How personalization shapes the retail industry

NEW YORK — Target wants the retail industry to know it’s brought its “Targét" touch to grocery and omnichannel. 

Ease, joy and affordability are the pillars of the retailer’s framework for differentiating itself to customers, Chief Growth Officer Christina Hennington and Chief Food and Beverage Officer Rick Gomez said during the National Retail Federation’s conference in New York earlier this week.

Like other mass retailers, Target has benefited from the initial pandemic years prompting one-stop shopping, as well as recent months-long high inflation placing a renewed focus on value — leading to mass retailers attracting more grocery shoppers and posing bigger competition to traditional supermarkets. 

While Target a few years ago lagged other large national retailers in areas such as grocery assortment and having a loyalty program, the Minneapolis-based retailer has not only worked to catch up, but now, according to Gomez, sees its innovation in food and beverage and omnichannel as providing competitive advantages over traditional grocers and other mass retailers. 

That innovation ties into Target positioning itself at the intersection of affordability, one-stop shopping and experiential retail, both in-store and online, with “affordable joy,” Gomez noted. 

“At Target, we think about building a shopping experience that's differentiated on multiple dimensions. But it's really about creating an emotional connection to that consumer,” Hennington said in a one-on-one session with Kantar with a packed audience on the last day of the conference. 

Here’s what Hennington and Gomez, who are also both executive vice presidents for the retailer, shared in separate NRF sessions Tuesday about how Target is innovating with grocery and omnichannel.  

Taking a ‘holistic’ approach to value

With the challenging economic environment and the looming threat of recession, Gomez said Target is tapping into different components of value to appeal to consumers. 

“Value is top of mind, but we have to think about value more holistically than just price,” Gomez said, noting consumers also want quality, ease and convenience. 

Gomez highlighted Target’s private brands as a prime example: Good & Gather, which launched in 2019 and is now a $3 billion brand, offers high-quality, better-for-you options at an affordable price while Favorite Day, which debuted in 2021 and is growing by double digits, focuses on indulgence.

“We call them ‘own brands’ and not ‘private label’ because we put as much care and attention into the research, the design, the packaging, the quality as any great brand,” Hennington said.

To provide value through ease, Gomez spotlighted Target’s dinner solution meal bags, which cost around $15 and include the ingredients needed to make family-favorite recipes: “It’s been a huge success.”

Using assortment as a differentiator

Target’s multi-category offerings provide one-stop shopping that people can’t get at most grocery stores, Gomez said: “We’re a $20 billion grocery business. It's a big business for us — bigger than a lot of regional grocers — but it's only 20% of our mix.”

Hennington said Target is looking to provide inspiration with its assortment. 

Drilling further into assortment advantages, Target has a three-pronged approach to its food and beverage business that sets it apart from conventional grocers: own brands; national partners who can offer exclusive, limited-time items; and small, emerging brands often from BIPOC founders and women, Gomez said.

Target is growing its private brands portfolio. “Our own brand portfolio is actually growing 2X [compared to] national brands, and I think that's our guests saying, ‘We are looking for value during these tough times,’” Gomez said.

The retailer introduced a new private label line of pre-mixed cocktails called Casa Cantina last year and in 2021 added a plant-based line under its Good & Gather brand. Target’s Favorite Day is one of the top fastest-growing private label brands by household penetration in the second quarter of 2022, according to findings from Numerator. 

Target’s over $30 billion worth of own brands is a large part of its “secret sauce,” Hennington said.

Gomez noted that Target supports emerging brands to help them scale their business at Target “and beyond.” For example, the retailer worked with the McBride Sisters wine brand to launch varietals: “They've gone on to other retailers and they're selling in other places, but we're really proud that we were able to partner with them in the beginning,” Gomez said, adding that the brand’s Black Girl Magic wine has been “hugely successful” with Target shoppers. 

Hennington also pointed to the commitment Target made in 2021 to invest more than $2 billion in Black-owned businesses by 2025, which the retailer said in May it’s on track to achieve.

While Target, like many other food retailers, has had to stay focused on supply chain availability for the last couple of years, increased innovation in food and beverage that provides “newness” is an area Gomez is especially excited about. Health and wellness, in particular, is one area where Target customers are leading edge and interested in trying new things, Gomez said, pointing to its vegan, plant-based line launched with Tabitha Brown at the start of this year. 

“[It’s] very approachable, very affordable and it has done incredibly well,” Gomez said about the exclusive line.

Experimenting with store formats

Target has completed over 1,000 remodels to date and is rolling out different store formats to meet different markets, Gomez said.   

In March 2021, the retailer promised to invest $4 billion annually in remodels, new stores and online fulfillment enhancements. Last year alone, Target pledged $5 billion to scale its operations in 2022 with work on its digital, fulfillment and distribution capabilities.

For example, the retailer has dozens of small-format locations, which it heavily leaned into in recent years, in Manhattan and paired with college campuses, Gomez said. 

Last spring, Target unveiled its first net zero energy store, which is located in Vista, California, around the same time Amazon announced its pursuit of a net zero carbon certification for a new Amazon Fresh in Seattle.

Now, Target is seeing opportunities to also open larger stores, such as the nearly 150,000-square-foot location it opened in the fall in Katy, Texas. Leveraging different store formats is all about meeting the needs of individual markets, Gomez said.

“We want to show up in a way that's appropriate for that community” regardless of store size, Gomez said.

Boosting omnichannel services

Target has long had a strong reputation for its in-store shopping experience, but the retailer is positioning itself as an omnichannel retailer that blends in-store and digital, Gomez said, noting customers are intertwining different shopping methods. 

“They may start digital and end up in stores or start in stores and end up in digital. They may be in stores and they're on their app at the same time,” Gomez said. “So we need to build both and we need to have the best of both. ... One of the things that we're doing is we recognize that the store experience is just as important as digital.”

The pandemic prompted Target to transform its business overnight, Gomez said, by expanding same-day services and allowing shoppers to get dry and frozen grocery, alcohol, fresh produce and more in a four-minute drive-up pickup. Target has also brought its widely popular in-store Starbucks cafes into its curbside pickup service and has also expanded its pickup and same-day delivery options for alcohol. 

After testing Starbucks drive-up orders in about a dozen stores, Target has now rolled the option out to approximately 250 locations.

