Personalization is the next frontier in e-commerce

The growth of e-commerce has impacted bricks and mortar retailers across verticals. Originally launched for the electronics industry, e-commerce has since expanded to clothing, furniture, household appliances, consumer goods, and many other sectors. The rapid growth of e-commerce is the result of two key factors: cost and convenience. By removing the offline store as an intermediary, online retailers are able to sell their products to customers at a lower cost. And since the products are sold online, customers don’t need to visit the shopping mall to get what they want.

Despite its fast growth, e-commerce still accounts for less than 10% of all retail sales in the US. The figure is even lower for other countries. There is still a lot of upside to be captured and this requires innovation. Many of the incremental improvements have already been made in the form of better marketing campaigns, wider brand selection, improved user interfaces, one-click checkout options, faster delivery services, and flexible return policies. In order to get a leg up on competition, online retailers need to shoot for something bigger.

A prime candidate for the next frontier in e-commerce is personalization. Instead of going to an online retailer and randomly browsing their catalogue item by item, or reviewing their highest rated items, imagine if you could see only those brands, styles, and products that are recommended specifically for you based on your stated preferences and prior shopping habits. Led by retail as a service and private sales sites, this is exactly what many online retailers are beginning to offer.

By choosing the types of products that you know you naturally gravitate to, you make it easier for the online retailer to take those products as an input into their algorithm to produce personalized recommendations. In verticals like clothing and furniture, a stylist’s input can complement the algorithm’s baseline recommendation to add a personal touch to the offer. Depending on the satisfaction of customers with different offers, the algorithm learns to make better recommendations as time goes on.

What ultimately emerges is a new and improved Pinterest. Instead of being the prime online destination for window shoppers, online retailers have the opportunity to become the prime destination for those with an intent to purchase. This intent to purchase is complemented by higher conversion rates due to the greater likelihood of customers buying a product that is aligned with their personal tastes and prior shopping behavior.

The next frontier in e-commerce promises to be both profitable and exciting to follow.