Retailers Believe in the Power of Artificial Intelligence
Retailers are cautious of emerging technologies, but believe in the power of artificial intelligence (AI). That’s just one of the key takeaways from Total Retail’s 2019 Retail Technology Report, which was produced in conjunction with Arm Treasure Data, an enterprise customer data platform. In this year's second quarter, Total Retail surveyed its audience of retail executives to get a better understanding of their current usage of technology, future technology needs and wants, and the technology buying processes within their organizations.
When asked to choose up to three emerging technologies that they’re not investing in right now, but plan to invest in during the next 12 months, more than one-third of respondents selected "none." Thirty-eight percent of retailers won't be allocating any budget to the emerging technologies listed, such as AI, chatbots and visual search. It's unclear if those respondents have a lack of confidence in the technologies to have a meaningful impact on their business or if they just don't have the capital to invest in new technology right now. Regardless of the reason, retailers could be missing out on a big opportunity to be an early adapter of emerging technologies. Consider voice commerce: A Juniper Research report predicts that by 2023 there will be 8 billion devices with voice assistants in them, up from 2.5 billion at the end of 2018, and that a massive $80 billion voice commerce market will grow out of this trend. Those retailers that are capitalizing now on voice commerce might capture a larger share of the market as the technology becomes more mainstream in the future.
While retailers are cautious to invest in emerging technologies, they do believe in the power of AI. They feel AI is the technology that will have the biggest impact on the industry over the next 12 months because of its multiple potential benefits, including sales gains and cost savings. Retailers are most commonly using AI to analyze massive data sets — whether it be customer data, product data, competitor data, etc. — and identify valuable insights and trends, which can then be used to make smarter business decisions, such as merchandising your website, personalizing marketing communications, routing shipments, etc.
Using AI to Increase Purchases and Drive Down Ad Costs
One way AI can help retailers is with paid advertising. Pattern89, an AI-driven digital ad software company, helped Bump Boxes, a monthly subscription box for pregnancy and baby products, cut its ad costs in half while increasing purchases by 25 percent in two weeks.
“What Pattern89 does is [every day] it calculates across 2,900 dimensions, what it is about Bump Boxes’ digital ads that could be changed, updated, [or] adjusted," says R.J. Talyor, founder and CEO of Pattern89. "Then, our model fits what the outcome could be and surfaces alerts to customers into a really easy to use to-do list. That to-do list is fully transparent, and it provides the exact instructions on what you should do, as well as the data behind them."
Talyor believes this is especially helpful for D-to-C brands such as Bump Boxes.
"Subscription box companies, and all these D-to-C brands, they’re running campaigns on a regular basis," Talyor notes. "And the frustration marketers have in digital advertising, especially on social channels, is that what worked last week doesn’t work this week. What our algorithms do, and what AI does, is it identifies these windows of opportunities that emerge. [...] [You] just [have to] trust the AI to implement it."
Leland Deehring, Bump Boxes’ co-founder, decided to invest in AI to streamline the company's paid advertising efforts, making time for other other responsibilities in the process.
“As a co-founder of a startup that’s scaling really quickly, time management is so incredibly important," says Deehring. "When we started to look at software to help us maximize our ad efforts, it’s also about being able to reallocate our time to spend it on the next highest ROI potential idea out there. When we looked at Pattern89, it allows us to look at our ads daily, know what's working and what’s not working really quickly, and then be able to make changes within minutes. We can then just move on to the next thing on the list to do.”
Pattern89 helped Bump Boxes launch a successful ad campaign on Facebook and Instagram in just nine minutes.
“I think a large part [of why this was successful] has to do with just the amount of data [AI] can process," Deehring says. "There’s just no way a human can do what it does as fast as it does. I really can’t stress that the speed at which things are done contributes to the success of whatever campaign we’re running with. I think it’s just as important to understand what’s not working as to understanding what is working. Pattern89 looks at the things that aren’t going to work, and it makes suggestions to turn them off immediately."
Talyor agrees with Deehring. “Humans can’t find these patterns and outliers like AI can,” says Talyor. He acknowledges that AI can be intimidating, especially when there's a narrative out there that the technology will be replacing marketers’ jobs. "AI is going to make marketers’ jobs even more important because humans can apply ethics to AI," Talyor notes. "Humans can decide what creativity should be applied to their brand. What AI is going to do is really augment humans.”
Deehring and Talyor had some advice for companies considering investing in AI. Deehring believes if you want to scale your business quickly and need to better manage your time, AI may be for you. Talyor explained the takeaway is to experiment, see the results, and move from instead of just standing on the sideline.
Total Retail's third annual Retail Technology Report provides valuable insights into the technology landscape within the retail industry. The data collected from 100-plus retail executives serves as a road map for retailers and brands, identifying the technologies their competitors are currently investing in as well as what they’re targeting for future spend.
Download Total Retail’s 2019 Retail Technology Report today.