“We’re not advertising [the Starbucks drive-up option]. We’re not marketing it. Quite frankly, we don’t need to because the social media alone is driving a ton of trial,” Gomez said. “And our guests, they love it.”

It’s a prime example of how Target is turning to innovation to bring “a little bit of happiness to people’s everyday moments,” Gomez noted. 

Creating a customer-focused loyalty program

Collecting data is important but Target learned the hard way it needed to build a customer-first loyalty program in order to successfully glean shopper insights.

When Target first tried to launch a loyalty program about four years ago, its initial offering was “transactional” by rewarding spending with points, said Gomez, who admitted that Target was lagging other major mass players in offering loyalty programs. 

After roughly a year and not getting the desired results, Target pulled the program: “We lost sight of what we do, what we believe in, which is: data is in service of our relationship,” Gomez said.  

In its next attempt to create what is now Target Circle, the retailer made personalization the centerpiece, allowing members to unlock offerings that are tailored and relevant to them and also letting them vote for which local charities in their communities they want Target to make donations to. With more than 120 million members currently, the program is one of the largest and fastest-growing loyalty programs in the U.S., the Target executives noted. 

Hennington said that Target is connecting its loyalty program data with its retail media network, Roundel, to further boost its customer experience and also deepen its vendor relationships.

“You have to put the consumer at the center ... The point of innovation is to make sure that you are either addressing their pain point or providing the delight that your guest is looking for. I think innovation comes big and small. It's in products and services. And we focus a lot of innovation on ease, providing the joy [and] providing affordability,” Gomez said. 

In an effort to expand accessibility for beauty consumers, L’Oréal last week showcased its new handheld, computerized makeup applicator called HAPTA. 

The beauty corporation’s HAPTA technology aims to help those with limited fine motor skills apply makeup more easily using an ergonomic handle with a magnetic attachment at the top, per a company press release. HAPTA also has a “clicking” function that allows users to maintain the application position they’re in, and save it for future use. 

HAPTA will be piloted through L’Oréal brand Lancôme this year, beginning with a lipstick applicator and expanding application options in the future.

"For years, Lancôme has sought to provide every woman with beauty solutions adapted to their needs. Beauty tech has enabled us to fulfill this mission in an even more powerful way, revolutionizing the way we develop beauty products and services and enabling greater personalization," Françoise Lehmann, Lancôme global brand president, said in a statement. "With HAPTA we are going one step further by making beauty more accessible to use, because everyone should have equal access to it."

Along with HAPTA, L’Oréal also released a new eyebrow makeup applicator called L’Oréal Brow Magic, which offers in-home AR technology through a handheld device with 2,400 tiny nozzles to print a recommended shape onto a user’s brows. The technology will officially launch this year, with the goal of providing more precise eyebrow application without the need for more invasive procedures like microblading.

L’Oréal isn’t the only beauty company interested in making the industry more inclusive, however. Estée Lauder on Wednesday released a voice-enabled makeup assistant mobile application to help visually impaired users apply makeup. Guide Beauty was created by founder Terri Bryant in 2020 to help makeup users have an easier time using products. Bryant founded the brand following her Parkinson’s disease diagnosis, and brought on actress Selma Blair — who has multiple sclerosis — as chief creative officer.

Guide’s patented design eyeliner applicator uses a “wand” shape with a built-in finger rest and a window on the tip for application visibility.

Sponsored content

By Acoustic

What’s the average email open rate?

Marketers have been asking this and other metrics-related questions for years. And as people keep trying to improve their marketing programs, benchmarking your brand’s performance is only becoming more crucial.

With this in mind, Acoustic is excited to share the findings of our 2019 Marketing Benchmark Report. It examines email and mobile marketing messages sent by thousands of brands in 2018 to share industry standards on customer engagement, delivery, device and email client type, and subscriber churn. All of this data helps marketers understand how their programs stack up to competitors and the report’s analysis and tips provide insights to help improve performance and results. (You can actually see how your own metrics compare to top performers in our interactive tool.) So let’s dig into a few of this year’s highlights.

Slicing through the data

Open rates and click-through rates continue to grow: Since 2014, open rates and click-through rates (CTRs) have increased steadily each year — with the biggest jump in 2018. Open rates rose to 24% in 2018 from 21% in 2014, a 14% increase. And click-through rates increased 19% to 3.8% in 2018 from 3.2% in 2014.

This steady rise is likely a combination of two factors: one, brands are focusing more on list hygiene and high-quality subscribers, and two, messages are more relevant due to the increased use of behavior- and preference-based personalization and journeys.

Privacy regulations such as GDPR and CASL (Canada’s Anti-Spam Legislation) that limit how data can be used and shared are rapidly changing the marketing landscape, forcing brands to find new ways to drive loyalty without jeopardizing the privacy of consumers. Because of these and other current and planned regulations, many brands are greatly increasing their focus on list hygiene, permission practices, and quality over quantity. As a result, with the denominator number in metrics improving (list quality), open and CTR metrics are rising and are likely will continue.

Auto races to the top of click-through rates: This is the first year we have metrics for the Automotive industry, and the results were impressive. Emails sent by auto brands clearly click with recipients with a mean of 10%, far above the second highest industry, Computer Hardware and Telecommunications, which has 7.3%. Lowest performing industries include Hospitals, Healthcare & Biotech, Industrial Manufacturing & Services, and Retail & Ecommerce all at 3.0% and Nonprofits, Associations & Government with a mean of 2.8%.

So why are auto brands on top? They tend to send emails infrequently, but when they do, current owners and shoppers often click on recommended service information or browse a new model of interest. So lower frequency and high consumer interest and relevance are driving high CTRs.

Mobile email engagement declines: The percentage of consumers opening emails on mobile devices dropped to about 44% in 2018 from 49% in 2017, likely because modern consumers use mobile devices primarily for inbox maintenance.

Comparatively, the average percentage of consumers opening webmail (such as Gmail or Yahoo) increased to 40% from 33%. As consumers increasingly use mobile for general inbox maintenance, they can more quickly identify and delete messages.

Transactional messages are top performers: Emails that are triggered by a customer’s behavior have average (mean) open rates 20 percentage points higher than non-transactional emails such as promotional offers or newsletters. Transactional messages sent in 2018 had a mean open rate of 47.6% versus 23.8% for non-transactional messages.

