January 23, 2013
Q&A with Jill Puleri, VP and global retail leader, IBM Global Business Services
We spoke with Jill Puleri while researching two of our 10 Trends for 2013: Everything Is Retail (shopping is becoming a value exchange that plays out in multiple new and novel ways) and Predictive Personalization (data analysis will enable brands to predict customer behavior, needs or wants). In her role at IBM’s Global Business Services, Puleri helps retail customers adapt to, manage and automate their practices in a rapidly changing landscape. Last week IBM released its annual 14-country shopper survey, finding that consumers “are in a transitional state” as they increasingly diversify their shopping behaviors. In our conversation late last year, Puleri talked about the new behaviors she’s tracking and how retailers need to respond.
What are some of the key trends you’re seeing around shopping and technology?
Consumers are absolutely empowered to the point where they have most of the control over the shopping process because of technology. … It’s not just about the Internet anymore. It’s about the Internet “and”—and when I said “and,” it’s usually mobile. What people are using mobility for depends on the country, but here in the U.S., a lot of people check prices.
What about social commerce?
One of the fastest growing websites right now is Pinterest, and the click-through from Pinterest, it’s the highest referral or click-through site in the world. It’s one of the most aesthetically pleasing websites too, and so people are getting a lot of great ideas from Pinterest.
When you go on Pinterest, a lot of retailers are looking to see, what did people pin from their website, and so you’re starting to get some insight into what is interesting to people and you can start to use that in terms of another input to your forecasting and your demand planning. … Some of the social is starting to come down to reality.
Is Pinterest fairly global?
Yes, and you can get onto Pinterest and pin any website anywhere. So a great case study is, I was working with a client who only had their stores down in the Southeastern part of the U.S., and yet people from other countries were pinning products from their website. So they were starting to get an indication of how far-reaching their brand is.
The sharing aspect of Pinterest is great, where people are getting ideas and re-pinning people’s pins, and so you can see how fast and viral some of these pins and these product ideas can go. It’s free advertising to the retailer.
Do you think we’re moving into an era of so-called omni-channel shopping, where it’s not simply online or brick-and-mortar?
Yes. So how I would encapsulate the whole omni-channel [idea] is, consumers don’t think of channels at all. Consumers think of a brand, and they want to be able to access the brand whether they’re on their mobile channel or they’re on their social channel or they’re on their Internet channel or they’re in the store. And so what retailers need to realize is that the notion of channel-only promotion for channel-only sales doesn’t really make sense. If you get an email and it says “Online only, 50% off,” the consumer is thinking, “Why couldn’t I just print this and go to the store?” Consumers might start in one channel and wind up in another.
How do [retailers] close the deal, if you will, if someone’s researching with them and comes to the store and tries on? How do they have you buy from them versus whip out your mobile device and see how they could buy it from an e-tailer, whether it be one of the auction sites like Gilt or or Amazon, and how do they keep you buying now?
There are some trends that retailers are doing to make sure people continue with them. One is personalized promotion. So, getting to know who the customer is a big, big deal right now. This notion of putting 30 percent off to everybody out there—what you’ll start to see is retailers getting a bit smarter about who they promote to and making sure it’s personalized.
So this is where Big Data and analytics come in?
Yeah, it is a huge Big Data problem. If you think of not only the transaction history that retailers have but then getting it down to, can they segment their customer base based on behavior, not just based upon how frequently they shop or how much they spend. Most retailers have their top-tier customers who spend a lot, and they’ll promote to them and they probably don’t even need to; they’re going to shop with them anyway. So why wouldn’t they use their advertising dollar and go after net new consumers or consumers that don’t shop as frequently or could be moved from one tier of spending to the next?
So that’s where the big trend is going, and the Big Data problem is, if you’re going to segment your consumers, you need to look at their behavior, and their behavior might be identifiable by not just your data but external data. So looking at social, I call it the social exhaust—all the trails that consumers are leaving behind. If they are shopping on the Internet with you and then abandoning a cart, you just learned something about them, right? Why didn’t they finish that transaction? You could also learn how they respond to advertising. Did they click on the promotion you sent? Did they click on the email? You could also learn, do they only shop on holidays and when you mark down to the second markdown?
You can start to learn behaviors about consumers, and then you can decide how you’re going to advertise and how you’re going to promote, how you’re going to treat them differently. So the big trend is around customer analytics and trying to understand who’s who and trying to treat them differently depending on what their needs are.
So how are retailers treating various consumers differently?
A good example is a trigger event. Think of lifestyle events like getting married, getting a dog, having a baby—all of those are trigger events that could cause a different level of spending or a different behavior. If you can start to predict a lifestyle event or at least get the trigger through their purchases that the lifestyle event happened, then you can certainly treat them differently.
