The Convergence Between AI, E-Commerce, And An Optimized Experience

The retail sector has seen tremendous change over the last year, and headlines prove that industry leaders are spending time and money on “building the new.” Amid strict lockdowns and fear of shopping in stores, consumers have turned to e-commerce in droves. According to eMarketer, worldwide retail e-commerce sales saw more than 27% growth in 2020, even as projections reported a decline of 16.5% mid-pandemic. 

To capitalize on today’s seismic shift toward e-commerce, merchants cannot sit back and wait for orders to roll in; they must ensure they have perfected the recipe for success. It stands to reason that organizations that take advantage of the immense tech advancements in the world of e-commerce are more likely to thrive. The challenge? Keeping up with ever-changing consumer behavior is a job in and of itself.

So, What Do Consumers Want? 

Walmart recently announced its plan to scale its local fulfillment centers to meet customers’ delivery needs. Predictably, Amazon continues to invest heavily in its fulfillment strategy as well, with its shipping network offsetting the need to rely on third-party partners. This pressure to deliver speedily is known as the “Amazon Effect” and is often mistakenly understood as the primary way to maintain happy customers.

According to Forrester, 52% of shoppers say that free shipping is a major incentive to selecting online merchants, but only 8% report that expedited shipping is important for them. Regardless, retailers have been aggressively chasing faster shipping methods to compete with Amazon, often while neglecting opportunities that result in a higher return-on-investment (ROI).

In contrast, leading retailer Nordstrom is proving that faster shipping is not the key factor for growth. The company recently announced its pivot to a “digital-first” approach for both its flagship and Nordstrom Rack brands, expanding its online selection, which already carries almost three times the volume of its physical store selection. It also plans to expand online to 20 times the in-store selection to extend its reach and increase sales.

Nordstrom is one example of a retailer reprioritizing to accommodate the times by escalating its digital approach. The company is focusing on customer experience—not price or delivery—highlighting optimization and personalization, and breaking down silos between its digital and physical store strategies to achieve this goal.

It’s critical to note that optimizing the online experience is not reserved for the largest brands. IDC’s Daniel-Zoe Jimenez, AVP of digital transformation (DX), future enterprise, and SMB says, “Small businesses are realizing that digitalization is no longer an option, but a matter of survival.” Regardless of company size, merchants must explore the value of integrating AI into their e-commerce strategy to deliver an excellent shopper experience.

AI-powered merchandising, site search and personalization is fueled by data fueled by shopper behavior, store inventory and visual signals, and is accessible by merchants of any size in today’s ecosystem.

AI and Strategic Online Merchandising

AI promises tremendous value, especially in e-commerce, where data collection and shopper interaction are measurable and manageable. Innovation in merchandising involves the strategic combination of art and science, and is key for maximizing sales, regardless of the sales channel. The challenge for online merchandisers is that they must identify and apply creative and strategic visual cues to make up for the absence of physical objects and ambiance. Traditional merchandising used guesswork and historical information and proves ineffective in today’s retail landscape. 

Insights from McKinsey report that the retail industry has the potential to create $1.7 trillion of value, or 12.39% of total sales, due to AI. But value stems from the ability to address the right questions at the right time, including:

• Are customers finding what they want or are they getting frustrated and leaving? Using AI, patterns are recognized and digital merchandisers can make informed decisions about placement. Instead of manually re-merchandising, create rules and apply them to products, then A/B test the way your customers like to shop.
• Is the variety of products meeting customer demand? Customers have expectations when it comes to online shopping, and using AI-driven data, the merchant has insight into what the consumer is most likely to buy. Using a machine learning system that acts as an algorithm and evolves with time, a website grows smarter with every search, click and purchase.
• Which products are not only relevant to what shoppers are looking for but also more likely to sell due to their sales velocity?
• How can a collection be optimized not only to display the right products but also to fit margin and inventory constraints?

The recent health crisis has expedited e-commerce by years, and companies must keep pace by examining and shifting their online AI strategies right now. This moment in time will prove key to unlocking a more resilient and sustainable paradigm for business for the coming years.