Transactional emails have always performed well because of their relevance and timing. Unfortunately, many marketing organizations neither own these messages nor are optimizing their design, content, and opportunities to cross- or up-sell customers or educate new buyers leading to greater customer experiences.

Mobile App Inbox Messages Outperform Push Notifications: Consumers open simple mobile push notifications about 5% of the time while mobile app inbox messages see average (mean) open rates of more than 22%. Push notification content — such as a flight delay, package shipping status, or breaking news — often doesn’t require further action from the recipient. Mobile app inbox messages, however, present a significant opportunity to create an email or web-like HTML experience for customers within the app inbox.

The data in the latest Acoustic Marketing Benchmark Report shows that email and mobile marketing continue to not only thrive but that marketers can expect to see improved results from these channels. See how you stack up by downloading our report.

Nordstrom has launched a “Stylist Ambassador” program, enlisting store stylists from each of its top 20 markets, which include cities in the U.S. and Canada.

The stylists will work as influencers, helping to “bring the Nordstrom experience to life in a variety of ways including social media, events,” media opportunities and other channels, according to a company blog post.

Nordstrom’s top 20 markets are Los Angeles; New York; Chicago; Dallas; San Francisco; Boston; Philadelphia; Seattle; Toronto; Washington, D.C. (including Baltimore); Atlanta; Austin, Texas; Denver; Detroit; Houston; Miami; Minneapolis; Portland, Oregon; San Diego and West Palm Beach, Florida.

Last year, Nordstrom finally ended its long-struggling Trunk Club apparel subscription, a service akin to Stitch Fix where customers would sign up to receive a box of clothing curated by a combination of algorithms and human stylists. But even then, CEO Erik Nordstrom said the retailer would expand its styling services to include more virtual touchpoints.

Nordstrom sought to make clear that the retailer is aware of how much stylists can influence a sale. Customers engaging with a stylist, online or in a store, spend seven times more and report higher levels of satisfaction, he told analysts in May. As a result, the company is investing in styling, ranging from what Nordstrom called “low-touch outfit inspiration through our digital channels to a high-touch and personalized relationship with a stylist.”

That low touch can nevertheless be powerful, according to Deb Gabor, CEO and founder of Sol Marketing. She praised the diversity of the first group of stylists, as seen in a video provided by Nordstrom, and said the campaign overall fits with her recommendation that retailers and brands bring “authentic human connections to a customer experience.”

“The combined approach of personalization and localization enables consumers to take advantage of a high degree of market-level knowledge and might empower shoppers to deepen their relationships with Nordstrom, powered by real humans,” Gabor said by email. “Nordstrom can extend its brand value through interpersonal relationships. This represents a novel 360-degree approach to giving customers access to Nordstrom when, how, and where they want.”

The company will choose a new group of stylists each year, “and our hope is that this program helps them continue to grow their business and expand their styling expertise,” Nordstrom said in its blog post. 

Stitch Fix, which 10 years ago launched as a data-enabled styling service selling clothes by the box, touts its AI to investors, but doesn't seem eager to speak of it to customers.

A few weeks ago in April, the apparel e-retailer told its stylists to refrain from invoking its technology when dealing with customers who say their preferences are being ignored, according to internal communications obtained by Retail Dive.

“Now, not only do they not want us to mention an algorithm, they want us to own the choices it makes,” one stylist, speaking on condition of anonymity, said by email.

In an internal message sent to stylists in mid-April, the company said in part: “Data science and Stylists have always worked hand-in-hand… When that partnership doesn’t result in the best client experience, Stylists should take ownership of the disappointment, no matter the role the data played.”

Additionally, stylists were instructed not to use internal terms “unknown to clients such as ‘AGP’ or ‘algorithm’ or explain our algorithmic technology in their notes to a client.” 

According to Stitch Fix stylists interviewed for this story, the company previously did instruct them to let displeased customers know that its algorithm is always learning, and doesn’t always get it right.

As with the text on its customer-facing retail site — where it says it employs "real people who really get your style," referring to the nearly 4,000 stylists who curate its boxes — the new directive stands in contrast to how the company emphasizes data science in investor materials like its annual report, comments to analysts during earnings calls and communications with business reporters. 

In an emailed statement for this story, Stitch Fix said that its “combination of human touch and data science is unique in the industry; we were the first retailer to hire a team of world-class data scientists to enable personal styling at scale and today we are still the only retailer that employs 1000s of style experts to build and maintain trusted, one to one relationships with clients and help us deliver a completely differentiated, entirely personalized shopping experience.”

Wall Street vs Main Street

Given Wall Street’s affection for tech stocks, it stands to reason that Stitch Fix would promote itself to investors as a data-rich disruptor of retail. 

“Wall Street looks favorably on firms with a technology play, and tends to cut them more slack than it does traditional retailers,” GlobalData Managing Director Neil Saunders said by email. “In some cases part of the rationale is that technology gives companies a strategic advantage, and also that it could be resold or licensed to other firms creating an additional stream of revenue. For some, like Ocado or Amazon, this plays out and it is quite legitimate to see those players as technology-first retailers.”

The apparel box business, practiced by Stitch Fix and a few other companies, is predicated on a marriage between data and the human touch. The company gathers information like preferences, size and budget via style quizzes, and bolsters that with clues from purchases and returns, but enlists people to ultimately fill the boxes.

Speaking at the Milken Institute Global Conference, Stitch Fix CEO Elizabeth Spaulding described the setup much the same way that founder and former chief executive Katrina Lake always did. 

“From the very beginning, I think one of the differentiators of our model has been really, really embracing human-in-the-loop machine learning,” she said during a panel on Retail’s New Reality: Technology, Innovation, and Consumer Behavior. “If you think about why the whole styling model works — and every quarter on record, we’ve improved our keep rate, which is how many items people keep in this box of products sight unseen — is where we’re leveraging the power of data science, feedback from our stylists, feedback from our client community."

But the model’s track record has been bumpy, leading Stitch Fix to introduce the ability to shop directly from its site, and forgo the boxes, in order to stoke sales. In the months since that move, the box business has suffered more than executives had anticipated.

Stitch Fix’s tech advantage is “less convincing” than at other retailers, according to Saunders. 

