Operations
13 January
Google debuts 4 AI tools for retailers
Shelf checking, online window shopping and product recommendations are the focus areas.
Photo by Alex Dudar on Unsplash
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The NRF Big Show arrives in New York on Jan. 14, and that means companies will be rolling out their latest technologies and partnerships to start off 2023 strong.
Google is getting a head start. Just ahead of the event, the company’s cloud division shared details on four new AI-powered releases for retailers on Friday. The technologies are designed to advance in-store shelf checking, as well as ecommerce browsing and recommendations.
The launches show how Google Cloud is expanding a suite of products for others. This is distinct from Google Shopping through the search giant’s own site, which has also gotten plenty of upgrades over the last year.
"Upheavals over the last few years have reshaped the retail landscape and the tools retailers need to be more efficient, more compelling to their customers, and less exposed to future shocks," said Carrie Tharp, VP of retail and consumer at Google Cloud, in a statement. "Despite uncertainty, the retail industry has enormous opportunity. The leaders of tomorrow will be those who address today's most pressing in-store and online challenges with the newest technology tools, such as artificial intelligence and machine learning."
For those looking to see how AI will play a role in commerce, Google’s technologies offer a few use cases, from store operations to personalized online shopping.
The technologies include:
A shelf-checking solution
This aims to ensure that shelves in stores don’t become low or empty. Built on Google’s Vertex AI Vision, this uses Google’s database of people, places and things to help recognize products. It uses two AI models: a product recognizer and tag recognizer.
The goal is to solve a particular problem: “how to identify products of all types, at scale, based solely on the visual and text features of a product, and then translate that data into actionable insights.”
The AI tool can identify products based on images taken from a variety of different angles. Currently in preview, the product allows retailers to retain their imagery and data.
An online window shopping tool
This feature is designed for browsing and product discovery.
Here’s how it works: Shoppers choose a category, such as “women’s jackets.” Then machine learning selects optimal ordering of products in the results. The system, which is powered by Discovery AI, learns the ideal order on each page, and improves over time with more data.
The feature can be used on browsing, brand and landing pages.
Typically, products are ordered based on best-selling items, or human-written rules. The AI tool essentially self-curates a selection. For retailers, the potential benefits are more revenue per visit and team time saved.
Personalized search and browsing results
This is designed to show customers products that align with their tastes and interests.
AI is employed to analyze a customer’s behavior on an ecommerce site, such as their clicks, cart, purchases and more. This helps to determine shopper tastes and interests, and AI then moves up products that match them in results.
Google said the results are based solely on an interaction on a specific retailer’s site through an account or first-party cookie, and not linked with Google more widely.
Upgrades to Recommendations AI
This is designed to help retailers arrange and coordinate recommendation panels that appear on ecommerce sites. New capabilities include:
- Page-level optimization to help an ecommerce site dynamically decide what product recommendation panels to show shoppers.
- Revenue optimization uses machine learning that helps to identify recommendations that will increase revenue per user session.
- A third tool, built with DeepMind, uses machine learning to analyze product categories, item prices, and customer clicks and conversions. It finds recommendations that balance customer satisfaction and revenue lift.
- Buy-it-again, which provides recommendations for repeat purchases based on a shopper’s history.
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Macy's sees 'reset year' for ecommerce
The retailer's marketplace is expanding quickly.
When it comes to ecommerce growth, was the pandemic a blip or a new trendsetter?
As we move further from the height of COVID-related closures, it’s a question that will start to be answered through the lens of history.
So far, the narrative of ecommerce growth in the U.S. from 2019-2022 has gone like this: Ecommerce’s share of overall retail saw a huge spike at the height of the pandemic in 2020-21, when goods in general were in demand and online shopping was necessary to preserve health and safety. Experts looked out and saw a permanent exponential change in the penetration of ecommerce as a share of retail that would last beyond the pandemic. Then, in 2022, everyone went back to stores and the trendline came back to 2019 levels. Growth was no longer exponential. There was still growth, but it was not happening as fast as during the pandemic period.
With this in mind, it’s worth pointing out that 2023 is the first year that there likely won’t be a pandemic-influenced swing to influence ecommerce growth. It is also a year where demand has suffered challenges amid inflation and interest rate hikes.
So as we seek to determine the importance of ecommerce to overall retail, it’s worth it to continue taking a close look at what growth trends retailers are seeing now, whether ecommerce is remaining resilient amid consumer pullback and how retailers are preparing for the future.
The latest example arrived this week from Macy’s. It’s a fitting one for the times. Overall, Macy’s is seeing a slowdown as consumers pull back on discretionary purchases, with sales declining 7% in the first quarter versus the same quarter of 2022. Digital sales were down 8%.
Macy’s is particularly susceptible to the macroeconomic headwinds that many brands and retailers are facing, as spending among the middle-income consumers it counts as a primary customer base is particularly softening, said GlobalData Managing Director Neil Saunders.
But while ecommerce is slowing overall, the importance it gained to Macy’s business during the pandemic is remaining in place.
In 2019, ecommerce made up 25% of Macy’s revenue, CEO Jeff Gennette told analysts on the company’s earnings call. That jumped to a high of 44% in 2020. By 2022, digital reached 33% of sales after the pandemic boom. In the first quarter of 2023, it remained at 33%. So, while the trend line dipped after shoppers returned to stores, ecommerce share still settled in at a higher post-lockdown point than it was before the pandemic.
This came in a quarter in which traffic was “relatively good” across both online and in-store, Macy’s CEO Jeff Gennette said. It was “flattish” online, and slightly up in stores.
“We do expect that this is the reset year with the penetration between them,” Gennette said. “But we do expect more aggressive growth in digital in the future versus stores as we think about '24 and beyond. And that's going to be foisted by a lot of ideas and strategies.
Over the last year, the retailer has made investments in boosting ecommerce, even as shoppers returned to stores. In a bid to boost the assortment of goods available online, Macy’s launched a marketplace in September 2022 that welcomes goods from third-party sellers.
The marketplace had an “outstanding” first quarter, said Macy’s President Tony Spring, who is poised to succeed Gennette as CEO next year. Gross merchandise value increased over 50% when compared to the fourth quarter of 2022, while the average order value and units per order for marketplace customers was 50% above those not shopping at the marketplace.
Macy’s is continuing to build the marketplace even as it racks up sales. The retailer added 450 brands, ending the quarter with 950 brands.
This is helping to draw in new customers, as well as younger existing customers who are buying more items, resulting in increased basket size.
“We're very excited as to how marketplace is really attracting the Gen Z customer, particularly in categories where it was not economically feasible for us to carry in the past,” Gennette said.
In the end, Gennette said a strong digital and social presence is key to attracting younger consumers. That's a different type of shopper than other age groups.
“We know the younger customer starts first online,” Gennette said. That behavior will still be in place as the generation gets older, and gains more buying power in the process.
Going forward, Macy’s is seeking to expand the model to other retail banners in its portfolio. Bloomingdale’s will open a marketplace in the early fall.
The Macy’s ecommerce trajectory isn’t that different from the wider U.S. ecommerce narrative detailed above. With one quarter of 2023 data, there is evidence that ecommerce share settled out at a higher point after the pandemic than where it started before COVID arrived. There is flattening now, but the retailer is taking it not as a sign of a slowdown, or a signal to change course. Rather, it sees changing consumer behavior as a reason to build for the future.
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