Personalization Across the Supply Chain
A couple of years ago, the concept of having everything personalized arose. It was not marketing tactic, but was a pending reality with consumers willing to be different. Moving from a mass market where one product-fits-all to a personalized offer was, and is still, an impressive challenge for retailers.
Personalization is everywhere
About 10 years ago, all competitors of the French car maker Citroen were seeing the offer to personalize a DS3 model (specific roof top, seats, color combination…) as a stupid idea impacting supply chain costs.Yet today, all of them are doing this, as it has become a must-have. Personalization is more than car colors and added features. It’s everywhere – from food choices, to vacation packages, iPhone protection offers and more. Everything we buy can be more or less personalized.
Millennials are impacting personalization
One key learning of all researches about millennial shoppers is showing strong pushback on impersonal service and a strong desire for personalization from product offer to in-store services. The mindset has become “Why should I buy in a store where I may get poor customer service when I can buy the same product online from the comfort of my own home?” Retailers should understand that personalization is not promotion only, it is having the entire organization serving a shopper as an individual.
Research made by WSGN shows that 82% of the U.S., and 74% of non-U.S. consumers want more human interaction, but 59% of all consumers feel companies have lost touch with the human element of customer experience… Did we forget these shoppers? Probably yes.
Hardline retailers are the first to be impacted, if they are offering the same products and service level as 10 years ago. Look and learn from leading brands like IKEA or Decathlon. They have massively invested in technology to reduce their back-office costs, leveraging the savings to bring more well-trained associates in stores to engage directly with their clients. An NBA store in New York City recently saw an increase of 370% in sales from shoppers engaged with a store associate during their shopping journey. Decathlon recently opened their « Store of the Future » in Singapore where technology is used to improve the customer experience, automating back-office functions to offer world-class customer service and interaction. This is a massive return on investment.
The global retail arises
In this personalized world, many new sales channels are or will be offered to millennial shoppers, each of them trying to get the largest possible « piece of the cake. » One of the most likely outcomes will be that retailers will gradually transform offering a large choice of shopping experiences:
- Click and Collect facilities: Orders could be made from shoppers’ office, with an intuitive mobile application offering personalized assortment or directly in-store using kiosks or QR codes, with less than one-hour preparation time
- Areas of services such as quick service restaurants prepared meals, and convenience stores are seeing massive changes in customer preferences which is changing their business:
- In some countries, 25% of groceries are now bought in convenience stores so they must cater their assortments to growing and diverse demands
- 43% of millennials buy more food from convenience stores than they did three years ago (source: Millennials Marketing 2019).
- 85% of millennials go weekly to a c-store (source: CSP 2019).
- The demand for fresh and ultra-fresh items and local supplied fresh items is increasing so store managers must also be able to engage with local vendors and track and monitor by expiration date and time
- New and innovative services building the image of each brand: cooking classes, wine tasting, sewing lessons to personalized clothes, etc.
- A wide range of new shopping channels such as rental, subscription, Made to Order, etc.
Made to Order, Direct to Consumer, Subscription – all these channels will grow. There is no reason that retailers will stay out of these verticals. The consolidation hasn’t started yet but will soon.
Engaging this strategy is not the easiest change. Many areas will be impacted, and it will force each organization to rethink their global organization, generating savings from back-office functions to bring more people to customer service and interaction. A few examples among many:
- Supply chain: a strong connection between category management and demand forecasts. Store replenishment will be key for decreasing all hidden costs such as stock and waste. Retailers must also consider moving gradually to an autonomous supply chain with efficient AI components. highlighting only potential issues or bottlenecks and proposing solutions to maintain high service
- Pricing strategy: increasing or decreasing a price too quickly could really damage the P&L bottom line. Retailers should consider using AI insights rather than traditional methods to change pricing. A good example is to connect markdown strategy external data such as weather forecasts and patters and consumption trends. By leveraging internal data and external factors that influence demand, AI-powered recommendations can be made for individual store locations on when and how a price should be change during clearance.
- Category management: Introducing customer data science and AI into category management processes will allow retailers to select the best possible assortment for the shoppers visiting their stores. It is not only selecting a SKU, it could also be selecting yogurt flavor, size of can of juice, type of dress for an apparel collection, etc.
- Labor management: the changes in shoppers’ behavior, combined with the need for a more efficient supply chain is heavily impacting retailers’ labor management. Adopting a workforce management solution providing agility and reactivity while keeping employees loyal must be considered. Retailers having made this choice are seeing strong return on investment.
Personalization should not be words only
A few years ago, while leaving in France, my wife and I subscribed to a new loyalty card from a supermarket where we were shopping one or twice a week. This loyalty was a national launch with a lot of advertising on the radio. The promise was to make us recognized customers to get personalized offers.
We were really surprised when we received our personalized coupons for diapers. Our daughter was 20 at that time so, the retailer was too early or too late, but did not have the right timing! And our surprise was even bigger when we saw a mass promotion in the store for the same diapers, at the same price than what was offered to us.
Doing fake personalization through words (“the client is King”) or promotions (“This chocolate bar is discounted because it is back to school period”) is waste of time and money. Personalization is everywhere and relies on a simple concept: retailers should know their customers better than shoppers know the retailer. And this knowledge must influence the entire supply chain.