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AI in eCommerce: Hype or Reality?

AI in eCommerce: Hype or Reality?

AI in eCommerce: Hype or Reality?

AI in eCommerce: Hype or Reality?

The whole business universe, eCommerce included, is buzzing about artificial intelligence, the capability of a machine to imitate intelligent human behavior.

Unfortunately there is no exact classification of what makes a solution an artificial intelligence solution. Any computer based system that is using data to make some decisions can be labeled as an artificial intelligence solution. Artificial intelligence means many different things for many different people.

This gives almost every software vendor a license to add an artificial intelligence ‘spin’ to the description of their product. This is counterproductive. Instead of attracting new buyers this just confuses the marketplace.

So, let us help you develop a pragmatic framework for understanding and use of AI in your eCommerce strategy.

Why AI in eCommerce?

Manufacturing, information systems and services are rapidly commoditized. The next industrial revolution is fueled by a need to deliver memorable customer experiences. It’s called the experience economy.

Remember Steve Jobs and his decision to recruit John Sculley as Apple’s CEO. People were confused about the logic of hiring Pepsi-Cola’s president who has nothing to do with technology to run the pioneering computer company. At the time only Steve had the vision and understanding that it is not about computers or cola but about the experience that customers have while using the computer or while drinking cola. That passion for memorable customer experiences is what eventually made Apple into one of the most successful companies in the history of mankind.

Delivering memorable customer experiences is a business of treating the right audiences with the right experiences at the right time.

 

Technically speaking this is a problem with many moving parts and infinite number of permutations. Each visitor to your site can be classified through use of hundreds of attributes. Buying journeys and consideration paths are different for different audiences. And, finally the business owners can act and treat visitors with a myriad of promotions, product recommendations, messages, content or layout changes.

To illustrate the size of the customer experience problem let’s compare it with a simple chess board.

Here is how. Let’s imagine that our problem is only to create the best customer experience on eight pages of your site. Let’s further assume that each page has only 8 elements, and that we have only one variation for each element. Visually this problem can be represented as 8×8 chess board where each column is a web apge with 8 elements and where each field can only have a black or white color (white is for old and black is for a new version of an element).

AI in eCommerce: Hype or Reality?

The total number of permutations of how the experience chess board can look like is equal to 264.

To help you visualize the size of this number let’s assume that each number is a kernel of wheat.

AI in eCommerce: Hype or Reality?

This number represents a huge pile of wheat. As a matter of fact this number is so big that it represents more grains of wheat than was ever farmed on our planet since the beginning of time.

This is precisely why we should use AI in eCommerce.

A problem of this magnitued can’t be solved through brute force. Conventional A/B split testing or if-this-do-that visitor personalization may sound nice but they are grossly inadequate solutions. To remain competitive you must arm yourself with much more powerful tools that are built on the foundation of big data analytics and machine learning algorithms.

Trust, but Verify

AI in eCommerce: Hype or Reality?
Product recommendation solution providers have done the most to apply advanced machine learning techniques and to deliver consistent results. But not all product recommendations are equal.

If you speak to the best of breed solution providers who invested tens of millions of dollars into research and development you will hear loud complaints about newcommers who are using open source packages to mimic their solutions. Unfortunately, many eCommerce brands are choosing a vendor on the basis of feature completeness of its offering rather than on the basis of the quality of the individual solution components.

If you listen to a vendor talk you will logically think that irrespective of the type of product recommendation solution you will get good value. The only difference between two products is how much revenue lift you will materialize. When a vendor tells you that ‘visitors who engage with recommended products are 10%-15% more likely to buy’ you are inclined to believe such a statement.

There is a small problem. The statement above could be true but at the same time you might be losing money with your product recommendation solution.

Here’s how. If you read the statement above more carefully you will realize that it does not compare results of those visitors who have seen product recommendations against those who were not presented with product recommendations. This would be the most accurate measurement. Instead, each visitor is presented with product recommendations which prevents you from knowing if the same visitors who enaged with recommended products would buy if there were no product recommendations at all.

That’s why we recommend you always test and verify the impact of each of the add-on solutions to your eCommerce site.

Start Small

AI in eCommerce: Hype or Reality?
In developing your business strategy do not view AI as a ‘silver bullet’ that will magically make your eCommerce business better. Instead, think of it as a new set of technologies that are dramatically changing the competitive landscape.

Over years the ability of your company to adapt and effectively use AI solutions will correlate with your ability to effectively compete and win in the marketplace.

The logical question is where to start and how to build a long term strategy.

We always like to be practical and recommend actions that are satisfying 20/80 rule: 20% of effort (cost) that provides 80% of benefit.

The list of such ideas includes:

  • Customer experience assessment: in addition to a quite common UX audit we also recommend use of visitor data to perform an experience health check (FYI: if you do not have resources or do not know how to do it we offer a free health check service)
  • Validate ROI of add-on applications: we see on a daily basis how brands are spending a lot of money on expasive user generated content applications, reviews, product recommendations – validate and make sure you are getting ROI from each one of them (FYI: we have advanced testing capabilites and we can assist you with this task).
  • Uncover persuadable audiences – a fatal flaw of conventional personalziation solutions is targeting of potential customers vs. persuadable audiences, those who will become a customer only if you do something for them.

 

As a final note…

Consider this perspective from innovator Adam Morris, CEO of Redstage Worldwide:

“For better or worse, humanity is witnessing ever-increasing evidence that AI provides profoundly better solutions to problems we as humans lack the cognitive processes to conceive. Over the past decade, what we consider ‘modern’ or ‘state-of-the-art’ UX for online shopping hasn’t changed all too drastically. Of course, we’ve experienced improvements in search, filtering, and personalization, but an eCommerce sitemap still looks remarkably similar to the sites of old. Since AIs lack any preconceptions regarding how things ‘should’ be done, I believe AI will work to our advantage, ushering in a fresh age of progress that we ourselves could not possibly create alone in the same scope of time.”

