Lucy Mowatt speaks to James White, Head of UK & IE at Nosto, about ecommerce personalisation and online shopping. They explore who’s doing it well, who could do it better, and James’s predictions for the future of retail.
Just a skim read of Nosto’s About Us page reveals its origins story – and you’ll quickly find it has similar traits to other SaaS success stories.
Born of frustration with the status quo, the company first launched in Finland in 2013. It came about after co-founder Juha Valvanne failed to find an affordable, Amazon-style product recommendation tool for his online menswear store.
“He got together with a couple of friends and they built what became the first iteration of Nosto” says James White. “It delivered product recommendations via machine learning and that’s how it all began.”
Fast-forward to the present day and Nosto has a wide range of ecommerce solutions that sit alongside its first product recommendation tool. From segmentation and insights, to personalised emails and social media advertising, Nosto has a range of tools available online. In recent months, the company has also launched on-site content personalisation, so visitors to ecommerce stores see information and imagery that’s relevant to them.
In order to distribute these services to clients around the world, the company now has offices in the US, France, Germany, Finland, Sweden and, of course, the United Kingdom.
One of the reasons behind their rapid growth is, of course, demand for personalisation tools.
“It sounds really obvious,” James continues, “but we have an expectation [of personalisation] now.
“Spotify and Netflix, for instance, have individual storefronts for every single user. Netflix has 35 million customers, and their storefronts are all different. Everyone can access the same content, but the view they receive is unique depending on their preferences. That’s true one-to-one personalisation.
“We’re not quite at the stage where any retailer can do one to one, with full, site-wide personalisation. I think that’s something we’ll get to in the next five to 10 years. We can do one-to-one in places though, providing product recommendations.”
Read more: Ecommerce Glossary
Making personalisation work for businesses and end users
James goes on to explain how Nosto is helping businesses to achieve one-to-one personalisation online and what that looks like to end users.
“Thanks to cookies, if you spend a lot of time on a site, you might get one-to-one product recommendations. When you’re on a men’s and women’s fashion store, you’ll only see men’s products if that’s what you’ve looked at previously. If you bought trousers, you’ll see shirts, because that’s typical of how customers shop.
“But there are also areas where we’re looking at one-to-few promotions. If you take the men’s and women’s fashion site again, you might only be shown men’s products, men’s banners and men’s menu items on that home page, because you’ve only looked at menswear on previous visits.
“We’re moving from a one-to-all [model], to one-to-one in places, and one-to-few on core pages.”
And if customers log in to shop, there are even more options for personalisation, as James reveals.
“It might be that you might have a B2B website and your high-value trade customers get shown different prices when they log in. They may also see different banners, different bundles and different offers depending on their value.”
And while this is great for the customer experience, what are the benefits for Nosto’s clients?
“Overall, we have a 7x return on spend across all Nosto features,” James states. “If you want to look at individual features, you’ll find it varies widely.”
By way of explaining how these differences in return come about, James uses the example of a luxury fashion retailer. This company may want to show curated but automated bundles and ‘shop the look’ content. It looks aesthetically pleasing on the site and delivers the same experience you get in the store.
“However, when you look at a well-traded site, like ASOS, the ecommerce team isn’t interested in the nicest-looking setup or the nicest-looking outfit. They’re focused on the revenue-driving outfit,” James explains. “They’re looking at profitability and margins. That means they’ll show the customer the five shirts with the highest margin, or the five that are higher-priced incrementally than the ones he was looking at.”
Key markets for ecommerce personalisation
When it comes to the international markets that are pushing at the boundaries of ecommerce personalisation, James points to the US and the UK. As a result, the number of personalisation partners in these markets is growing. And James views this as a positive.
“There are probably five or 10 really solid personalisation partners that you can work with. We don’t see that as a bad thing. It’s great that there’s such a big appetite for it and we’ll all do well.
“In general, ecommerce technology is on a massive upward trend in almost all markets, but the US and the UK are really dominating. The Nordics are nearly always early adopters of all-things-tech and in ecommerce they’re pretty much market leading. However, their market cap and overall size is not as big as the UK or US by quite some margin.
“Ecommerce technology is on a massive upward trend in almost all markets, but the US and the UK are really dominating”
“We do come across some privacy issues in the DACH Market – Germany, Austria, Switzerland – predominantly the German market. They’re quite hot on privacy around opt-in data. In the US they’re extremely relaxed and in the UK we’re somewhere in between, especially with GDPR.”
