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Report: AI Could Elevate the Future of Online Merchandising

While fashion e-commerce remains a competitive space, retailers will turn more and more to AI to increase consumer purchases and deliver relevant experiences in the next few years.

A recentDrapers report, “Artificial Intelligence: The Future of Online Merchandising?” says investments in technology, including AI, are key for retailers to win share of consumer spend. Moving forward, retailers will have to tap into consumers’ needs based on data and create relevant experiences with AI to remain competitive.

For the report, Drapers and research partner Apptus surveyed 80 senior fashion directors and gathered a group of leading retailers, including Asos and M&S, to highlight how they will leverage the power of AI down the line.

Why AI investment is critical for share of consumer spend

E-commerce growth is moving rapidly and retailers must be able to merchandise and market to consumers in way that’s fast, personalized and provides the opportunity to win share of consumer spend.

The report says technology investments, including those in AI, are crucial for retailers to efficiently analyze consumer data and make this happen. Most retailers (72.2%) aim to focus their AI investments on merchandising, while 72.7% are using the data they capture on consumers to help inform their online merchandising strategies.

Retailers are investing in AI because it would enable real-time online merchandising informed by customer data to maximize conversion (44.2%), to better use customer data (40.4%) and free up merchandising teams to be more creative (15.4%).

Despite the push for AI investments, technology issues are holding most retailers back. Almost half of retailers (42.3%) said they have problems with data siloed in various channels, 40.4% said they don’t have the skills to internally analyze data and 36.5% said they require AI to keep up, because they have too much data. Most retailers (82.1%) are also not ready to use AI as part of their personalization strategies, yet 65.5% said they plan to invest in systems to help with this in 2017 and 2018.

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AI could boost retailer relevancy

With the number of products available online today, relevancy is critical for retailers. Consumers are placing orders frequently and they don’t have time for retailers that don’t address their needs. AI could help retailers deliver relevant experiences with the help of data insight.

More than half of retailers (56.5%) agreed that their consumer experiences were “quite relevant,” while 20.8% say they aren’t sure about relevancy. Despite differences on relevancy, nearly half of retailers (46.2%) believe that their target consumers browse fashion websites daily, demonstrating that the need for relevant experiences is high.

Relevancy is also dependent on how fast retailers react to evolving trends. In the report, 28.3% of retailers were confident they could respond to these trends in hours, but only 9.4% said they could take on this challenge in real-time. What’s more, 28.8% of retailers were not very confident that their e-commerce operations display on-trend fashion merchandising. This could be an indicator of why retailers are turning to other options, including AI, to stay relevant.

Retailers agreed that AI could significantly improve their market presence and business initiatives. Most retailers said AI could make moderate to big improvements in many areas, including customer service, data and customer understanding, operations and testing. AI would enable retailers to bring more visitors to their e-commerce sites and foster more purchases from existing consumers.

What top retailers are doing now to prepare for an AI-driven future

Along with the launch of the report, Drapers and Apptus held a discussion with top retailers on AI’s prospects. At the discussion, most retailers agreed that AI could be a positive force in retail and online merchandising.

Although most retailers (90.9%) surveyed are excited about AI’s possibilities, only one retailer is using AI for its online merchandising operations—Asos.

Asos global trading director, Nicola Thompson, said the company incorporated AI into its online merchandising early last year. AI enabled Asos to analyze consumer data and provide more personalized experiences to millions of shoppers.

“With the scale of the data and the global nature of the business, we realized that to truly unlock the potential in the business, we had to move in that direction,” Thompson said. “It’s given us the ability to investigate other business problems and go down to a level of detail, rather than just doing the manual surface work.”

Although most retailers (42.4%) said cost remains a barrier for AI investment, some are focusing on data sources or specific customer types to deliver better experiences.

Some retailers, like M&S, are analyzing data from their loyalty programs. M&S childrenswear online merchandising manager Zoe Klyhn uses the data to split consumers based on their purchasing and browsing activity. The data enables M&S to provide personalized offers and product recommendations to consumers.

Andrew Fowler, Apptus U.K. country manager, said taking on a “cluster approach” could be difficult for retailers, since consumers don’t fall into one silo in fashion e-commerce.

“There’s a place for segmentation, but I’m not sure it’s when you’re trying to merchandise products,” Fowler said. “When that person’s on your website looking at product, you need to be ahead of the game and that’s where AI comes in.”