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I’m really pleased to announced our latest hire to our fast-growing Merchandising Services team of Avail, Frida Sandin.

Frida has a background as a retail marketing strategist, most recently at the European e-commerce company EuroFlorist. She is a frequent speaker on the intersection between digital strategies and business development. Frida will join our Merchandising Services team, headed by Markus Schilling, and with her background I’m confident she will bring new light and even more focus on success delivered with the use of the Avail software.

Frida also has experience from social and mobile commerce and will therefore strengthen Avail’s offer within this field even further. As she’s an avid blogger and twitterer, I’m sure she will also be an active contributor to our blog.

Welcome, Frida!

Facebook’s valuation just continues to rise. The latest number: a whopping $60 billion.

I can’t really judge if a company where one in 13 people on Earth log in each day should be valued at 6, 60 or 600 billion dollars. But I do think there’s some confusion as to where this value would come from. What can the The Social Network do?

Max Levchin (Paypal, Slide) and Bill Gurley (Benchmark) explain it well in this panel discussion:

While it is clear that Facebook has become the de-facto white pages for finding people worldwide, and a communication network to rival even email and texting, the story is different when it comes to commerce.

What Facebook knows when it comes to recommendations today is primarily your social graph – who you know. What it knows a lot less about is your interest graph: what you are interested in, what you have bought, and what you’re considering buying.

Gurley cites a Netflix project where they used customers’ social graphs as the basis for their movie recommendations, but quickly found out it wasn’t as effective as their existing algorithms.

A lot of retailers are pioneering Facebook recommendations; widgets that tell you what your friends have “Liked” on a certain site. There are two problems with that:

1) As Gurley puts it: “It seems intuitive that friends recommendations would be powerful motivators. But when you look a little bit deeper, you hang out with people who have different very different tastes than you.”

Consider your average Facebook friend – do you share their taste? In what context? Going to myself, I may have one or two friends who I’d trust for product reviews. But to rely on their taste in books and movies – no way. When it comes to retail recommendations, you are what you buy, not who you know.

In fact, the most likely situation where a friend recommendation would work is when it’s an item with very broad appeal (say Dan Brown). But those recommendations add very little in incremental sales and can be accomplished with a simple top-list.

2) It requires explicit input. There’s a well-known Internet rule saying of all visitors to a site, 90% are lurkers who never contribute, 10% are occasional contributors and only 1% are active contributors.

In Facebook terms, this would imply only 1% of all shoppers can be counted on to reliably tell you using the “Like” button what they prefer. The rest of us, you will never know or get very scattered input (a like on a song, a picture of a dog, and a college Alumni page).

As a retailer, rest assured that you still own a much more detailed and actionable interest graph than Facebook. It’s just a matter of putting it to practical use.

The NY Times “Personal Tech” recently published an interesting piece on Groupon. In “Psyched to Buy, In Groups”, author David Pogue explores the reason why Groupon succeeded where so many others have failed.

His main thesis: It’s all about psychology, more than the coupon itself. From how the daily deals are selected to cater to regional tastes (Segway vineyard tours in SF vs theater tickets in NY), to how they are presented and worded.

I agree. After all, psychology is the study of the human mind – and retail is all about selling to humans. In the year since Avail launched our new Success concept, part of which is to advise and educate retailers on the merchandising psychology behind recommendations, the average customer ROI on our technology (measured as recommendations clicked & bought) has gone up by 100%.

I don’t mean to trivialize the software engineering and artificial intelligence that goes into making a state-of-the-art recommendation engine, but it shows there is tremendous value to be captured from how you place, present and design your merchandising elements, such as recommendations, too.

Read the Groupon article, and then go back and take a fresh look at your site. Is your merchandising psyching your customers to buy – or just telling them?

It’s a slow move, but step by step, we are moving towards an age of recommendations.

