Why AI Won’t Save Retail This Holiday Season ... But Will Next Year
COVID-19 has changed everything. The retail ecosystem has been impacted more than any other industry. Now, the industry is tiptoeing to the most important time of year: the holidays.
In-store traffic is down over 50 percent from a year ago, and let’s not forget that this traffic had already decreased every month for over six consecutive years. Online shopping has surged, but every brand is wondering whether online growth will be enough. In that pursuit, brands are turning to artificial intelligence (AI) to save the day.
Spoiler: AI won’t save the holiday season this year.
However, AI will in 2021!
Retail’s New Era
In the last decade, shoppers have wrested control of the retail industry from brands and merchants, empowered by multidevice connectivity. According to the U.S. Department of Commerce, in 2019, consumers spent $601.75 billion online, up 14.9 percent from the prior year, representing 16 percent of total retail sales.
Then, the COVID-19 pandemic hit hard, and pushed the pendulum online.
In the second quarter of 2020, U.S. e-commerce sales soared a record 44.4 percent, with more than $1 of every $5 spent online, the highest penetration on record.
With shoppers continuing to spurn physical storefronts, the impetus is on retailers to transition online. Since early 2020, Shopify has experienced what its CTO, Jean-Michel Lemieux, described as “Black Friday-level traffic every day.” According to Salesforce, 30 percent of all 2020 holiday shopping will be online.
Therefore, people, procedures and systems must be leveled up to meet increased online demand. It’s at these digital touchpoints where AI can save retailers.
The retail industry isn't good at change; it’s more a follower than early adopter.
Just look at the NRF BIG Show to find examples: in-store analytics have been around for a decade, but most store brands haven’t deployed a solution that sheds insights into how consumers shop the store. Most stores don’t even deploy shopper traffic counters to calculate basic retail metrics. Whereas online divisions know nearly everything about shopper behaviors.
AI to the Rescue in 2021
The secret to sustainable retail success has always been as follows: What’s good for the shopper is good for the retailer. And there’s no better place to start than the purchase consideration funnel:
- Pre-shopper journey
- Top of the funnel
- Bottom-half and post-purchase
There are AI applications for each segment of the funnel, as highlighted below.
These AI solutions primarily involve supply chain data. AI data creation and labelling occur at the beginning of brands’ product digitization processes, creating metadata for each product. Computer vision algorithms automatically identify products, tag them, then generate descriptions with search engine optimization-ready metadata.
AI organizes data too, particularly for multibrand retailers — e.g., one manufacturer’s taupe may be another’s beige. Algorithms can transform attributes from sentences of text and tables of data to automatically suggest attributes to digitize products across brands and categories, resulting in easily searchable data.
AI also develops data models and builds decision engines, empowering retailers to make data-driven decisions, including demand forecasting.
Top of the Funnel
Product discovery is the most critical step in a purchase journey, and a search engine user is a high intent shopper. Simple discovery processes deliver a high return on investment. On-site search captures the intent of queries and returns products closely matching search terms. AI goes further, returning hyper-relevant results that drive conversions.
AI personalization also delivers a better understanding of intent with every click, so personalized product pages and recommendations are served. For example, AI-powered solutions that curate mood boards, color palettes and collections for each apparel shopper are proven to increase transactions, average transaction value and conversion rate.
Bottom-Half and Post-Purchase
AI provides solutions for the problem of abandoned online shopping carts, worth over $4.5 trillion dollars. More than half of merchants use cart abandonment emails, but AI-powered applications deliver personalized suggestions of the merchandise abandoned — and of similar products based on individual shopping behaviors.
At the last critical stage of a shopper's purchase consideration funnel are newfound tools to improve experiences with customer representatives that return tangible results through increased conversion and basket sizes. Salesforce found a 30 percent increase in the number of consumers reaching out to contact centers over a few months earlier this year. AI-powered contact-center tools empower contact-center agents with real-time scripting, resources and tools to guide every customer interaction to its fullest potential.
Stability is Coming
Every year there are winners and losers. In 2020, however, the number of winners will be fewer, but their winnings will be huge — we’re looking at Amazon.com and Walmart. For those survivors, there’s good news ahead. The industry should stabilize and recover, and AI will lead the way. It’s no longer “if;” it’s a mission-critical “when,” and the early adopters and fastest followers will reap the rewards.
Zayd Enam is the co-founder and CEO of Cresta, a technology company that enables sales, care and retention teams to be “experts on day one” with AI-powered live prompts delivered in real time during every customer interaction.
Related story: Cosabella is Using AI to Better Connect With its Customers
Zayd Enam is the co-founder and CEO of Cresta, a technology company that enables sales, care and retention teams to be “experts on day one” with AI-powered live prompts delivered in real time during every customer interaction. You can connect with Zayd on both Twitter and LinkedIn.