letting people quickly find everything they need in a physical store digitally (i.e. via a mobile app or a digital kiosk within the store) is the companion technology to curbside pickup that will start taking off in 2022.

Walmart and Home Depot are already starting to do this. Today it’s a novelty, but like e-commerce itself, as users grow accustomed to how much better an experience it is, it will become an expected necessity for brick-and-mortar retailers. As stores reopen, but people remain wary of Covid, letting shoppers shop with less need for interaction with another human becomes even more of an advantage.

When you shop online, you don’t have to browse every digital aisle of a store to find milk. You can just search for it and find exactly what you’re looking for. That experience should exist within every brick-and-mortar store because it’s so much better than what we have now.  And the coolest part is the new possibilities for innovation this opens up. If a shopper is already using a digital medium like an app to find that milk, as a retailer you now have new opportunities to improve their experience like telling them about those new organic cookies on aisle 8 that they might like with that milk because they identified themselves as a health-conscious buyer within the app. And then you can improve the experience even more by handing them a digital coupon for the whole bundle and have the app remind them the next time the cookies are on sale. It’s the start of new digital innovation previously unavailable to brick-and-mortar stores. And the possibilities are endless.

How will this all be enabled? Better, purpose-built technology that’s made just for retailers. A lot of the technology that retailers use today isn’t really built for them. Retailers’ handling of the supply chain challenges we saw in 2021 is a good example. What you as a retailer really want to do is sell the product you have, not the product that won’t be in stock again for three months because those orders are much more likely to get canceled. 

But too much of the search and product discovery technology retailers use today makes overly simplistic assumptions like surfacing the best-selling products at the top of search results and category pages regardless of inventory. If someone searches “video games” and you have five Xboxes left, you don’t want to show that person Xboxes unless you’re really sure that’s all they’re willing to buy. You want to see what alternatives you can show them that they might be interested in and that you have lots of. You’d prefer to use personalization to help you figure that out and save the last Xbox for the shopper not willing to buy anything else. 

The supply chain challenges we’re seeing are making more retailers realize that their success isn’t just about how many products they can sell today, but also about how they can minimize out-of-stock rates over the coming months. But the concepts of inventory and out-of-stock don’t exist in the on-site search engines most retailers are built on, so retailers only get clumsy solutions to the problem in their old tech. The same is true for the personalization built as an afterthought into that technology and just about everything else about it.

Entering a New Chapter in E-Commerce

The really exciting part of all of this is the renaissance of innovation we’re going to see from the best retailers in 2022. As they adopt more technology that’s tailor-made for them, new possibilities for how they can make the shopping experience better for their customers and themselves will open up. By necessity, the retail winners will see their digital homes become something users really want to use, whether they’re on-site, in-app, in-store, or some new mix. And the other retailers? They’ll have to settle for selling via channel partners like Instagram, Instacart, and Amazon.

Eli Finkelshteyn is the CEO and founder of Constructor.

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