NY Times reports Yahoo is getting ready to launch a new product that delivers personalized content to your phone. “The Yahoo platform aims to draw from a user’s declared preferences, search items, social media and other sources to find and highlight the most relevant content, according to the people familiar with the matter.”, the newspaper reports. The project, codename “Deadeye”, currently has 50 engineers working on it, and is set to launch at the Mobile World Congress in Barcelona next week.

But as I wrote about in my posts on e-commerce trends, personalized product recommendations are only one piece of the personalization puzzle. Marketwatch has a very inspiring article on all the various ways big-name brands are experimenting with personalization.

What’s your personalization strategy?

In the second part of our series of interviews with merchandisers, I speak with Daniel Reckling, Head of Dynamic Sales at Neckermann.de, one of Germany’s (and Europe’s for that matter) largest & leading retailers to talk merchandising and e-commerce.

If you’d like to join Neckermann, Daniel Reckling is currently looking for a new senior recommendation engine specialist.

Can you give an overview of Neckermann and your e-commerce business?

Neckermann.de is one of the leading online retailers in Germany. Neckermann Group also has subsidiaries across the European market: In Benelux, Switzerland, Austria, and some central European countries as well.

2010 was actually a double anniversary for us: we celebrated 60 years since our company was founded, and 15 years since we launched our first web shop. Today, e-commerce is our primary channel. We still publish a large printed mail order book, which directs consumers to the online shop.

In numbers, Neckermann Group had a turnover of nearly 1.2 billion and about 4,000 employees in 2009. We offer over 700,000 SKUs online, including fashion items, consumer electronics, furniture and more over our online shop.

Since the summer of 2009, our web shop runs on the Demandware platform.

How is e-commerce organized at Neckermann.de?

Neckermann sees e-commerce as our key business – it’s not just a department, but a cross-functional responsibility for all our employees. Today, two thirds of our sales are generated via the Internet. Changing our name from Neckermann Versand (“mail order”) to Neckermann.de in 2006 has been one way to signal this shift.

Nevertheless, there is a dedicated e-commerce department at Neckermann.de, organized into E-Commerce Sales, Project Management, Online Marketing and Newsletter.

What are your responsibilities?

I am the team leader for “E-Commerce Dynamic Sales”, part of E-Commerce Sales. We were set up last year, and have now grown to 3 people – and we’re looking for a 4th team member.

Our team is responsible for the operational business of all performance-optimized selling. That includes our product search, recommendation engine and other tools for dynamization and individualization of shop elements (products, prices, brands, campaigns, incentives). We also develop strategic concepts to find new fields of applications, and optimize rules- based functionality to increase order values and conversion rates.

You could say a web shop is quite plain in itself, so there are a lot of applications for dynamic sales and recommendation engines.

Can your share some recent projects Neckermann has launched?

Last year we migrated to Avail Behavioral Merchandising G8, a major update for us. Before that we hadn’t done any updates, so version G6 had been running for 3 years.

At the same time, we increased our usage of Avail, especially on search pages and personal pages:

1. On search pages we now take Avail’s search recommendations and display them not only at the top, but also mixed within the generic search results, using larger pictures to mark them as special recommendations.

You can try it by searcing for “poloshirt”: http://www.neckermann.de/on/demandware.store/Sites-DE-Site/de_DE/Search-Show?q=poloshirt&Submit=Los

2. We created a personal area at the web shop, with individualized merchandising. The area is divided into three pages:

• First you are able to look up all recently viewed products
• Second, we display a page full of personal recommendations based on recent purchases and clicks
• Third, we have created an interface where the user can explore products in an entirely different way. The user is actually navigating among cross-selling rules.

http://www.neckermann.de/on/demandware.store/Sites-DE-Site/de_DE/Customer-RecommendationsWorld

Neckermann was an early adopter of behavioral merchandising / personalized recommendations. Can you share a learning?

The users are flooded by advertising. If you just display products a user could be interested in, they won’t respond in most cases.