So this notion of personalization is big. It’s where the industry needs to get to, and the reason it needs to get there is this little thing called Amazon is the one that’s waking up the industry, because Amazon is very personalized. When you log onto your Amazon and I log onto mine, it’s a very different greeting because they know who you are. They know what you’ve bought, and they recommend things based upon your purchase behavior.
Retailers, especially brick and mortar, have got to step up and start paying attention to the personalized experience that consumers have and they’re expecting. And that requires analytics, and that requires pretty sophisticated systems. The kind of secret sauce for the future is being able to detect and determine what’s the next best action for that consumer, whether it’s sending them a promotion, whether it’s how can you get them to come in another time during the week. If they always buy organic, how can you get them to buy more organic in a different product category? There’s so many cool things you could do once you understand who a consumer is.
Are there any retailers that are ahead here?
The grocery chains have a leg up on customer analytics because of their loyalty cards. So Safeway on the West Coast has Just for U—my coupons that come to me are very different than the coupons that come to you because I probably have a different shopping pattern. Your price of doughnuts could be very different than my price because maybe you buy doughnuts all the time and they don’t need to promote them to you, but I don’t and maybe they need to give me a coupon.
So it’s this notion of treating people specifically on how you want them to behave or rewarding them for behavior. Safeway’s doing a good job, and Kroger is as well. They’re giving personalized promotions as well, based upon previous history. Grocery chains are starting to get it, and that’s causing consumers to expect it everywhere else, right? But they’re the segment that has the most linked data to you as a person because you swipe your loyalty card every time you go. So that’s an easier trick to pull off rather than some department store who only has a credit card history or they’re assuming they know what segment you’re in.
The days of just throwing out a circular in every Sunday paper—those days are going to be waning very fast. I had a retailer tell me that they get more lift in sales when the sun shines than when they print the ad. In the past promotion was just to the masses, and now it really needs to get personalized.
And not only personalized but actually predicting what the person will want or need?
I like to talk about the four P’s. In marketing school, business school, you learned about price, place, promotion and pricing, right? Now what we’re saying is the four P’s are personalized, permission, persuasion and presence.
So persuasion is all-around social, people influencing other people. If you think of permission, that’s the consumer opting in, giving you permission to either have you text them or promote to them directly, or giving you permission to opt in when you go to the store, can you hop on their hot spot, et cetera, so their permission side.
Presence, it’s all about knowing where they are in their shopping behavior—this notion of if you’re online, can you promote to them right there, or if they’re in the store, can their mobile device alert you that they’re there? Presence is really important. And the last one is personalization, which we just talked through.
So those four P’s is an easy way to think about how the industry has shifted, because it used to be all about products, right? And getting the right products, the right prices, the right sites for the right promotion. Now it’s all about, How do you get the consumer to be—to win them over?
Getting back to this idea of shopping moving to all kinds of channels, do you see brands getting a lot more creative with finding ways for consumers to shop?
Yeah. There’s some great examples. One is the Tesco wall [in Seoul]. Carrefour has one too. There’s a lot of grocers putting up the poster with the product that you can ship directly to your home after you swipe the bar code or put your camera over the QR bar code. The poster of the toys, Sears did that in the bus stations in New York, bus stops anyway. There’s a lot of different ways consumers can be triggered to shop with their mobile device, and this shooting QR codes with the camera is a really easy way to do it.
One of the innovations at IBM that we’re piloting is this notion of having your phone and the camera of your phone be a device that can do some augmented reality while you’re shopping. The use case is really cool. Let’s take cereal as an example. You’re in a store, and let’s say there’s 50 different boxes of cereal, and what this technology allows you to do is you can customize the app to say “I want to be notified of which cereal has high fiber, which has low sugar,” whatever my sensitivity is.
Once you do that, the technology does product recognition, gets the label content and gives you a red or green indicator for this is a product that you could pick or not. Imagine how this could help people with shopping faster or even people who have eyesight problems, if they’re getting older. There’s a lot of cool applications around augmented reality like that.
What’s driving retailers to experiment with new ideas right now?
Again, everyone’s trying to compete with Amazon and to create a lot of buzz around their store. The big reason why retailers are excited about leveraging technology is they’re trying to differentiate, and they’re trying to do it through personalization.
Amazon has kind of woken up the industry. They’ve grown 45 percent year-on-year. It took them about 17 years to reach the size they are, and that took Walmart 30. And as Amazon continues to add more product categories—now they’re going into high fashion—other victims of Amazon are starting to wake up. Everyone’s starting to go, “Oh no, now Amazon’s into my category.” It’s really a fun time to be in a technology retail space, because that’s one of the weapons the retailer can use to combat this e-tailer threat.