AR & AI: The Ecommerce Arms Race

AR & AI: The Ecommerce Arms Race

No One Saw It Coming.

AR & AI: The Ecommerce Arms Race

Earlier this month, IKEA emerged as the sleeper champ of retail’s augmented reality arms race. On the AI front, companies like Emarsys and Edgecase released ecommerce products that use advanced machine learning techniques to automate time-consuming data analysis and predictive forecasting strategies for retailers.

With such tools available to manage mass audiences and their data, this is an opportunity for tech-minded shops to get a leg up on the competition. As a result, we can expect to see some large retailers (those who fail to adapt) fall behind in a relatively short amount of time. Survivors of this retail purge will make themselves known in the next year or two as these technologies become cornerstones of ecommerce. Here are some big changes to expect in the new paradigm of online shopping that everyone will be adding to next year’s budget.

“The IKEA Effect”

AR & AI: The Ecommerce Arms Race

Diving into Apple’s ARkit early-on, the home furniture & appliance giant successfully launched an AR app that lets users view how IKEA’s furniture will look in their home by selecting products from an online store. Released with iOS11, the brand was primed for a massive market reaction. Sure, the items still have some issues (they don’t adapt to lighting too well and their textures aren’t quite realistic), but as the first retail brand to jump into AR, the starting gun has been fired, and many companies are racing to capture value through this technology.

Redstage CEO Adam Morris sees huge potential for AR in ecommerce, stating, “There’s certain industries that I see really benefiting from AR, especially companies where seeing the item in-person plays a huge factor. I believe jewelry sales could be completely revolutionized with AR, and then on to home goods like furniture.” However, Morris notes that the ecommerce industry typically lags a few years behind the latest tech trends, relying on major user adoption for companies to jump on the bandwagon. “For instance,” he recalls, “we talked about ‘mobile-first’ for years, well before companies would begin implementing it. Most didn’t pull the trigger until they had no choice — when mobile users made up more than thirty percent of their user base. It’s easy to argue that the industry is still doing a horrible job at mobile commerce, even now with roughly two-billion online shoppers using mobile.” Perhaps the companies that have been slow to catch up with mobile will double-down on AR, or risk giving up their market share to the brands that do.

So what happens when health and beauty retailers jump onto this train? If Snapchat can already morph your face and add eye-shadow, will brands like Ulta Beauty and Maybelline step up to the challenge? How will consumers react to no-longer trying on makeup in-store, or to saving bundles of cash testing it through your app? Years down the line, this may even change the supply chain, because stores can test products without actually making them, without buying in bulk, and never worry about hemorrhaging money selling-off failed product. Will proactive make an AR filter to show what you’d look like without acne? Will Schick and Gillette face-off for a chance to show you how to carve up that beard? Furthermore, what will become of Snapchat, now that the company announced it will let brands create their own AR features? The possibilities are endless, and the brands that don’t engage AR or continue to view it as a passing trend will feel it in their bottom lines sooner or later.

Watch: Snapchat’s Latest AR Project Puts Artwork All Over US Cities

The Fully Automatic Customer Journey

AR & AI: The Ecommerce Arms Race

Emarsys’ ecommerce platform is taking the world by storm. Using artificial intelligence to automate various customer retention and acquisition strategies, the AI uses machine learning to quickly create the perfect online shopping experience for each customer. Designed by Forrester, the system quickly crunches oceans of data about site visitors to cater to their needs and desires. After uploading two years of historical user data, ecommerce companies can maximize ROI on existing users. For new users, the Emarsys AI takes an average of 8 weeks to optimize the customer journey and activate recurring campaigns to keep engagement high. While there are many AI competitors out there, Emarsys boasts a robust, user-friendly platform that creates a truly personal experience for each shopper. As Morris describes it, “AI is becoming essential to work personalization into ecommerce, and machine learning systems offer huge advantages over rule-based systems. Marketers do not need to spend nearly as much time tweaking and administering a rule-based system when the AI is optimizing it automatically.” He adds, “We had a customer that doubled their newsletter list from 50k subscribers to 100k. However, since they did not employ any personalization strategies for what products were beingpresented, they only received a 15% increase in revenue from that channel.” As ecommerce threatens to surpass in-store sales (Business of Fashion) personalization of branded messages is critical. What are you doing to cater to each customer?

Fringe Shoppers Beware

We all do it. We’ll aimlessly surf Amazon or another online retailer looking for something cool to buy, even when we don’t know exactly what we want.
Edgecase, the company formerly known as Compare Metrics recently released a new product that helps convert shoppers who have a vague idea or even no idea of what they want. In a time where ecommerce and marketing penetrate the lives of every consumer, tools like Edgecase that help convert the shopping addicted masses are becoming hugely important. When integrated with an online store, the software makes selections for users based on what they’re thinking of (i.e. a blue dress in a certain size) rather than a specific brand. Users can also receive lists of recommended items when shopping for a specific event like a wedding or graduation. As we enter that special time of year, consider how a system built to convert fringe shoppers can have massive impact.

Final Thoughts

As the holiday season looms, companies taking advantage of AR and AI pose the biggest threat to your bottom line. As the ecommerce arms race ramps up, winners and losers will be defined by how they spend their 2018 budget. Make sure you’re planning to implement these tactics by next year’s holiday rush, or risk being left out in the cold.

Further Reading

+ Here’s five other ARkit projects that released with iOS11.
+ View Redtage’s outlook on the future of marketing & customer experiences.
+ Ten companies using machine learning in cool ways.