Evan Schuman's StorefrontBacktalk

Tesco, the world’s third-largest retailer, is taking E-Commerce customization one huge step further than anyone else, displaying higher priced items only for customers it believes can afford them. Although what Tesco is doing is bold, bolder yet are its public statements that it’s not relying solely on purchase history. Display decisions are also based on comments customers make on social sites, which payment cards they are using and, perhaps most controversially, various types of mobile phone data.

Drilling into the details of the plan raises questions about how different the site will truly feel, and that speaks to how the data is used and to how aggressive the customization is. For example, the more decisions are made—or, more precisely, perceived by customers to be made—about spend levels and then displaying higher priced items, the more resistance might be encountered. But if it’s mostly based on showing more of what customers have been buying, it’s much less likely to be an issue.

For example, the Telegraph newspaper reported that one “key test” will be if a customer has purchased a lot of Tesco Finest, a high-end suite of food products. If they had, much more of that line will be displayed. Heck, that’s no different than what Amazon has been doing for years. Purchase a lot of cables or murder mysteries, and you know what you’ll be hit with on your next homepage visit to Amazon.

It’s leveraging other data that gets into riskier territory. Using that Amazon example, seeing more of what a shopper has been purchasing is not problematic. But if that same homepage starts showing things that could only be known by examining social site comments or phone data, that’s when creepy feelings kick in.

Gathering and analyzing such intimate data is fine. But will sites have the discipline to be very discreet in how it’s used?

Tesco CEO Philip Clarke said in a recent speech that his site’s testing indeed went way beyond prior purchases and looked at, candidly, how picky a shopper that consumer was. “When a customer visited our Web site, we would use (CRM) data to tell us if the customer was more swayed by price or quality,” Clarke said. “We’d then display the type of mattress that best reflected that shopper’s characteristic. Sales grew by 10 percent.”

Tesco officials have been quick to stress that all customers will be able to see all products when they visit Tesco.com. It’s merely the sequencing—and which items are on the homepage and other key pages—that will be impacted.

Although that’s true, it’s somewhat without context. Tesco boasts more than 75,000 products on its site. As a practical matter, the sequence of products displayed will likely have a huge impact on product selection.

Unless a shopper has a very specific product in mind and is willing to do a site search to find it, the typical customer is only going to flip through a couple of pages of cereals or pots before making a selection. If the results are heavily weighted to one type of product, that’s going to be extremely influential.

In a move that is unlikely to be common in the U.S., Tesco is offering to share with its customers a report containing all of the data the chain has about them if the customer is willing to pay £10 (about US$16).

In a similar move to Tesco’s, Orbitz Worldwide has started showing pricier hotels to shoppers it thinks can afford—or would be willing to pay for—higher priced rooms. What’s different with Orbitz is that, according to a report on Tuesday (June 26) in The Wall Street Journal, the site wasn’t using purchase history or even site activity to determine the shoppers’ likely spending habits. It was using operating system, with Mac users being shown consistently higher prices than Windows users. Orbitz “found that people who use Apple’s Mac computers spend as much as 30 percent more a night on hotels, so the online travel agency is starting to show them different, and sometimes costlier, travel options than Windows visitors see,” the Journal said.

Legal Columnist Mark Rasch this week wondered whether some chains will take the next step and start charging different prices for the identical products—moves that neither Tesco nor Orbitz has taken yet. A two-year-old Safeway program called Just for U gets closer, though, with a range of customized discounts.

Tesco is clearly a market player and is opting to lead in this customization area. But as The Daily Mail has reported, the move could also be seen as a desperate measure from a chain that needs to reinvigorate its revenue. “The supermarket giant is fighting a desperate battle to reverse its fortunes in the U.K. after a dire year in which it has lost out to rivals and posted its first profit warning for 20 years,” the paper reported.

Maybe it takes a bit of fear and panic to truly push change. The rest of retail, though, has the luxury of sitting back and seeing if customers will revolt or embrace.