Pedro Palacios, associate director of commerce strategy, VML
This is the second of a two-part series on artificial intelligence and e-commerce.
During the past decade or so, artificial intelligence (AI) has made mostly behind-the-scenes progress in e-commerce. Between 2011—when McKinsey published a report estimating that retailer’s operating margins could increase by 60 percent through the use of big data—and now, when Alibaba is using AI to process 175,000 transactions per second, the adoption of AI tools by online retailers has been slow, steady, and not consumer-facing.
As we talked about in part one of this series, that’s now starting to change. Research and Markets estimates that the market for AI in retail will grow by $26.5 billion between 2016 and 2025. Tech companies are already increasing their investment in AI, so it stands to reason that they’ll continue to refine their AI products and increasingly roll them out to consumers as a core offering rather than a support feature. This change will make it easier (and due to the pressure of competition, more necessary) for e-commerce retailers and brands to adopt these all-encompassing AI solutions.
Time is running out for companies to reap the rewards of being an early adopter. But it’s not enough to buy some software and say you’re “doing AI”—companies looking to truly gain an edge must learn to prioritize augmentation over automation.
What Is AI Augmentation?
Retailers have augmented the shopper journey using AI to enhance human-managed consumer touchpoints. Some of these touchpoints include product recommendations throughout their website, multiplatform chatbots that facilitate product discovery and customer service, or simply promotional emails triggered by a specific action shoppers take as they continue to interact with the site.
What Is AI Automation?
While AI augmentation is mostly about consumer-facing changes, a bulk of the AI impact is occurring behind the scenes at retailers’ warehouses and brands’ supply chains. Both retailers and brands have automated the shopper journey by removing human dependencies and generating operational efficiencies. AI applications in supply chain management expedite processes and inform decisions with predictive insights. The result? A systematic removal of unnecessary human interventions that generates cost savings and, ultimately, shopper benefits, such as faster and free shipping, stock stability, lower prices, flexible subscription programs, broader product offerings, and more.
Essentially, market trends require that retailers improve the interfaces that customers are already familiar with before making a complete jump toward an automated future. By augmenting the tools that shoppers already understand today, brands and retailers alike will facilitate the transition into the more exciting automated future.
3 Ways E-Commerce Retailers Can Join the Revolution Now
Once you understand the principles of augmentation versus automation, you’re on your way to drafting a full AI strategy, the first piece of which should be shoring up your existing operations. Here are three ways retailers can lay a foundation now for AI growth in the future:
1. Augment search
Search is one of the areas ripe for integration with AI, as today’s search tools rely heavily on manual product categorizations and keywords. Consider adding natural language processing and data management tools to your search feature—these tools will make a customer’s search query pull up more relevant results, creating an immediate positive effect on sales.
2. Automate supply chains.
Fully automated supply chains will prove incredibly valuable to retailers by allowing them to scale quickly as demand for their products increases. In order to tap into this potential, retailers must work hand-in-hand with AI platforms at each step. For this to be effective, however, supply chain managers will need to remove data flow barriers so that the AI can be put to use across different channels. Begin this process by building strategic partnerships with supply chain partners that share your vision.
3, Plan for tomorrow.
Despite what some AI vendors might claim, current AI applications, such as chatbots, virtual assistants, and product recommendation engines, don’t solve all customer pain points immediately. Create a plan that includes these technologies, but also keep track of where they fall short and where they excel. Keeping this documentation will empower your team with the proof of insights needed to expand into a fully AI-automated e-commerce world.
When technology can change the way people browse products, make purchases, and interact with their favorite brands, it can change everything about the retail industry. E-commerce retailers should pay attention to the obvious ways that AI is changing their business—like consumers ordering their products via Amazon’s Echo—but also the less apparent ways that AI is making the industry more efficient. If you don’t move now, you could quickly fall behind.
VML is a global marketing agency.