“While it is creative with technology, it isn’t a pioneer and what it has done with algorithms and AI still has a lot to prove,” he said. “This is likely one of the reasons Stitch Fix is keen to downplay any issues with their technology even though there are clearly some problems.”

Stitch Fix appears to have fallen from grace on Wall Street. At press time, its share price is hovering around $10, down from nearly $100 just about a year ago in 2021.

A preview of the problem

The company didn’t address Retail Dive's questions about its new directive to stylists, which is centered around “Fix Preview.”

That option, introduced in 2021 is an email sent before a “Fix” is shipped that allows subscribers — those who participate in its decade-old box business, as opposed to its much newer e-commerce site — to choose or reject suggestions for items that could go into their box. The added step has contributed to higher retention rates, Spaulding told analysts in March, according to an earnings call transcript from Seeking Alpha.

The preview can be a win for customers as well because there’s a greater chance they’ll keep something from their box. If they do, they can use the $20 styling fee toward the purchase; if they keep all five items they also get 25% off the entire cost.

Fix Preview has also introduced new potential pain points, however, according to stylists who spoke on condition of anonymity to protect their jobs. Stitch Fix’s pitch to customers is curating apparel that fits them well, and meets their preferences. When clients are miffed by the preview suggestions, they tend to assume that their stylists are ignoring their communications and disregarding their preferences or needs, the stylists said. It can be especially irritating when all 10 potential options are accessories like bags or ties, or the same garment in various colors, they said.

It’s the company’s tech that is usually responsible for poor selections like that, according to stylists. Successful tech-generated suggestions also raise other questions, they said.

“The algorithm is often (usually) selecting all of the items for the Preview — this is what stylists aren’t allowed to talk about or blame,” one stylist said by email. “We’re still charging clients a $20 styling fee, but leading them to believe a human stylist is always involved in the process even when that’s not the case. So what’s the styling fee for? Seems really unethical.”

A Stitch Fix spokesperson said that the Fix Preview is generated using various combinations of technology and stylist expertise, depending on the individual client. The company didn’t elaborate on how often the preview is surfaced entirely by the company’s algorithm, entirely by the stylist or some combination. 

More than the algorithm

Being more transparent around its AI, rather than less, may actually be more helpful to Stitch Fix, experts say.

Technology in general, at least for now, isn’t great at handling the many mercurial factors around apparel and style, according to Piyush Patel, chief strategic business development officer at AI platform Algolia, which specializes in search and discovery.

“In fashion, I think there’s such a subjective element of what is right,” he said by video conference. “It’s going to take the input and give you the output, that’s all. It doesn’t have a preference, humans have a preference. If I didn’t have my cup of coffee this morning, I might think differently about stripes versus not stripes. Or something I saw, where stripes didn’t look good on somebody else. Maybe I just don’t like stripes, who knows? So many subjective elements go into fashion that I don’t know that you can trust either humans or data.”

Companies like Stitch Fix that present themselves as tech-forward often face elevated expectations from investors and consumers alike, according to Patel. Yet when it comes to making choices in areas like clothing, tech is less nimble than humans, who are aware of the subtle shifts in trends and understand the emotional response to style, he said. One way to manage customer expectations is to pair recommendations with the reasons why they surfaced.

“Put tags under it that say, ‘This was based on the colors you’ve chosen. This is based on the size you’ve chosen,’” he said. “Let the consumer drive the data that’s being used to make recommendations, and show them why. Then it’s not creepy. And then it can be wrong, and humans can accept it.”

Steve Zisk, senior product marketing manager at customer data platform Redpoint Global, said it’s understandable that the company doesn't want stylists to point to the algorithm when a customer complains. 

“Both customers and brands themselves find it easy to blame the tech,” Zisk said by video conference. “But blaming the tech doesn’t help because the tech is a reflection of somebody’s idea of what was supposed to make things better. The difficulty with that message is, I as a customer don’t really care. What the customer wants to hear is ‘I’m sorry.’”

Still, having stylists “take ownership of the disappointment, no matter the role the data played” is irresponsible, unfair and ultimately will hurt workforce morale, according to Colorado State Business School Professor Jonathan Zhang.

Rather than admonishing stylists to minimize tech’s role, companies may get further with customers by being more up front about it, he and others said. 

“The algorithms are not perfect. Algorithms have certain skill sets, like humans have certain skill sets, and both make mistakes,” Zhang said by phone. “I think it’s important to avoid this illusion of technological superiority.”

Even if Stitch Fix could perfect its algorithm, however, it has bigger issues that would remain, including longstanding challenges that all retailers face, Saunders said.

“There are concerns around demand for their service, consumer appetite for apparel in general now that inflation is taking hold, and the underlying economics of their business model,” he said. “Having the best technology in the world doesn’t necessarily resolve those things – it just acts as a fig leaf to hide problems elsewhere.”

If you haven't heard of Roblox, ask your 10-year-old to explain it. 

Because while most of the adult population may still be struggling with the concept of the metaverse, chances are the tween in your life is already in it. 

Launched in 2004, founders David Baszucki and Erik Cassel wanted Roblox to usher in "a new category of human interaction." 

The company built out three major arms: Roblox Client, the application that allows users to explore 3D worlds, Roblox Studio, which allows developers and creators to build, publish and operate those 3D experiences, and Roblox Cloud, which includes the services and infrastructure that powers the platform. Users create a unique avatar that is able to go across experiences, like games and events. 

The result is a digital space where people can play, learn and communicate in a world that is user-generated. 

And it is gaining steam. 

In 2018, there were 12 million daily active users on the platform. By the time the company filed paperwork with the securities and exchange commission in the fall of 2020 to go public, 31.1 million people were on the platform every day — and 54% of those users were under the age of 13. In mid-February, when the company reported earnings, that number hit a record of 45.5 million average daily users for fiscal 2021, an increase of 40% year over year.

That's a lot of young people in one space, and a number of brands like Gucci, Nike and Forever 21 are on it, creating experiences for a plugged-in audience. 

But, should other retailers follow suit and be on the platform? And is it a meaningful way to build brand loyalty? 

The case for Roblox as a marketing tool

Take Forever 21, which joined the platform in December. The retailer, which is owned by Authentic Brands Group, created "Forever 21 Shop City," where users can manage a digital store and compete to become the top shop. Participants customize the look of their store and complete tasks like stocking inventory, operating the cash register, hiring employees and assisting customers. 

