Artificial Intelligence is really not as scary as it sounds. A far cry from robots putting millions of hard-working Americans out of work, AI is becoming a valuable breakthrough for both retailers and customers. Underneath the broad category of AI lie four major applications that bring incredible value to the world of digital commerce: voice search, hyper-targeting, personalization, and chatbots.
Voice search became mainstream with Apple’s Siri, but Amazon has utilized it for increased sales through Echo. Through these AI assistant devices, neural networks take in auditory data and attempt to respond in the same way a human would. While these are primarily transactional in their current functionality, the Four Horsemen and many of the largest retailers are heavily investing to expand the possibilities of “AI Assistants”. Hyper-targeting brings value to retailers by collecting and analyzing tons of data through machine learning, a subcategory of AI. Our phones can now point out a store with umbrellas in stock that we will pass on our way home from work when the forecast calls for rain. (Okay, I do actually find this one a bit scary.)
AI enhances customer experience through personalization and chatbots. It enables faster and more precise consumer recommendations using more than just your purchase history. In this way, AI combines data from purchase trends, customer loyalty, demographics, and browsing patterns in order to give customers exactly what they want exactly when they want it. Chatbots are getting better at understanding a wide variety of questions and comments, no longer sending pre-programmed responses to simple questions. Overall, AI software is expected to bring revenue of nearly $60 billion to online retail by 2025.
One sector of retail that is heavily investing in artificial intelligence is the online fashion industry. If you’ve never heard of Stitch Fix, it is an online subscription and personal shopping service. Basically, you set up a profile on the website or app which asks questions to determine your fashion style, clothing sizes, and price preferences. Next you request a “fix” whenever you want and a box with 5 items will be shipped to your door. After trying them on, you can keep what you like and send the rest back. You only pay for the items you keep. There is a $20 styling fee per box but you can apply that amount toward the items you end up purchasing. It’s a simple idea that solved a previously unmet need – the ability to try new clothes with the convenience of online shopping without the commitment of purchasing before trying. Many people, myself included, will order something online that doesn’t quite meet our expectations upon delivery, but the hassle of shipping it back for a return or exchange does not seem worth the effort. This results in dedicating a “I may wear this one day” corner of the closet until it grows too large and we decide it’s time for some spring cleaning. Eventually all of those not-quite-right, never-been-worn, tag-still-attached items will be folded up nicely and placed in a shopping bag for their trip to the Salvation Army donation box.
Stitch Fix fixes all of that! As impressive as this business idea is, their execution is the really remarkable piece. Stitch Fix uses a seamless combination of artificial intelligence and human expertise for their business operations. Specifically, it uses machine learning and natural language processing together with the massive amounts of data compiled from the style profiles and purchase/return history of each customer. After the Stitch Fix algorithm analyzes the profile results, personal notes and more nuanced data, it sends the results to a real-life human person (aka “stylists”). The stylist then makes the selection of 5 items for the fix box, packages them with a personal message and sends it out. While the technology helps increase productivity and efficiency, human interaction throughout the process is crucial. This combination helps to more accurately gain insight to the customer and maintain stronger relationships with the brand.
Just in case Stitch Fix’s $ 1.22 billion expected 2018 revenue isn’t enough to convince you that artificial intelligence is the future of fashion, Amazon is on board now too. Engineers at Amazon are working on algorithms for an AI fashion designer. As they aim to increase their footprint in the fashion industry (they even recently started their own line of apparel) Amazon hopes their technology will even be able to predict fashion trends of the future. Using a GAN (generative adversarial network) they can analyze properties of particular styles by looking at many images and apply the styles to an existing item. Leave it to Amazon to take AI to the next level! While artificial intelligence clearly has a prominent place in the future of e-commerce, there should still be a place for the human experts as well.