But if you just use the right message – e.g. “Other customers who searched for ‘poloshirt’ frequently bought these items” – conversion rises. It’s about transparency: If you let the customer know why you’re recommending these products, they recognize that this is really a helpful functionality and not just the output of some merchandisers who want to dump their overstock on the customers.

What makes someone great at merchandising?

Simplicity. You can come up with so many different merchandising algorithms and rules. Should I blacklist sales items in my recommendation engine? Or boost them?

Sometimes, you get the best conversion if you don’t over think it.

To take an example, we have actually noted that one of the best ways to retarget returning visitors to the web site is just to show them the products they viewed during their last visit.

In such a specialized environment as merchandising, it is very hard to simplify – but if you do, you’ll win.

What “must-haves” are there for merchandisers?

Numbers and detailed reports. You should be able to monitor your activities all the time. Neckermann is an incredibly numbers and reports-driven company.

How do you think e-commerce and merchandising will evolve in the future?

There will be more and more information on the Internet, and there will be less separate sites. For example, it’s not necessarily so that selling will take place at our online store – we could sell anywhere on the Internet, where the user is at that time. Consumers will carry their digital identities with them. In this context, it will be important to gather as much information as possible even before the user lands on your store’s pages – to use whatever information we collect, such as where they came from, what they have done, and so forth, and take this into account.

In this context, manual merchandising and manual campaigns will be impossibly expensive. It will take too much time and resources. Recommendation engines and algorithmic selling offers the opportunity to overcome this problem.

Another area that will change is advertising. Advertising is more and more becoming like auctions, where you have a lot of background on the user to help you determine if you should display a banner or not. This will drive up the cost of ads, and you will need to be selective in serving only those ads that stand a chance to drive a purchase, and use all the information at your disposal.

When I joined Avail, I decided that as a company in the personalization space, our marketing should be personal too. At every point in time, we should strive to treat prospects and customers not as email lists and accounts, but as humans, with personal interests and needs.

Big words, that aren’t always easy to live up to. Deadlines are tight, resources are limited, and B2B marketing tools are ba-ad at personalization, relying on one-size-fits-all approaches or crude segmenting. But the ambition remains.

So consider this blog – and thus, our newsletters – your space too. We have tried to become better at producing relevant articles for merchandisers, such as our new interview series “The merchandising view”, converting our webinars to embedded videos and occasionally translating them into other languages.

What should be our next step? Use the comment field or email me at david.johansson@avail.com

In December, I started a series of blog posts on e-commerce trends for 2011, covering m-commerce and multi-channel convergence.

However, I saved one great trend for this year: personalization. I see several technologies coming together to create the foundation for a wave of innovation within personalized retailing in 2011 and beyond.

To understand the importance of this shift, look at the evolution of the store. The bricks and mortar store was traditionally seen as “your store” so to speak – a store designed after the retailer’s preferences. Social commerce (ratings, reviews, Q&A etc) made it “our store” – designed by the shopper community. Shoppers could now influence the store content to make it better suit their needs, but still in a collective fashion. With personalization, it will finally be “my store”, one shop for each individual, tailored to their personal preferences and needs.

As just one of many examples of personalization, the adoption of behavioral merchandising technology is accelerating everywhere.

However, there’s a lot of potential left for retailers to become better at connecting customers with relevant items and utilising all their data to deliver sophisticated marketing and merchandising techniques. Personalized product recommendations will move from being on web pages and will increasingly be utilized in advertising, emails and even call centres. Even traditional retailing will eventually change. In the future bricks and mortar stores could use digital displays to allow for quick changes to be made to pricing and marketing messages, matching their merchandising to the customers visiting the store just then.

But personalization is larger than just Avail’s field, and examples are plenty. Fits.me has created an innovative technology to enables online shoppers to see exactly how clothes will fit their body. Puma recently invested “a 7-figure amount” to create Creative Factory, a new program that lets shoppers design their own, personalized trainers in 3D using iPads, and then have them made to order. A veritable army of new fashion retailers – Spreadshirt, Tailorstore, ASuitThatFits just to name a few – let shoppers design custom-made clothes online, choosing from a huge array of cloths and styles. I’m sure this is just the beginning.