The fast fashion retailer's objective is to gamify fashion and encourage players to express their individuality by running, and customizing, their digital spaces. Products can be purchased for users' avatars with monthly "metamerch" drops — namely, apparel, makeup and accessories.

But some products can be purchased in real life. A page on the retailer's website dedicated to the partnership currently includes a quilted zip-up puffer vest, a colorblock shoulder bag, a cable knit sweater dress, and high-rise jeans, among other items. 

The ability to purchase both digital and physical clothing creates different touchpoints for customers, and has the potential to be an additional revenue stream as well as a means to build brand recognition. 

Retailers joining Roblox is a "sound strategy" to increase brand awareness and sales, according to Jenn Szekely, managing partner at Coley Porter Bell. "As a person with two children under the age of 13, I can tell you firsthand the amount of requests I get from them to purchase things from their visibility to brands and products in their online entertainment usage." 

Szekely said that brands entering into the world of Roblox is a great long-term strategy that should be considered. "By getting to these younger audiences early, they are building affinity to brands they most likely would not be aware of yet," she said in emailed comments, adding that a presence on the platform demonstrates to existing audiences that a brand is "on the pulse of immersive technologies." 

Retail is evolving, and as the metaverse moves forward, omnichannel is not only about physical retail and e-commerce. 

"This is the ultimate omnichannel, because we're not just talking about stores and DTC and web 2.0," Keith Niedermeier, clinical professor of marketing at the Kelley School of Business at Indiana University, said in an interview. "Now we are talking about web 3.0, and a persistent digital world where millions upon millions of customers are spending significant time. So if that's where they're spending their time, and their engagement, that's where brands and retailers have to be." 

And when it comes to interacting with the larger metaverse, the level of engagement is expected to grow. A recent report by Gartner forecast that 25% of people will spend at least one hour a day in the metaverse by 2026. 

Companies are taking note. In December, Walmart filed multiple trademark applications regarding virtual products. Meta, owner of Facebook, is investing $50 million to create a "responsible" metaverse where users can communicate in a virtual environment. Microsoft announced it will acquire Activision Blizzard to grow gaming operations and build infrastructure for the metaverse.

"Vendors are already building ways for users to replicate their lives in digital worlds," Marty Resnick, research vice president at Gartner, said in a statement regarding the research firm's report. "From attending virtual classrooms to buying digital land and constructing virtual homes, these activities are currently being conducted in separate environments. Eventually, they will take place in a single environment — the metaverse — with multiple destinations across technologies and experiences."

Roblox in particular is a means for companies to engage with the metaverse and get their brand identities in front of a younger audience. Because, as Niedermeier points out, tweens for the most part are not hanging around malls to discover products. 

"Thirteen-year-olds aren't cruising the mall everyday after school," he said. "Stores in malls were the major brand builder where you could interact with the brands, the designs, the offerings, the employees. That's not where kids are spending their time now. Kids are spending their time online, and increasingly, in this digital space." 

Instead, retailers need to go to where their audiences are gathering, according to experts. 

"If you are targeting that age group, you absolutely should consider that as a major opportunity for you," Hana Ben-Shabat, founder of Gen Z Planet and author of the book "Gen Z 360," said. "Because it is marketing 101. You have got to be where your customers are. And here millions of them are hanging out on Roblox. Why would you not go there?" 

Avatars and spending 

An advantage of being on the platform is the ability to create virtual items that can be worn or used by an avatar. Each user creates a digital identity, and has the ability to keep the same avatar across Roblox. When users sign up, they personalize their avatars by selecting a body type, clothing and "gear" which may include weapons, musical instruments or skateboards. 

While signing up for Roblox is free, along with most of the platform's experiences, users can also use real-world currency to purchase Robux, the platform's digital currency. Robux is the way people within the universe can purchase experiences and items for their avatar. 

That means if a retailer sells a digital hat with a logo, let's say, the user will be able to wear the hat while visiting different experiences on the platform, and thereby show off the brand. Just like in real life where people can sport labels and perhaps be influencers, avatars can show up wearing items that are valuable within the digital world. 

"You're becoming an ambassador for a brand," Ben-Shabat said. "Your avatar can go between different games, and show up as a representative of Gucci, for example," she said, noting that, "right now everyone wants to be an influencer." 

Avatars wearing brands from space to space has big potential, according to Niedermeier. Because, if the metaverse evolves in ways that are being forecast, avatars don't have to stay within one world — they can potentially jump from platform to platform. "That's one of the huge values to brands," he said. 

Additionally, virtual items can translate to real-world money. Last May, Gucci offered a limited-time, digital version of its Dionysus Bag with Bee through its Gucci Garden exhibition. The bag sold for around $6, but when people started flipping the product its price went up. One user paid around $4,115 for the digital purse, while the actual, real-life version of the bag sold for $3,400, according to reports. 

Which would you rather have?

A real-life $3,400 Gucci Dionysus Bag with Bee

OR

A virtual $4,100 Gucci Dionysus Bag with Bee in Roblox pic.twitter.com/Xz4T4QVLoj

— Morning Brew ☕️ (@MorningBrew) May 25, 2021

So while brands are creating hype and brand awareness on the platform they could potentially be accelerating sales. And those digital purchases come with high margins because, as Niedermeier states, there's "no holding costs. There's no manufacturing costs. There's no distribution costs." 

Creating and consuming, simultaneously

While companies with name recognition are building out Roblox as a channel, everyday users are also generating income from selling digital items. The developer community earned $538.3 million in 2021, exceeding the company's goal of $500 million.

Roblox was launched as a way for people of all ages to generate their own worlds, as a "co-experience platform." 

There are reports as to how some young creators have experienced wild financial success through Roblox, and others on how it eludes them.

The thing to note, though, is that users are both creating and consuming content through Roblox. Brands should understand that co-creation is foundational to how a generation of young people are approaching a digital experience. And that may set the tone for future marketing. 

"This is tapping into something that is so fundamental for Generation Z, which is their creativity," said Ben-Shabat. "This is a very creative generation. They grew up with access to digital tools that no generation has before them." 

Having an audience co-create digitally may give retailers a deeper understanding to how products may operate in reality, and inform real-world product design, according to Niedermeier. "They can crowdsource products without having to actually produce them. It just exists in this virtual world, which then could translate into — at some point — into real-world products." 

