Commerce Weekly: The lucrative art of tracking shopper behavior

Revealing shopper behavior, retail battles web with experience and service, and Starbucks' struggles with Square.

Snooping on shoppers pays off

Liz Gannes took a look this week at how online retailers’ desires to track consumers’ shopping habits are resulting in emerging startups offering services to track various behaviors on behalf of retailers. In a post at All Things Digital, she highlights newly launched startup Sift Science, which tracks online shopper behaviors to uncover fraudulent activity, and Commerce Sciences, a startup in beta that offers online retailers a Personal Bar for their websites that uses behavioral science to increase online sales.

Gannes outlines a few interesting insights each company has gleaned from aggregating consumer shopping data. For instance, Sift Science has found that a shopper who types her last name in all caps is 5.6 times more likely to be a fraudster, and shoppers who don’t sign in with a Facebook log-in are four times more likely to be fraudsters. Early findings from Commerce Sciences include using the word “free” — as in “you have won a free coupon” as opposed to “you have won a coupon” — increases sales by 15%, and social influences from displaying what a user’s friends liked and bought had zero effect during the day but resulted in 49% more sales in the evening. You can read Gannes’ report at All Things Digital.

In related news, it turns out Facebook ads are strongly influencing the platform’s users’ buying habits, even if they’ve never ever clicked on an ad in Facebook. Farhad Manjoo reports at Slate on in-depth studies conducted by Facebook showing that ad clicks don’t matter. He reports:

“‘On average, if you look at people who saw an ad on Facebook and later bought a product, [fewer than] 1 percent had clicked on the ad,’ [Sean Bruich, Facebook’s head of measurement platforms and standards,] says. In other words, the click doesn’t matter; people who click on ads aren’t necessarily buying, and people who are buying are almost certainly not clicking.”

More notable, however, might be the way Facebook is managing to gather this data. Manjoo notes that last year, Facebook partnered with consumer data aggregator Datalogix, which tracks the purchasing behavior of more than 100 million U.S. households by tying consumer identities to their purchases through store loyalty cards. Manjoo writes:

“Over the past few months, Facebook and Datalogix figured out a way to match their respective data sets in a manner that maintains people’s privacy … Facebook can now tie its users to the stuff they buy at supermarkets. Armed with this data, Facebook began running a series of analyses into the effects of advertising campaigns on its site. If, say, Procter & Gamble ran a Facebook ad for Tide, Facebook could look at Datalogix’s data to see whether people who were exposed to the ad tended to purchase more Tide in the weeks after the campaign.”

Manjoo looks at the differences between direct-response and demand-generation marketing, and compares Facebook’s ad practices with TV advertising. You can read his report at Slate — it’s this week’s recommended read.

Retail struggles to remain relevant

The days of the traditional retail mall are numbered, according to experts at this year’s MIPIM trade fair in Cannes. Tom Bill reports at Reuters that property experts at the show explained to him that “[m]alls must become more like full-service community centers to survive in the face of a growing list of failed retailers” and that European malls are looking to add such tenants as hospitals, art galleries, education centers and government offices in order to offer services that can’t be found on the web.

Christian Ulbrich, chief executive for Europe, Middle East and Africa at property consultant Jones Lang LaSalle, told Bill that shopping no longer provides enough of a reason for consumers to go to shopping centers. “Stores will get bigger and become more like adventure parks that attack all of your emotions,” he said. “For example, Globetrotter has a climbing wall and cycle track in its Frankfurt store to try out its products.”

In related news, the Kate Spade brand is doing its part to reinvent retail for the future consumer. Mark Wilson reports at Fast Company that the Kate Spade flagship store in Japan is experimenting with the lean startup concept.

The store teamed up with Control Group to digitize its new campaign that offers customers espresso to encourage them to linger and launches a new product every Saturday that can’t be found anywhere else. The Control Group outfitted the store with digital iPad signage that engages customers and allows them to interact with the store’s displays. The cloud-based set up also allows the store to track customer response. Colin O’Donnell, a partner at Control Group, told Wilson:

“They can see sales corresponding with a change. So you can do A/B testing seeing how you drive consumer behavior. Using those web analytics in the real world is a super exciting place to be.”

“With a lean startup mentality, Kate Spade doesn’t need to prognosticate the habits of their customer base,” writes Wilson. “They can hypothesize, test that hypothesis, and refine over time.” You can read Wilson’s full report at Fast Company.

Starbucks’ struggles with Square illustrate challenges all mobile wallets face

The Starbucks partnership with Square that launched late last summer might not be going as well as either company had hoped. Austin Carr reports at Fast Company this week that he and other writers and freelancers at Fast Company have been experimenting with the Square-Starbucks partnership in the wild, and the results were inconsistent at best. Carr writes:

“At worst, the service simply did not work. On average, however, the user experience was buggy and awkward, with Starbucks employees seemingly more confused about how Square works than their own customers. Our evidence is anecdotal — and our sample size small — but the results of our tests are telling, especially given the reputations Starbucks and Square have for customer service. It serves to show that however refined a user experience might be on a local level, scaling such a streamlined UX all at once is borderline impossible.”

Harry McCracken commented on Carr’s post in a piece at Time’s Techland, noting that the service worked well for him in tests at independent businesses last year, but the situation is a bit different at Starbucks because Square is integrated with Starbucks’ POS system and requires a QR code to be scanned. He adds that Carr’s experience is a “sobering reminder” of how difficult the transition from credit card to mobile wallet is going to be. “Plastic may be boring, but it’s universally accepted, it’s understood by both consumers and businesses — and it just works,” he writes. “That isn’t yet true of any of the challengers which are trying to render it obsolete.”

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