Presented by Commercetools
Retailers have been ahead of the AI curve for a long time, embracing predictive AI algorithms early on compared to other industries. Again, in this next wave of AI, which includes generative AI and more advanced algorithms, many brands have already leaned in, testing out the potential of the technology. This holiday shopping season, which reached its peak during Cyber Week, marks the inflection point, where the experimental phase has come to a close, and we’re starting to see the promised results, says Jen Jones, CMO of Commercetools.
“Our recent survey shows that AI is hitting both the bottom line and customer satisfaction,” Jones says. “We learned that 91% of businesses have seen improved demand forecasting accuracy. It’s critical to avoid stockouts or overstocks at their busiest time of year, when customers expect to find things and don’t want to be disappointed, and retailers also don’t want to be discounting overstock in January.”
On the personalization and recommendation engine side, the latest iteration of AI technology shines not only in analyzing larger-than-ever data sets, full of rich customer information that used to be difficult to process in its entirety, but gets a major glow-up with functions like autonomous bots that detect patterns and make real-time decisions.
“We’re finally creating those curated, personalized experiences,” Jones adds. “From a customer standpoint, that’s where having our data in the hands of a brand that we trust makes sense. Now we’re getting something in return, with the items we want served up from the start, making for a far more seamless customer journey.”
But while AI adoption is widespread, with 62% of businesses already leveraging AI, and another 32% planning to implement it soon, the journey from implementation to meaningful outcomes is not always straightforward.
Prioritizing AI investments
Brands continue to keep AI and social commerce front and center of their ecommerce strategy, with 69% planning to ramp up their investments in both technologies. But AI can be an expensive proposition, especially when fully committing. To prioritize spend, Jones advises that brands hone in on the customer journey, from ideation and discovery, to selection, checkout and delivery, and look at how AI can transform key customer touchpoints.
The whole journey is the short answer, of course. But you can rank those potential applications by examining each point at which a measurable outcome could be achieved, and consider what impact that outcome would have on the brand’s ultimate goals.
That said, there are a few practical areas in which brands are seeing great success when leveraging AI, including inventory management, demand prediction, fraud detection and customer service.
Fraud detection is especially critical during the holiday shopping season when the number of transactions jumps dramatically, and keeping track of unusual activity becomes even more of a challenge. To protect their organization’s bottom line, 94% have added AI-enhanced fraud detection amid rising online threats.
AI-powered fraud detection harnesses what predictive AI does best — analyze behavioral patterns and detect anomalies and spikes in suspicious activity. Generative AI takes that a step further, taking action if it’s an issue that the system can handle on its own, or bumping it up the chain of command by alerting humans to a problem that needs to be handled.
Generative AI has also improved customer service chatbots to the point where they understand natural language and are significantly better at detecting intent. As a result, they’re far better at handling the less complex customer issues that flood call centers during the busiest time of year, letting agents focus on more meaningful, complex problems while call volume is reduced. In turn, customer satisfaction goes up, and so does agent satisfaction.
Additionally, AI-driven personalized advertising is driving huge gains in campaign performance for 93% of retailers. In an era where advertising costs are mounting, anything that optimizes advertising outcomes directly leads to greater revenue. From a consumer standpoint, better, more personalized, more targeted ads take frustration out of the shopping experience and can make customers feel more seen.
And then there are the innovations — for example, Commercetools customer Sephora launched a color IQ foundation-matching service that helps customers find the right foundation shade, and the brand that’s right for them. On the B2B side, Dawn Foods is using AI-powered search capabilities to help customers navigate a growing product catalog and turn up results more quickly and more accurately, as well as offer up useful new selections to improve customer relationships.
Why barriers to AI value remain
Moving from experimentation to successful outcomes has proven to be a challenge for some brands. One of the major barriers is navigating the gap between the demands of cutting-edge AI technology and commerce software that in some cases has been around for decades.
“Many brands are still using software that was built for a different world,” Jones says. “But you need to be able to seamlessly integrate your AI technology into your platform, and you must be able to immediately react to data, stay agile and make changes on the fly. Otherwise, AI just won’t live up to your expectations.”
That’s where having a modern commerce platform approach, including composable commerce, sets companies up for success, she adds. Another recent Commercetools survey found that 90% of the businesses that switch to modern ecommerce platforms report significant boosts in sales and revenue. Of those platforms, composable commerce has emerged as a frontrunner for brands, with 91% already using or considering it, and 92% cite increased agility as the most important adoption factor.
“Composable commerce, at its heart, is about being ready for whatever’s next,” Jones says. “AI is a great example of a technology that broke into the limelight, and brands with flexible, more modern architecture were able to jump on it early, do those early experiments and be ready for this year. They’re seeing benefits both on the operational efficiency side of things, but also on the customer experience and loyalty side. I expect they’ll have a standout holiday shopping season compared to their peers on more outdated systems.”
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