The potential challenges

While creating an experience that is tailored to a young audience may appeal to brands, it does come with some potential drawbacks. Namely, what's the best way to navigate a space that is primarily used by kids? 

Roblox is aware of the potential complications, and enclosed language in its S-1 filing to address it. Namely that the Children's Online Privacy Protection Act applies to its operations, as it imposes requirements on operators of websites that are directed to children under the age of 13. 

Retailers need to keep in mind that, while Roblox is predominantly a platform for kids, it also is a multi-generational social community, according to Mark Geden, head of strategic planning at Tribal Worldwide London. It "contains all the peer pressures, low levels of moderation and risks of predatory activity that can be found elsewhere," he said in emailed comments, noting that it presents a degree of inherent brand safety risks. 

Other experts agree about moving forward, but with care. 

"I think retailers should be moving with some caution, and largely because the platform is dominated by minors and children," Niedermeier said. But, he says, those brands that are "at the cutting edge and want to stay at the cutting edge are not coincidentally the first ones getting into this space." 

Roblox addressed some of those concerns in a letter to shareholders released Tuesday. "[W]e must maintain the community's trust. And to do that, our platform must be safe and civil. Since our founding, safety and civility have been at the foundation of everything we do and we will continue to invest substantial resources to improve on this key priority." 

The company is also making moves to expand its engagement with older users. It named attracting users in older age demographics as one of its "key objectives." CEO Baszucki in the company's recent earnings call noted that in January its 17- through 24-year-old segment grew 51% year over year, stating that it was "a wonderful validation of our vision to bring people of all ages together on our platform."

While co-creation is fundamental to the platform, it does mean that retailers have to give up some brand control as users expect for interactions to be collaborative. 

But, that may be part of the larger future of how brands decide to market to their future customers anyway. Especially with a generation that holds community, creation and competition in high regard, according to Ben-Shabat. 

Roblox "shows a very strong understanding of who this generation is, because it plays on all these elements," she said. "This is going to the heart of the psychology of this generation." 

Finally, there is always the risk that users simply decide to abandon the platform because one that is more compelling arrives on the scene. Roblox understands that risk, stating that because a majority of users are under the age of 13, the demographic "may be less brand loyal and more likely to follow trends, including viral trends, than other demographics." Young people are ripe to change means of entertainment rapidly. 

Yet, tens of millions of active, daily users on the platform means Roblox currently has a significant place in many users' lives. 

"It's the Wild West," Niedermeier said. "And these things are going to continue to be moving targets. This is for the edgy marketers who have the stomach to roll with these changes." 

In the midst of a beauty revamp, J.C. Penney on Thursday introduced new beauty experiences powered by artificial intelligence and augmented reality through a partnership with Revieve.

The department store launched an AI-driven skincare adviser experience, which uses diagnostics technology to analyze selfies and provide recommendations for a personalized skincare routine. Users of the online experience will also answer a questionnaire.

Alongside its skincare adviser experience, J.C. Penney also debuted makeup try-on capabilities via AR.

J.C. Penney is turning to technology to help drive its revamped beauty strategy. The department store in late 2020 announced it was planning a new beauty concept after previous partner Sephora teamed up with Kohl’s instead. The vision included selling a variety of products across the mass, masstige and prestige categories. The new offering launched in October last year at 10 stores, with inclusive beauty site Thirteen Lune serving as a flagship partner. The department store said at the time that the concept would be rolled out to all of its locations by 2023.

From the start, J.C. Penney emphasized inclusivity as a core part of its new beauty concept, and the department store sees its new tech offerings as an expansion of that promise.

"We want to be the shopping destination of choice, offering a personalized approach that fully celebrates and honors them as unique individuals," Michelle Wlazlo, chief merchandising officer at J.C. Penney, said in a statement. “Our partnership with Revieve allows us to deliver on our customers' desire for personalization regardless of age, gender, race, skin tone, beauty regimen, or budget.”

The features J.C. Penney is adding have been pursued by the industry at large for years. AR try-on capabilities, specifically for beauty products, have expanded far and wide, and became even more relevant when the pandemic did away with in-store try-on. 

Personalized product recommendations — and even custom-made formulas for beauty products — have become increasingly popular among startups entering the beauty space. The likes of Prose, Proven and Function of Beauty create unique product formulas for shoppers based on data from questionnaires and other sources. And even traditional brands and retailers have worked to create unique recommendations for shoppers. Clinique just this July opened a “Clinique Lab” concept at Macy’s that uses diagnostics tools and facial scanning software to analyze skin and provide product recommendations.

For J.C. Penney, the work to improve its beauty offering comes as the retailer more broadly is seeking to reinvent itself after a 2020 bankruptcy. The company has rolled out new private label apparel lines as well that, much like its beauty offering, emphasize inclusion and diversity.

Joining other retailers investing more in augmented reality, Walmart announced this week that it will release two new app-based AR tools for at-home and in-store shoppers, according to a blog post by Walmart eCommerce Senior Vice President of Site Experience Brock McKeel and Walmart Global Tech Senior Vice President of New Businesses and Emerging Tech Cheryl Ainoa.

The new “view in your space” feature, which will be rolled out to all customers by early July via the iOS app, allows shoppers to view select furniture and decor items in their spaces. This will initially be available for 300 items but Walmart will expand the offering to back-to-college items in the coming months.

The other feature – which does not have an anticipated launch date and is still in development – is an in-store AR app feature to personalize product information. Shoppers and employees will be able “to simply point their mobile device camera at our store shelves via the Walmart app to filter our assortment based on your personal preferences,” per the post.

Walmart’s latest announcement shows a sense of confidence that its shoppers want more personalized, immersive experiences – at home and in stores.

“We believe the closest store to our customers is in their pocket, and we are focused on making that always-on experience as easy, engaging and personalized as possible,” said McKeel and Ainoa.

The “view in your space” feature uses haptic feedback as well, vibrating the phone when users drag furniture or decor beyond room boundaries. It was also developed with customers with disabilities in mind, per the post, with voice-based instructions for blind or low vision shoppers, and gesture controls for those with limited mobility.

