This Industry Is Driving the Development of AI

This industry drives AI development like no other. It's a race for our wallets

There is an industry where technology is becoming more important than people. It's not medicine, nor is it autonomous cars or robotic assistants. It's retail, which is responsible for the largest investments in AI, according to IDC. The analytical firm predicts that this year alone, spending on artificial intelligence development will reach nearly $36 billion. However, no one will be as generous as retailers, who plan to allocate nearly $6 billion for this purpose.

Just two years ago, the e-commerce industry was responsible for the sale of products worth about $2.3 trillion. eMarketer estimates that by 2021 this value will double. Online sellers' turnover will reach nearly $4.8 trillion.

– Today, even with really small capital, you can start your own business; often a bit of effort and a good product are enough. This is possible thanks to technological development and extensive sales platforms that function as virtual shopping centers with thousands of digital boutiques. There are already 5 million sellers with Amazon accounts, of which about 1.5 million are active. Amazon's statistics clearly show that such activity pays off. In the US market alone, over 140,000 sellers can boast annual turnover of at least $100,000 – comments Sascha Stockem from Nethansa, which introduces Polish and German companies to the world's largest trading platform, where it comprehensively manages their sales using its proprietary Clipperon system, equipped with artificial intelligence. Can the innovative system developed by the Sopot-based startup meet market expectations? Software alone is not enough. Appropriate knowledge is also needed, without which it is impossible to fully exploit Amazon's potential, and you can even get into trouble. Meanwhile, high competences plus artificial intelligence algorithms seem to be a recipe for success. At least that's what the data presented by Nethansa suggests. – We meticulously monitor the results achieved by sellers with whom we cooperate within the Amazon platform. As statistics show, for our clients from Poland and Germany we generate an average of EUR 370,000 in turnover per year on Amazon. That's 10 times more than is the case for the statistical Amazon seller – reveals Sasha Stockem.

Everything indicates that his startup, like other entities offering sales support technologies for e-commerce, will have its hands full. Online shopping is becoming increasingly popular. NasDAQ.com estimates that by 2040, 95% of all consumer commercial transactions will take place online.

Commerce will replace e-commerce

Commerce will replace e-commerce

"Faster, better, stronger" – sang American singer and music producer Kanye West. Electronic commerce follows the same principle, using modern technologies to win the war for customer attention. According to IDC, total enterprise spending on AI in 2019 was to reach nearly $35.8 billion. This means an increase of 44% compared to the previous year. Meanwhile, by 2022 this sum will more than double ($80 billion). Retailers as a whole will spend the most this year, as much as $5.9 billion.

– Traditional e-commerce sounds a bit like an oxymoron, but the truth is that electronic commerce has significantly expanded its scope. It's already much more than ordinary online sales. We have found ourselves in a very difficult phase of transformation. E-commerce is turning into c-commerce. C as in customer experience, conversation and cognitive. C-commerce is everything related to AI and intelligent improvements in shopping – explains Nethansa's CEO.

Algorithms hungry for knowledge

Algorithms hungry for knowledge

Technological development is true turbocharging for business, which, like car engines, where using the same power units, manufacturers can offer better performance - so in the world of companies, technology helps generate better results.

A perfect example is the development of increasingly smart artificial intelligence. E-sellers from around the world have gained an extra pair of hands and ears that effectively support their work. How? For example, by tracking the user, algorithms efficiently search for traces of their activity, examine their preferences and behavior. The knowledge obtained in this way is used in many ways, the common denominator of which is personalization. This is the process of adapting all communication to the recipient.

But is using this technology profitable? In the report prepared by SalesForce, "Personalization in Shopping," it was shown that 6% of retail visits resulting from artificial intelligence recommendations brought 37% of revenue. These personalized experiences resulted in a 4.5 times higher basket value and 5 times higher purchase price.