It seems like Amazon is also driving higher expectations of convenience, especially now that they’re starting same-day delivery.
Amazon’s trying to get down to a two-hour window. So again this gets back to, how can a retailer get you to buy now? There’s a lot of techniques here. Some retailers are starting to look at their suppliers and get exclusive lines. So if you like this whatever it is, maybe you can only buy it from them; you’ll never find it on Amazon. In other words, getting your suppliers to say, if you’re going to sell through me, I’d like this to be exclusive.
From a technology way, there’s this notion we were just talking through of all the tricks around personalization and creative uses of technology like augmented reality to make you pick products off the shelves faster that are more targeted to your liking. That’s what everyone’s trying to create now: something that’s going to be differentiating so that it’s not easy for you to just whip out your phone and save $2 dollars on this product. It’s just, you feel better taking it now.
The other one is this notion of click and collect—buy online, pick up in store. We’ve seen a lot of retailers do well with this, especially in Europe. Tesco does a fantastic job of click and collect, and what they found is that people don’t just go click and collect. They purchase all their goods online, especially bulk items, and when they get to the store, those bulk items are put in their car. So it’s alleviating the hassle of, if you think of big things like toilet paper and paper towels, large dog food, things that it’s just a pain to put in your cart. What they’ve found is it’s a very cool service to allow a consumer to pre-buy those items, have them be loaded into their trunk, and a lot of people actually then go shopping in the store. They want to go buy their produce by squeezing their own peaches or whatever.
So it’s not one or the other, it might be both, and I think that’s something we should all pay attention to.
So we’re seeing people getting accustomed to shopping in different ways?
One of the things I think everyone needs to realize is, are you giving the consumer the various options to shop with you how they want, when they want. The example of click and collect is a really good one, where you just don’t know until you implement it that consumers are actually not doing all their purchasing on click and collect; they’re doing some. Right now there’s just so much experimentation going on, and I think that’s very healthy.
Does it seem to you that in the next few years we’ll see some really major changes in the retail sector, as some experts are saying?
There’s a perfect storm going on. The fact that the recession hit made consumers more savvy with how they spend their dollar. At the same time, Amazon grew and gave the consumer a more personalized and, a lot of times, a cheaper way to purchase products. Consumers are getting used to having things shipped to their home. Plus, at the same time, mobile took off, and so did social. So social, mobile and digital and multichannel all hit at the same time. The old expression “Stack ’em high and let ’em fly,” those days are over.
Retailers have to be more prudent on what inventory they procure. They have to be a lot more savvy around moving inventory around their enterprise. They have to be a lot more savvy on knowing what consumers’ wants and needs are. They have to be a lot more savvy about integrating the channels, and they have to figure out how to communicate and advertise to the point where it feels personalized. That’s a big shift.
At the same time, maybe there are more opportunities today for the smarter retailer?
Yeah. I mean, for little companies like Threadless to all of a sudden be as big as they are, or if you think of all the different business models that are out there with Gilt.com and Haute; you know, Nordstrom bought HauteLook.com. What’s happening is these treasure hunt, auction sale, time-limited sales are something consumers are getting used to. So all of this is happening at the same time, and I think technology is one of the weapons a retailer needs in their arsenal to figure out (a) how to link the channels together, (b) how to optimize what they know about consumers and do some consumer insight and get customer analytics as part of their practice. People do a lot of analytics around product, and they have to start doing a lot more analytics around consumer.
Do you see Millennials driving some new trends as well, especially since they’re so tied to their mobiles?
The Millennials shop very differently, and it’s going to be the next largest group of big spenders post-Baby Boom. As the Millennials age and their spending power gets greater, we’re going to have to pay attention to how do you serve the Millennials, because they don’t have any brand loyalty. They do shop more digitally than anyone else, and they’re very influenced by each other. So the trends I just talked about through social and mobile, et cetera, are even more heightened with them.
They grew up digitally, so they don’t understand why it’s hard [for retailers]. They think, “Every time I log in you show me, you know, men’s underwear. I don’t buy men’s underwear. Why do you show me that?” They think it’s easy.
Are there any other key trends that you wanted to touch on from your research?
Those are the major ones. It’s all around omni-channel, all around customer analytics and personalization. It’s also around rapid experimentation of new technology. Who knows if any of these are going to be the next big thing, but for the retailer today, they’re going to have to figure out a way to experiment and see what clicks to combat the online-only retailers, and that’s probably the biggest threat.