This is not Walmart’s first step into AR technology, and it is focusing its efforts on both customers and store associates. A LinkedIn post from Walmart Global Tech’s Executive Vice President Srini Venkatesan last year discussed the launch of an AR tool “that instantly maps and tracks every box in the backroom for store associates,” allowing employees to avoid lifting each box to read content labels.

Other large retailers have been utilizing similar AR technology as well. Earlier this month, Amazon launched a new AR app feature for shoppers to virtually try on select sneakers. Beauty brand Sally Hansen released an AR nail polish try-on tool in February as part of a partnership between its parent company Coty and the technology organization Perfect Corp. Image sharing company Pinterest also released a home decor and furniture AR feature in February, with items from Walmart, West Elm, Wayfair, Crate and Barrel and more.

After appointing new digital leaders, Build-A-Bear Workshop, Inc. has redesigned its website with improved checkout, payment and product visualization features, the company announced.

The company enhanced the Bear Builder 3D Workshop tool to guide shoppers through the bear building experience, from stuffing their bears to finalizing their design. Shoppers can also choose from a wide selection of clothes and accessories to customize their bears, the company said.

The company added a buy online, pick up and store option to allow customers to pick up their bears at a local workshop. Deloitte Digital also helped the company modernize its website to improve how it showcases its products, shares events and promotions with shoppers and view the site across various mobile devices.

Build-A-Bear Workshop said it invested in marketing technology to provide a personalized experience for its customers. Jenn Kretchmar, the company’s chief digital and merchandising officer, said in a statement that it had grown its digital demand by 180% for the first half of 2022, up from the first half of 2019. 

“We want our guests to get the same wow factor they do when they walk into a retail store as when they engage with the brand online,” Kretchmar said in a statement. “Our website plays a critical role in the guest experience, from pre-shopping before visiting a Workshop location, to building and personalizing a furry friend online for home delivery. With the site’s enhancements, we will soon be able to show product availability specific to store locations, making same day delivery or in-store pick up gift-giving options even more seamless.” 

In addition to modernizing its website, the company has also shaken up its leadership to steer its digital direction. In November 2021, the company hired Char Nicanor-Kimball to serve as its vice president of e-commerce. The company also promoted Art Huggard from the director of e-commerce development to vice president of digital technology.

After suffering steep losses early in the pandemic, the company reported a 28.4% increase in Q1 2022 revenue to $117.7 million. The next quarter, it reported a 17.1% increase in total revenues to 218.3 million, the highest in the first half of the company’s history, according to its Q2 2022 earnings report.

“We continue to make progress on our strategic initiatives including accelerating a broad-reaching and comprehensive digital transformation, continuing to evolve our retail experience and footprint while optimizing our expanded omnichannel capabilities, and leveraging our solid financial position to invest in initiatives intended to drive growth and return value to our shareholders,” Sharon Price John, Build-A-Bear Workshop president and CEO, said in a Q2 earnings statement.

Alongside its digital investments, the company has been attracting in-store shoppers again. In an investor presentation, the company said that less than 60% of store visits are planned, and the top reason for visiting its stores is birthday celebrations. The company also noted in the presentation that it plans to add about 20 stores in North America this year and celebrate its 25th anniversary with exclusive events and products.

Expanding its reach into e-commerce, Google announced the launch of new shopping features at its Search On 2022 event Wednesday, including a Shop in 3D tool that will be available soon for select sneakers. The technology company will assist businesses in the upcoming months by creating 3D models of their sneakers for free by using a group of still images. 

Additionally, the company is releasing a “shop the look” tool that provides a set of suggested products to complement the apparel item a user is shopping for. Google has also expanded its personalization functionality, allowing shoppers to input their preferred brands to see more of them in future searches, suggesting styles based on previous searches in its Discover function and launching dynamic search page filters based on trends, according to a blog post by Google’s Senior Director of Product and Shopping Lilian Rincon.

Google also announced a buying guide feature — currently only available for specific category topics — meant to help customers with harder purchasing decisions by aggregating research from a variety of sources.

While Google may not be a retailer itself, it's changing the way shoppers can learn about and interact with brands on its platform.

“We're not a retailer, nor are we a marketplace,” Rincon told Retail Dive. “Instead, we enable an open and free commerce ecosystem. So it's our mission really to connect shoppers and merchants regardless of where the final transaction occurs.”

Behind Google’s understanding of retail is its Shopping Graph, an AI-enhanced model that understands over 35 billion product listings. This is up from 24 billion product listings last year, which Rincon says is an achievement that’s helped create the latest features.

“The opportunity to improve the shopping experience we think is huge,” Rincon said. “And we're building the tools to make those shopping moments more natural, intuitive and fun.”

Other features announced Wednesday by Rincon at Search On include a new way to access available products. By searching the word “shop” on its search engine followed by the name of an item, users in the U.S. will now be shown a visual feed of products and resources related to the product.

Similarly to Google, other tech platforms have been expanding their shopping functionalities. Instagram in July released a pay-in-chat tool for small businesses, and that same month Pinterest released new commerce features a few weeks after tapping Google’s former head of commerce as its new CEO.

Grocery stores and hotels might at first glance seem to have little in common. But for Ryan Draude, the similarities are crystal clear.

Just as hotels offer rewards to people who regularly stay with them and take steps to recognize guests when they walk in, Draude, head of loyalty and digital for Giant Food, thinks one of the most effective ways food retailers can build ties with their customers is by turning grocery shopping into a personalized experience built around their needs and preferences.

To accomplish this for the Ahold Delhaize-owned grocery chain, Draude is looking for inspiration to his former role overseeing the frequent-guest program operated by lodging chain Choice Hotels International. Among his key takeaways from that job is that customers want to feel that a merchant appreciates them and is committed to helping them get what they want — and won't hesitate to leave if they spot a better option, Draude said.

For now, Draude is focused on using Giant Food's e-commerce program, Giant Flexible Rewards, to deliver personalized pricing, product recommendations and rewards to customers that also relate to their experience in the chain's stores. Later, the company may add technology to its locations that gives customers the ability to signal their presence in stores using a smartphone and then receive location-based promotions, he said.

"My biggest fear is if a grocery store opened up half a mile closer to my member's home than a Giant was, what are we doing [that is] so differentiated that would continue to make them drive that extra half a mile to go to our store?" Draude said

Giant Food is focusing on personalizing the shopping experience at a time when grocers are looking for strategies to maintain the momentum they have made connecting consumers with essential goods during the pandemic. 