However, for all the benefits of personalization technology for shoppers and retailers alike, it can still create a consumer backlash if used in the wrong way. Despite the good intentions, and the fact that many applications – like ours – rely on anonymous data, retailers and technology vendors have little to gain from ignoring shoppers requests for privacy. Putting consumers in control, and being transparent about business practices, will be the order of the day in 2011.

Last week I outlined my predictions for the trends that I think will transform the business of e-commerce in 2011.

One of these, multi-channel convergence, will be a crucial consideration for brands wanting to offer the most convenient and engaging shopping experiences over the coming year.

As discussed previously, companies have to become quicker and smarter at making it easy for consumers to shop how they want, where they want, what they want, and when they want.

As more and more potential channels are invented (smartphone apps, iPad / tablet apps, Facebook stores, popup stores just to name a few), I see retailers becoming increasingly confused about which channels to cover and how to approach them in a unified way. Some approach it like a checklist, where you need to tick all the boxes. Others stick to the same single channel where it all started. Both are wrong, I’d say.

Retailing, in whatever outlet, is fundamentally about understanding your customer and the different ways they behave across multiple channels. Companies need to ensure they are present in the channels that matter to their target customers, and that their merchandising strategy is tailored to how customers use each of them. This, in the end, creates a great shopping experience cross-channel.

I was planning to post thefull trend post here, but Retail Systems were kind enough to publish it on their blog. For more of my thoughts on multichannel convergence and where I think it’s heading in 2011, please read the full blog on Retail Systems.

Update – continue reading here:

• Trend #3: Personalization

Last week I outlined my predictions for 2011, one of which, m-commerce, is an area which is really going to explode in 2011 with smartphone sales outgrowing feature phones by 200%.

The smartphone has revolutionized both the retailer and consumer’s behavior alike.

Before 2009 it was not clear that m-commerce would really take off and companies let their mobile sites drift as demos. The success of the iPhone and Android family of devices changed this fundamentally, marking the start of a new smartphone era.

In 2010, retailers rebooted their mobile strategies, hurrying to launch new m-commerce apps into the market.

Next year I predict retailers will move beyond standard apps and fully utilize the potential of mobile to create a rich shopping experience. They will realize there is not one m-commerce opportunity but several, each requiring different customer experiences and presenting different merchandising challenges.

2011 will of course see the arrival of more tablet (e.g. iPad) apps, as these devices become more popular with consumers. Shopping on the iPad is much like turning the pages of a fashion magazine or a catalogue – it is browsing-friendly and engaging. This leisurely way of browsing will allow retailers to employ more emotionally engaging merchandising techniques and leverage maximally their cross-selling and up-selling capabilities.

The smartphone is a different way of shopping to the tablet. The iPhone is more about customer convenience, buying on the mobile has to be quick and simple. Conversion is essential and relevancy is key – with a small screen, retailers must become better at selecting which products to display at which time, so that customers can make their purchases with as few clicks as possible. Cross-selling is harder in this channel compared to the iPad and traditional website, but it may be important to avoid excessive shipping costs.

Up until now, m-commerce has been treated as a showcase, with a heavy emphasis on technology as a marketing tool. In 2011, successful retailers will treat m-commerce as a retail channel in its own right and instead be using technology to make mobile sites perform better commercially and deliver significant revenue streams. As both smartphones and tablets are personal, consumer data can be used in increasingly sophisticated ways to make shoppers purchase more on their mobiles.

Next week I’ll be blogging on another upcoming trend for the New Year, personalisation, and the sophisticated techniques being employed by retailers to better connect with their customers in presenting them with the items they want to purchase.

Update – continue reading here:

• Trend #2: Multi-channel convergence
• Trend #3: Personalization