Holiday Season Sees Businesses Heavily Investing in AI: Will it Truly Impact Results?

Brought to you by Commercetools

Retailers have long been pioneers in the realm of AI, adopting predictive AI algorithms ahead of many other industries. As we enter the next wave of AI, encompassing generative AI and more sophisticated algorithms, numerous brands are already exploring the capabilities of this technology. This holiday shopping season, which culminated in Cyber Week, signifies a turning point. The experimental phase is over, and we’re beginning to witness the tangible benefits, according to Jen Jones, CMO of Commercetools.

“Our latest survey reveals that AI is positively impacting both profits and customer satisfaction,” Jones shares. “We discovered that 91% of businesses have experienced enhanced accuracy in demand forecasting. This is crucial to prevent stock shortages or surpluses during their busiest period, when customers expect availability and don’t want to be let down. Retailers also want to avoid discounting surplus stock in January.”

When it comes to personalization and recommendation engines, the newest iteration of AI technology excels in analyzing larger-than-ever data sets, filled with valuable customer information that was previously challenging to process. It also introduces powerful features like autonomous bots that identify patterns and make real-time decisions.

“We’re finally crafting those curated, personalized experiences,” Jones continues. “From a customer’s perspective, it makes sense to entrust our data to a brand we trust. Now we’re receiving something in return, with the items we want presented to us from the outset, resulting in a much smoother customer journey.”

However, while AI adoption is widespread, with 62% of businesses already utilizing AI and another 32% planning to implement it soon, the path from implementation to significant results is not always linear.

Investing Wisely in AI

Brands are keeping AI and social commerce at the forefront of their ecommerce strategies, with 69% planning to increase their investments in both technologies. However, AI can be a costly venture, particularly when fully committed. To prioritize expenditure, Jones suggests that brands focus on the customer journey, from ideation and discovery to selection, checkout, and delivery, and examine how AI can revolutionize key customer touchpoints.

Of course, the entire journey is the short answer. But you can prioritize potential applications by assessing each point where a measurable outcome could be achieved and considering the impact that outcome would have on the brand’s ultimate goals.

That being said, there are several practical areas where brands are reaping significant benefits from AI, including inventory management, demand prediction, fraud detection, and customer service.

Fraud detection is particularly crucial during the holiday shopping season when transaction volumes skyrocket, and monitoring unusual activity becomes increasingly challenging. To safeguard their bottom line, 94% have incorporated AI-enhanced fraud detection to combat rising online threats.

AI-powered fraud detection leverages the strengths of predictive AI — analyzing behavioral patterns and identifying anomalies and spikes in suspicious activity. Generative AI takes this a step further, either taking action if it’s a problem the system can handle independently or escalating it to human attention if it’s a problem that requires intervention.

Generative AI has also enhanced customer service chatbots to the point where they understand natural language and are significantly better at detecting intent. As a result, they’re much more effective at handling the less complex customer issues that inundate call centers during peak periods, allowing agents to concentrate on more significant, complex problems while reducing call volume. This leads to increased customer satisfaction and agent satisfaction.

Moreover, AI-driven personalized advertising is yielding substantial improvements in campaign performance for 93% of retailers. In an era where advertising costs are escalating, anything that optimizes advertising outcomes directly contributes to increased revenue. From a consumer perspective, better, more personalized, more targeted ads remove frustration from the shopping experience and can make customers feel more valued.

Then there are the innovations — for instance, Commercetools customer Sephora launched a color IQ foundation-matching service that assists customers in finding the right foundation shade and the brand that suits them. On the B2B side, Dawn Foods is utilizing AI-powered search capabilities to help customers navigate an expanding product catalog and deliver results more quickly and accurately, as well as suggest useful new selections to enhance customer relationships.

Overcoming Obstacles to AI Value

Transitioning from experimentation to successful outcomes has proven challenging for some brands. One of the primary obstacles is bridging 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 designed for a different era,” Jones points out. “But you need to seamlessly integrate your AI technology into your platform, and you must be able to instantly respond to data, remain agile, and make changes on the fly. Otherwise, AI just won’t meet your expectations.”

This is where adopting a modern commerce platform approach, including composable commerce, sets companies up for success, she adds. Another recent Commercetools survey found that 90% of businesses that switch to modern ecommerce platforms report significant boosts in sales and revenue. Of these platforms, composable commerce has emerged as a preferred choice for brands, with 91% already using or considering it, and 92% citing increased agility as the most important adoption factor.

“Composable commerce, at its core, is about being prepared for whatever comes next,” Jones explains. “AI is a prime example of a technology that burst onto the scene, and brands with flexible, more modern architecture were able to adopt it early, conduct those initial experiments, and be ready for this year. They’re seeing benefits on both the operational efficiency side and the customer experience and loyalty side. I anticipate they’ll have a standout holiday shopping season compared to their peers on more outdated systems.”

This article is sponsored content produced by a company that is either paying for the post or has a business relationship with VentureBeat. These articles are always clearly marked. For more information, please contact sales@venturebeat.com. rnrn