Findings from a poll of 1,000 consumers Grocery Dive, Retail Dive's sister publication, recently conducted with market research firm Inmar Intelligence suggest that the grocery industry faces obstacles as it looks to convert customer relationships built in stores to online — especially where the center store sales that are key to grocers' bottom lines are concerned.

Three-quarters of participants in the survey said the center store is "absolutely" or "mostly" relevant to their shopping habits. But just 9% of respondents said they use their local grocery store's e-commerce service to shop this department, while more than nearly 70% indicated they turn to Amazon, Walmart, Sam's Club or Costco for their favorite center store staples.

Customization strategies built atop loyalty programs like the one Giant Food operates may hold at least part of the answer for grocers as they look to hold onto customers smitten by e-commerce, experts said. Grocers now have access to a variety of personalization tools, including customized coupons and promotions, shoppable recipes based on a customer's nutritional preferences and spending-related discounts. But retailers need to carefully test options and prioritize those that make it easy for shoppers to find their preferred products and also discover new items amid what can be an overwhelming center store assortment, sources noted.

Serving shoppers a selection of center store goods that they are likely to be interested in is critical to retaining their allegiance online and alleviating the "click and scroll fatigue" shoppers run into while online shopping, said Spencer Price, co-founder and CEO of Halla, a startup that specializes in grocery personalization technology. 

"A process of elimination to some extent is one of the most important parts of personalization because you don't want to be inundated with tons and tons of products that you know you're never going to try or buy," said Price.

Using analytics to offer smart substitutions when items are out of stock is also essential to building relationships with consumers, said Sean Turner, co-founder and chief technology officer of Swiftly, a startup focused on digital loyalty technology. In 2021, Walmart introduced online shopping substitutions powered by artificial intelligence, boosting customer acceptance of those items above 95% as a result.

"It used to be personalization was just about 'how can I get shoppers products that they're interested in at a good price?'" but that has changed as retailers look to build deeper relationships with customers, said Turner. Now, he said, grocers face the tougher challenge of convincing people they understand their needs and are ready to meet them — without making them feel like just another customer.

Another factor behind the growing interest among grocers in developing personalized customer relationships is that shoppers themselves have an unprecedented ability to track prices, putting pressure on retailers to closely follow their competitors to ensure their customization strategies remain relevant, experts said.

"Whatever response you're going to take — whether it's a price change, whether it's an assortment shift, whether it's a new promotional cadence or approach — it all demands tracking your competition with much more granularity because that's what ultimately the shopper is able to do now," said Ben Reich, founder and CEO of Datasembly, a California-based company that gathers information from e-commerce sites for clients, including grocers, through a process known as web scraping.

Building a grocery store for every customer

While brick-and-mortar grocers have added shortcuts that help shoppers find relevant products in center stores and other departments, they're only beginning to scratch the surface of what a truly personalized shopping experience can be, according to online grocers that specialize in this approach. 

Because they don't have storied brands and physical locations to build awareness, e-grocers are focused on offering new customized shopping platforms built around advanced technology like machine learning.

"Based on what I know about you, based on what I know you'll buy [and] what you won't buy, I can build a specific grocery store" for every customer, said Abhi Ramesh, founder and CEO of e-grocer Misfits Market. "That power exists in the digital universe in a way that can never exist in person."

Ramesh's company, which started three years ago in 2018 selling cosmetically defective produce, has since raised hundreds of millions of dollars to feed its ambition of becoming a full-fledged grocer. Every customer who opens Misfits Market's app sees a personalized assortment of foods determined by the company's in-house machine learning technology, and Ramesh wants to take that personalization to an even higher level.

The company's goal, Ramesh said, is to only show customers items that might interest them and cut out all the products they're not likely to purchase. In addition to providing a "less mentally fatiguing" grocery-shopping experience, such a high degree of personalization can also help prevent food waste by enabling Misfits Market to precisely determine what it needs to keep in stock and when to bring it to its facilities, he said.

"Every off-the-shelf piece of technology and software that exists today is all designed for kind of the old-school model of buy from distributors, bring the same standard product into your warehouse, send it from the warehouse to the grocery store," said Ramesh. "There's very little machine learning, very little predictive algorithms built on top."

Given that an online shopping trip can take just a few minutes, California-based e-grocer Farmstead places a premium on only showing customers products they are likely to be interested in, said Pradeep Elankumaran, the company's co-founder and CEO.

"You're taking an amount of time that this customer is willing to spend on your site and you are maximizing the relevance of the product shown to that customer to maximize the possible basket that they will shop with you," Elankumaran said.

Farmstead, which also offers technology and dark store services to grocers, accomplishes this in part by encouraging customers to subscribe to the staple goods they always buy so they can use their time spent on the company's website or app to discover new items, he said.

"You can't have a high basket just by showing people the same things over and over," said Elankumaran. "It becomes especially important that you're showing people the right things that really resonate with them while also surfacing the things that they probably won't [otherwise] get to see, but surfacing it to them in a more relevant way to capture the thrill of the hunt, which is a very real thing."

High-touch doesn't have to be high-tech

Gary Hawkins, CEO of the Center for Advancing Retail & Technology, pointed out that personalization strategies don't have to be high-tech. 

For example, a retailer could invite their best customers to bring knives to the meat department to be sharpened, Hawkins said. Another option would be to offer a customer who signs up for a loyalty program a tour of the store with a manager, he said.

"I've worked with retailers all over the world … and one of the things I found no matter what country I was in, no matter what culture I was in, [is that] we as human beings like to be recognized," Hawkins said.

Bob LaBonne Jr., president and CEO of LaBonne's Markets, a chain of four supermarkets in Connecticut, said one of the most effective ways to build bonds with customers is to give them a selection of treats — complete with a personalized letter from a store director — as a tangible show of gratitude. LaBonne's runs a points-based loyalty program that automatically sends customers coupons when they reach spending thresholds, but has discovered that giving people something they might not have bought is especially effective, LaBonne said.

LaBonne said he has found that distributing holiday gift baskets filled with items like nuts, snacks, olive oil and balsamic vinegar to especially loyal shoppers can go a long way toward making them feel special.

"Customers felt like we gave them a trip to Hawaii," he said.