Personalization effects in online retail: Case of the Russian market

Аннотация
INTRODUCTION 6
CHAPTER 1. MODERN RETAIL WITH FOCUS ON RETAIL CHANNELS. 10
Overview of approaches to a retail channel definition 10
Choosing the combination of channels 11
Operational issues related to becoming a multichannel retailer 12
CHAPTER 2. PERSONALIZATION IN MODERN RETAIL 14
Customer experience and personalization 14
Conceptualizing personalization 17
CHAPTER 3. HYPOTHESES DEVELOPMENT. 21
Hypotheses derivation 21
Model to test the hypotheses 31
Classification of the personalization techniques 33
CHAPTER 4. METHODOLOGY AND METHODS 34
Variables 34
Questionnaire development and sample description 34
Methods of analysis 36
CHAPTER 5. DATA ANALYSIS AND DISCUSSION. 38
Obtained sample description 38
Research model and hypotheses testing 39
Discussion of the results 57
CONCLUSION 61
REFERENCES 62
Scientific articles 62
Reports and statistics 68
News 69
APPENDICES 70
Appendix 1. Questionnaire 70
Appendix 2. Translation and sources of scales 83
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E-commerce has already become an indispensable part of every consumer’s day-to-day life. It has changed the buying patterns and expectations of consumers, with Covid-19 accelerating the shift to online platforms. Brick-and-mortar retailers cannot keep pace with the competition without new technologies applications, which is illustrated by the closure of offline retail stores (Green & Harney, 2017). Nevertheless, online shopping gaining popularity quickly is also accompanied by the ‘revitalization’ of offline channels through new technologies implementation such as VR, AR, data analytics, and robots. McKinsey (2021) shares the insights into the future of retailing, emphasizing the importance of personalization in omnichannel retail. The company describes the retailing experience of the future as ‘phygital’, highlighting the vital role of the seamless interconnection of different retail channels. Though understanding the importance of omnichannel personalized customer experience, many retailers fail to provide unified experience (Hossain, Akter, and Yanamandram, 2020). More than that, customers expect a personalized approach in most touchpoints with companies, which puts additional pressure on the company’s marketing strategies. These factors underline the importance of the research in the area and allow to receive practically beneficial results.
As it can be seen, retailers are presented with the task to provide a personalized experience to the customers throughout the omnichannel customer journey. There is a complication with the provision of seamless customer experience, but the issue is complicated even more by the personalization-related problems. Though it might sound as if the more personalized the offer, the better for the company and consumers, it is not always the case. On the one hand, personalization enables retailers to provide an experience tailored to the needs of customers, which is the desired outcome as Martin & Palmatier (2020) highlight that 70% of consumers are dissatisfied with impersonalized customer experience. On the other hand, more than 70% of consumers are concerned about how companies use the data they collect (Auxier et al. 2019). This is one of the most popular paradoxes that complicates the personalization process, but it is the only one out of many. As more and more retailers switch to the omnichannel model, it has become an important issue to understand how personalization methods and customer experience differ depending on the channel and the stage of the customer journey. Since a company’s resources are limited and should be utilized efficiently, it is crucial to understand which personalization techniques are valued the most by the customers and at which stages. This will potentially allow retailers to concentrate their efforts and resources where customers expect them to provide personalization and know what personalization techniques are taken for granted by the customers.
Summing up the abovementioned information, it is necessary to emphasize that several factors underline the relevance of the study. First of all, the complexity of the technology used in retail is increasing, opening up opportunities for personalization. With the increasing variability of personalization techniques, it has become critical to understand which ones are taken for granted by the customers and which allow a retailer to differentiate. This makes it possible to capitalize on personalization and use it as a competitive advantage for a retailer, which shows the importance of the topic. Nevertheless, there are certain limitations and misunderstandings when it comes to implementing personalization right. The personalization paradoxes complicate the use of personalization, especially in the omnichannel context. Retailers are highly likely to implement omnichannel model, which provides several touch points with the customer and increases the likelihood of a purchase if personalization is done correctly. In this case it is vital to understand how personalization should be done efficiently without exposing sensitive data. The situation is exacerbated by the increasing amount of data collected by the retailers, which puts additional burden on them.
Speaking about the research gap, it is necessary to stress that two areas of research intersect in this study: personalization and customer experience. The author touches upon the problem of personalization throughout the customer journey in online retail. In the field of research on retail channels such areas as the impact of going multichannel, operational problems and customer experience with little regard to personalization are covered by the existing research. Large amount of research is focused on cannibalization and complementarity effects when adding retail channels. An example of such research is the article by Luo, Zhang, et al. (2020). Though there are some articles that consider customer experience in omnichannel retail, they are mainly focused on customer preference in terms of channels and categories of goods. Other articles such as Bilgihan, et al. (2016) investigate the unified customer experience based on literature investigation. As for the research in personalization field, there are articles that study personalization paradoxes and how to overcome them (Kaaniche, Laurent and Belguith, 2020), customer attitude towards personalized ads depending on different variables (Bleier, Eisenbeiss M, 2015), trust-building strategies (Aguirre, Mahr, et al., 2015) and the use of recommendations (Dellaert, Haubl, 2012). The article that is closely connected with this research is the work by Riegger, Klein, et al. (2021), which focuses on technology-enabled personalization in retail stores. Their research relies on 25 qualitative interviews and the authors point out, ‘Subsequent quantitative studies could offer more objective assessments of the effects of different drivers and barriers on TEP success’ (p.152).
To sum up, the research gap lies within the area where personalization and customer experience intersect because little attention has been paid to value received by the customer from personalization in different stages of omnichannel retail. This research focuses on distinguishing between personalization that is taken for granted by the customers and personalization techniques that can be regarded as optional.
By investigating the issue, practical and theoretical contributions are expected to be delivered. From the theoretical point of view, the work is supposed to fill the research gap by integrating the customer experience and customer journey and personalization. Though these areas are interrelated, their combination is tended to be overlooked in the current research. The study will provide an insight on how customers regard personalization techniques and how they affect customer experience depending on the CJM stage and interplay of mitigating factors. From the practical point of view, the retailers are to benefit from the research by understanding which personalization techniques they should provide by any means, and which can act as differentiation and give additional value to the customers. More than that, the research gives an understanding of which particular personalization techniques provide more value to the customers at each stage of the CJM. The research proposes that some personalization techniques are seen by customers as the “threshold” ones, which means that they do not bring additional value, but in case of their absences, a customer is highly likely to be unsatisfied with the company’s approach. The understanding of the personalization techniques classification helps to concentrate resources where they are expected to bring the largest impact, while not focusing on the issues that are not in the customers’ focus. Avoiding resource dispersion is especially vital amid unfavorable economic conditions, which might be the case due to economic sanctions against the Russian Federation.....
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