Pedro Palacios, associate director of commerce strategy, VML
This is the first of a two-part series on artificial intelligence and e-commerce.
The artificial intelligence (AI) revolution in e-commerce is here, and a handful of key players have already begun changing the common experience of how things are bought and sold online. Knowingly and unknowingly, each member of the e-commerce cycle—from technology owners to brands to retailers to the customers themselves—is actively affected by the AI phenomenon, and understanding how it all works may be the key to unlocking the e-commerce strategies of the future.
Research and Markets estimates that the market for AI in retail will be $27 billion by 2025. That’s $26.5 billion more than the market was in 2016. The increased investment and interest in AI has fueled an explosion of new opportunities for brands to take on, ranging from inexpensive technology implementations to much more expensive business model overhauls. But as with any other emerging technology, first movers stand to benefit the most—if they make the right first move. Before deciding what that move should be, you have to understand the forces driving the technology and the investment areas with the most promising returns.
Technology Titans, Revolutionary Retailers, and Big Shot Brands
AI has picked up so much momentum largely because it has the weight of some of the world’s biggest tech companies behind it. Microsoft’s AI platform, Azure, offers brands and retailers a comprehensive suite of AI tools; Amazon’s AI for businesses is an extension of the company’s already robust Amazon Web Services, a $10 billion business in its own right. IBM’s Watson has developed specialized AI toolkits for industries like healthcare and finance. Chinese e-commerce giant Alibaba uses AI behind the scenes to process 175,000 transactions per second from 550 million users around the world.
Still, the tech companies leading the way on retail AI are the ones that use the technology to redesign the path to purchase: Amazon and Google. You might use their AI products every day without sparing a second thought about the wider implications on e-commerce. Google, for example, now works directly with Walmart to allow shoppers to make purchases using their voice on any Google Assistant-enabled device, and Amazon’s Echo allows you to conveniently purchase products and take advantage of deals on Amazon.
These new products have helped consumers get comfortable with AI. As a result, it’s becoming easier for brick-and-mortar retailers like Walmart to seamlessly join their online and in-store experiences using AI or for brands like Under Armour and Starbucks to provide added value that extends beyond mere products. Under Armour partnered with IBM’s Watson to create a health tracking app called UA Record that generates personalized training recommendations. Starbucks, one of the most recognizable consumer brands in the world, rolled out a “My Starbucks Barista” feature that lets users create and submit orders with only their voice. The technology is here; the only question remaining is how the adoption patterns will play out.
Beating the Market
If the current trend of innovation in retail AI continues, customer experience will improve dramatically, and consumer demand will soon drive mass adoption of AI by e-commerce retailers. Because those retailers will all be seeking a competitive edge, this change will likely happen quickly and aggressively.
The most important thing to remember is that consumers are the ones who ultimately drive the e-commerce world. Their adoption of AI when they shop is shaping the way shopping works. In particular, Millennials have been eager to adopt and interact with AI, and the demand for personalization from many consumers in this generation has been an important driving force in the early development of the technology.
Even though this change is happening all around us, we’re still in the early stages of the revolution. What comes next? What can you do to prepare? We’ll cover that in part two.
VML is a global marketing agency.
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