He goes on to point out that while fashion seems to be the obvious sector to lead the field in ecommerce personalisation, other industries are adopting the technology more rapidly.
“One of the key areas is the supplements, health and wellbeing sector. They’re really replenishable products, there’s a lot of competition and it’s a massively growing market.
“Healthy living has been on the up for five or six years and there are lots of products on offer. Protein and supplements for work outs have been big for a long time now. It’s a very competitive space and lots of brands are online-only, like My Protein and Bulk Powders.
“If you look at fashion, ASOS and fast-fashion brands like SkinnyDip, Missguided and I Saw It First, are all doing some cool stuff. They reach customers with targeted content across every device type. Wherever the customer is, they’re there! But many high-street brands are lagging behind. Take a look at Next, New Look or TK Maxx and their online experience is quite poor. There are zero product recommendations. You might even get recommended women’s products when you’re looking at a men’s product page.”
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Masters of personalisation
I’m keen to know which brands are using ecommerce personalisation tools to their advantage and James has a few names on the tip of his tongue.
“I mentioned Bulk Powders earlier. They’re not one of our clients, but they have a really good experience on a transactional site. They make stuff simple to buy. It’s easy to see what you’re getting for your money and there are almost no barriers. It’s almost like going down a slip-slide to buy. They’re experts at it.
“They use great trigger points on every page, like trust marks. The ingredients are clear, and their vegan and dairy-based products are clearly labelled.
“They get their multi-channel messaging right too. They have an app, they’re using WhatsApp, they’re using text messages at the right times and they’re consistent with those as well. I find them really cool.
“When you consider the luxury space, Dunhill are looking at some great stuff right now and they’re a customer of ours.
“They’re doing some really cool things with personalisation, especially when it comes to understanding the differences between customer segments. They have aspirational shoppers, who tend to be young; they may not be super-affluent but aspire to be part of the Dunhill brand. Then they have their loyal shoppers who always buy the newest product lines.
“They’re doing some really cool things with personalisation, especially when it comes to understanding the differences between customer segments”
“They have identified those segments and are treating them differently. For instance, they don’t show discounting areas to their high-end customers. These people don’t want to buy at a discount, they want to buy it full price and they want to buy it the day it comes out.
“But they also cater to their aspiring customers, who are working their way up the career ladder and will probably be a loyal customer in five to 10 years’ time. They need to let them in somewhere and not lose them to another brand. And these customers do want to see discounts and offers. As such, Dunhill personalise the experience on the home page, the product page, cart page and email, and then they use messaging to reinforce that overall experience.”
The future of ecommerce personalisation
When it comes to new product development, Nosto is looking at ways to integrate online and offline activity.
“About a year ago we started investing in a technology called GraphQL,” says James. “It’s an open set of APIs that allow you to integrate with pretty much anything.
“It means Nosto can integrate with ERP technologies and opens up massive possibilities with our clients. It allows them to engage in omnichannel activities. On a basic level, it will allow their ecommerce platforms to communicate with their till systems, POS systems and sales systems.
“For instance, when a customer’s three shirts are scanned, the store assistant will see commonly partnered item. It means they can ask: ‘Would you like to add this pair of jeans and these socks?’. It could also mean things like ‘endless aisle’ technology, where you have limited stock in store, but you have the whole online store on an iPad, so customers can shop the look.”
James goes on to explain how it will allow businesses to tie online and offline behaviours together. For instance, when the customer is in their favourite store and buy an item, they may give their email address over at the point of sale. This could be used to tie the purchase to their online profile, so the next time they visit the website they’re presented with items that coordinate.
Looking further ahead, James states that there is real opportunity when it comes to mobile commerce.
“It sounds like it should be old, but mobile commerce still isn’t massive. If you’re thinking about visitors to conversions, mobile gets massive amounts of visitors but very few conversions, especially in the UK. The conversion rate of users on desktop is 2.9% on average, but it’s 1.6% on mobile. There’s still a long way to go.
“The conversion rate of users on desktop is 2.9% on average, but it’s 1.6% on mobile. There’s still a long way to go”
“It feels like those technologies have been around for a long time. And maybe they have been, but for a select few retailers – the ones we see in the press and in the highlights reel at every awards ceremony. For the majority in the ecomm world they’re still very new things that need implementing.
“Small things that can make a huge difference to sales. It’s joined up commerce.”
Read more: The future of fashion