– Thanks to personalization, AI-based C-commerce systems are able to instantly assess the buyer's needs and approach them with a tailor-made offer. There is no better example than Amazon, where all customers use the same service, located on the same server, and yet each of them has access to their own unique e-shop – explains Sascha Stockem and adds that the data collected about each user affects not only the appearance of the service, but also its content, e.g., search results. – If you recently bought a new iPhone, don't be surprised when the service suggests a wonderful case in the same color as the laptop sleeve you purchased 2 weeks earlier. The algorithms simply connected the facts – continues the Amazon expert.

It is precisely the potential offered by machine learning algorithms that has encouraged business to use modern IT solutions. Computer artificial intelligence is a true top student, gathering and absorbing knowledge, constantly improving its results. Today, such analyses cover not only internet users' behavior, but also audio materials, photos, text or video files.

Retail – the industry driving AI development

A perfect example of another tool that draws fully from machine learning is image search. Amazon store customers can use a phone app to take a photo of the product they are looking for, and the app will search for it in the database of available items and redirect to the appropriate page.

Autonomous psychologist in the service of business

Autonomous psychologist in the service of business

We have already gotten used to the above-mentioned functionalities. Intelligent suggestions or content personalization no longer cause delight. The same cannot be said about the controversial technology that, thanks to artificial intelligence, increasingly better recognizes human emotions. Facebook announced two years ago that it has an algorithm that recognizes mood. It assesses facial expressions, tracks the mouth, eyes or the way eyebrows are furrowed. In our mind's eye, we can already see a new option for targeting ads on Zuckerberg's platform. Sad people are sensitive to different stimuli, and therefore often decide to buy different products. "Say goodbye to sadness and go to the end of the world. This trip will change your life!" "Chocolates so delicious that a banana appears on your face," "No one understands you? You see everything in black colors? Thanks to this guide, you will discover who you really are," "Meet the love of your life and forget what loneliness is" – such ads may appear on the user's screen if Facebook classifies them as one of the downtrodden. The largest social portal does not have a monopoly on emotion recognition. We can therefore expect that in response to a sad look at the phone screen, a music app will suggest playing a blues playlist, and navigation will point the way to the nearest bar. It's scary to think what marketers will propose to people satisfied with life.

Artificial intelligence has also found application in predicting customer moves. It therefore allows for preventive action, identifying weak points on the path of the company-consumer relationship. Scientists from Google and the Indian e-commerce company Myntra Designs, using machine learning and data from over 600,000 transactions, created an algorithm that predicts the probability of return before the customer decides to make a purchase. Using this solution, it was discovered, for example, that 53% of returns result from size and fit issues and that the probability of return depends on basket size. People who buy 1 item and return it are only 9%, while buyers of 5 or more products return in 72% of cases. Knowing the origin of individual returns, online stores can look for innovative ways to reduce their number.

– Artificial intelligence, hyper-personalization, big data - these are solutions whose implementation involves large expenses. Even if we have the financial resources for it, we may lack time or competences. Meanwhile, thanks to the efforts of giants such as Amazon, Google or Facebook, online sellers can freely use them. It's like crossing the English Channel, separating France and England. We can try to do it ourselves, but is there any point when ferries and the Eurotunnel are at our disposal?

– asks rhetorically Sascha Stockem from Nethansa.

He also emphasizes that thanks to machine learning, Amazon predicts which products the customer will most willingly put in the basket. It is estimated that the e-commerce giant's recommendation engine drives 35% of total sales. Is there a company in the world that would not want to increase its turnover by over ⅓?

Summary

Retail will allocate nearly $5.9 billion to artificial intelligence this year, and total AI spending will reach almost $36 billion. E-commerce is evolving into c-commerce, where personalization and emotion analysis play a key role. As Nethansa emphasizes, its clients generate an average of EUR 370,000 in turnover per year on Amazon, which is 10 times more than the statistical seller. Importantly, Amazon's recommendation engine is already responsible for 35% of the giant's total sales, which proves the growing role of machines in purchasing processes.