What's behind the buzzwords of 2018?
Article published by Zacharie Lahmi, Lead Analyst AI at Keyrus
In my job, more than 80% of the people I met in 2018 used these words in the conversation. And I can’t blame them, they are in the center of most of the articles in my niche.
Anything that is closely related to retail or e-commerce makes mention of those words. They’re on everyone’s minds. In the tech scene, everyone talks about it, and I can’t remember the last startup deck I’ve seen that does not refer to them.
Artificial Intelligence. Personalization
But what’s behind the buzz words? What’s actually going on beyond these words?
I’ve broadly discussed AI in the past, and I haven’t said a third that needs to be said. Lots of literature is available, and people way more knowledgeable than me have already produced great pieces of content.
Even the abuse of the words has been discussed, and I’ve tried to contribute myself in previous pieces. This is why I’d like to focus on the latter for once and summarize what I’ve been observing over the past few months, especially in Consumer Packaged Goods (CPG) & Retail technologies.
CPG and grocery stores feel the need to adapt their
offer and enhance the customer journey.
Gartner reported that they expect by 2019 for “90% of brands to practice at least one form of marketing personalization, leveraging data, content and technologies to improve business results across the customer journey”. And from what I see among Keyrus’ customers, this percentage seems about right.
Personalization started in marketing. It was initiated by online businesses that leveraged collected customer data to provide tailored experiences and messaging to micro-segments. Companies like Dynamic Yield - a leading personalization engine with hundreds of references- are helping brands and retailers to leverage customer data to deliver personalized interactions with shoppers.
Shopping experience has changed. Online shoppers are used for their journeys to be personalized. It’s already the norm. Without even noticing it, buyers raised their expectations.
When buying boxing equipment at Decathlon online, one expects to have tailored recommendation along the journey, and not offers for yoga mattress or any other unrelated products.
Even in grocery stores, buyers expect to receive recommendations according to their cart and previous behavior. This is becoming true offline too. Grocery chains try to tailor their offering (and gather consumer data to do so).
Led by Amazon recent investments in brick & mortar stores and its increasing interest in grocery stores, both CPG and grocery stores feel the need to adapt their offer and enhance the customer journey.
Physical stores are becoming more and more connected, as Auchan initiatives in China hinted. The firm even recently made an announcement to follow the same path in Europe for 2019 and open hundreds of smart supermarkets.
Leveraging customer data is a challenge that hundreds of startups are trying to overcome. From Wi-fi tracking and online-behavior analytics to face recognition and in-store displays, startups are trying to provide retailers with the most accurate data in order to create personalized relationships with customers.
Startup solutions & niche players like Weezmo or Civalue (both Israeli companies with international clientele) enable retailers to gather & leverage large amount of raw data. This data is analyzed and turned into useful marketing tools, that can be used for personalized recommendations.
Access to data is even a bigger challenge for CPG, that need to “ask for permission” to retailers. So even when retailers have an access to data, brands still don’t. Nestle invested $77 Millions in Freshly for accessing consumer data.
To solve that pain, solutions like Civalue enable retailers to offer access to data to the suppliers, and monetize it. If micro-targeted branding usually requires an upfront investment, it usually results in a significant increase conversion rate and customer loyalty, by up to 25%.
But personalization is not in the center of everyone’s minds only in Marketing & branding. It expanded to the whole Distribution & Logistics chain as well.
Speeding up the operations becomes inevitable
Recently, Amazon announced its plan to expand Whole Food benefits and give to more customers two-hour Prime Now delivery services.
As usual, Amazon has driven many of leading trends in personalization and use of AI in retail, expressed in one figure: $22.6 Billion. This is the amount spent in R&D by Amazon in 2018, the highest spending in R&D globally according to Statista.
The effects of consumer behavior changes and rise of expectations are tangible in last-mile delivery. Buyers are expecting to have the choice between numerous options and decide what best fits them. Speeding up the operations becomes inevitable with Amazon challenging the status-quo.
To help retailers & grocery stores compete in this tech-savvy environment, startups offers alternative ways to manage the delivery and operations. Startups provide the tech-enabled optimization that Amazon delivered naturally to enhance customer experience along the buying journey.
Among others, the Israel-based company Bringg enables clients such as Walmart or CDiscount to offer same day delivery and flexible delivery options. Using machine learning & taking into account a wide range of constraints, Bringg's algorithms are able to optimize the routes, the delivery options and inventory management in real time.
Personalization doesn’t stop here. During the delivery, consumers expect to be updated, and brands can adapt the tone and medium according to numerous criteria.
Even the packaging & buying methods started to be personalized. Walmart recently patented methods of using connected appliances to track shoppers’ consumption in the home and automatically reorder missing product.
Every brand will practice personalization in 2019
I expect these trends not only to continue but also to accelerate. Marketers already understood that personalization is a key success factor. High ROI has been proven and justify investments in the space. Nearly every brand will practice one form or another of marketing personalization, leveraging data, content and technology.
User-centric experiences online push traditional retailers to create a new journey for their customers. In 2019, I expect more CPG brands and retailers to initiate changes in delivery & logistics.
Delivery options & return policy are part of the selling pitch online (free delivery, same day delivery, delivered in less than 2 hours...) and it will be the same offline without doubt.