Shop Direct’s online retail success shows there is life after turning the page on the paper-based catalog model

Profile picture for user gflood By Gary Flood June 6, 2019
Summary:
Relying on data from a customer’s past buying behaviour isn’t enough to create truly personalised product recommendations, warns the UK’s largest integrated digital retailer and financial services provider.

Shop Direct

British consumers used to love buying from the Victorian version of Amazon - AKA a catalog that bundled up all you might want to dress your family or your kids which came conveniently through the post-box every month. This approach to home shopping thrived all through the 20th century, but modernity, in the shape of the Internet, did finally catch up with the catalog model in the last few years. Check out what happened to JC Penney in the US for a prime example

One veteran that has managed to totally reinvent itself, however, is Shop Direct. the first incarnation of which was something called Kay & Company, founded all the way back to 1890. In 2003 the owners of high street retailer Littlewoods acquired rival Manchester-based catalogue retailer Great Universal Stores, merging the two businesses together to form one combined outfit in the form of Shop Direct.

Shop Direct now claims to be the UK’s largest integrated digital retailer and financial services provider. In its last full financial year, it reported annual sales of £1.96.billion ($2.49 billion), while its component brand websites receive over 1.4 million visits every day, with 74% of all online sales now coming from mobile devices.

Through its digital stores and apps, Shop Direct sells over 1,800 items from household name British brands and delivers 49 million products to four million customers every year. The kind of retailers it acts as a channel for include the UK and Irish arms of Littlewoods and  fashionwear company Very, which is now its biggest and fastest growing brand with sales of more than £1.26 billion. A central part of its value proposition is offering customers a range of flexible ways to spread the cost of their purchases via financing.

Life beyond the catalog

How do you serve your market, though, if you are post-catalog? Shop Direct went fully digital in 2015, convinced that its decades of experience in home shopping, coupled with different ways to spread the cost, gave it an edge in the digital age.

So there was a context of change and a commitment to digital. But what was that like inside the organisation, for the internal teams charged with making all this digital retail a success? Kathryn Chase, Head of Digital Product at the firm, picks out  one particular challenge in all this - getting product recommendations right:

Our on-site optimisation team observed that customers were finding the individual products they wanted with ease, but were struggling to find complementary or matching items, such as other pieces from a range of furniture. The problem is that relying on data from a customer’s past buying behaviour isn’t enough to create truly personalised product recommendations.; we know customers don’t always want to shop for the same products, so we need to anticipate what our customers are looking for to help them discover additional items that complement their choice within the area of the site they are shopping.

Chase says she’s solved this problem by turning to Artificial Intelligence (AI). Specifically, she’s using the technology and services of a San Francisco company called RichRelevance, which develops an AI solution that uses attributes associated with a product to enable it to deliver her team just those recommendations; Other customers include firms like  the UK’s Homebase and Barneys New York. She says:

This technology has helped us to achieve our overall goal of connecting customers with the products they are looking for. Its advanced merchandising technology has helped us create features such as ‘complete the look’ in fashion, and ‘more from this range’ in home and furniture, which inspires customers to shop all products within a collection.

As a direct result of using AI, we noticed an increase in the average number of items per order. We also observed an uplift in revenue per visit across multiple categories, suggesting customers were now seeing more tailored recommendations. AI has let us optimise product recommendations, and help us be more efficient, delivering a better result for our customers and our business.”

Solid, and welcome achievement, no doubt - but where might this journey go next? Like all good retailers, Chase is focused, on maximising her company’s opportunity through the next peak trading cycle:

In six months we’ll be in our peak Christmas trading period, and looking to build on our strong performance last year. But I can confirm that technology plays a vital role in this, and we’ll once again be using RichRelevance to help us deliver a strong peak.

Beyond that, we are starting our journey towards the creation of a more flexible architecture for our customer journey. With such technology, we’ll be able to further improve the placement of our personalised recommendations, which means really thinking about the type of experience customers expect from us.

Yet more change is on the way, as next month the company will re-brand entirely into The Very Group, bringing its name and identity in line with its flagship consumer brand Very.co.uk. Coinciding with the 10-year anniversary of Very, which launched in July 2009 as a pureplay digital retailer, the new identity is also intended to support Shop Direct’s ambition to recruit hundreds of roles in data and technology.