Attracted by the convenience of shopping anytime, anywhere, consumers are flocking to mobile commerce (m-commerce). We think the shift to browsing and buying via smartphones will sustain e-commerce growth, as the convenience of mobile encourages more frequent online shopping. We also expect the consumer-led shift to m-commerce to prompt a wave of retailer investments in artificial intelligence (AI) capabilities.
Small-Screen M-Commerce Brings Challenges
Just over one-third of all US online retail sales will be made via mobile devices (including tablets) this year, according to Euromonitor International, which projects that that share will reach 43% by 2020. But m-commerce brings challenges for retailers. Compared with sprawling physical stores or full-size desktop home pages, mobile sites and apps give retailers far less “real estate” with which to showcase products to shoppers.
Partly as a consequence of having small screens, smartphones see much lower conversion rates than other devices—in other words, fewer browsers become buyers. According to software firm Monetate, US shoppers registered an average conversion rate of just 1.5% on smartphones in the final quarter of 2016, compared with a 4.3% conversion rate on desktop devices.
It is perhaps no surprise, then, that fully 45% of major US retailers rated improving the mobile experience as a top priority in a March and April 2017 survey conducted by consulting firm BRP.
AI Enables Personalization
AI offers perhaps the most promising way to put the right products in front of the right consumers. A growing number of retailers are using AI technology to personalize what shoppers see when they visit a website or use an app on a small-screened mobile device.
Retailers that have rolled out AI-powered personalization include lingerie company Cosabella in the US and online retailer Shop Direct in the UK. Cosabella uses an algorithm to test alternative options for its website design based on the conversion rate generated by each variant. The company says this testing has resulted in a 30% increase in conversion rates. In the UK, Shop Direct is personalizing its home pages, marketing emails and off-site advertising. The company says it can offer millions of home page variations based on customer data, and management noted in 2015 that it expected this personalization to add about 1% to annual revenues. This deployment of AI has gone hand in hand with consumers’ migration to mobile, and fully 68% of Shop Direct sales were made through mobile devices over the 2016 holiday period.
Providers of personalization services to retailers include Sentient and Vue.ai. Sentient encourages shoppers to highlight which products they like and do not like, and its technology “learns” from this information in order to recommend products that match customers’ preferences. Vue.ai’s visual-intelligence technology learns from shoppers’ browsing and shopping histories so it can display items that match their preferences and provide personalized recommendations.
Mobile Could Spur AI Adoption
Online personalization is just one benefit AI can provide: the technology is also being used by retailers for inventory management, price optimization and customer service via chatbots. However, we expect m-commerce in particular to help drive adoption of AI in retailing and, in turn, improve the customer experience. While we are likely to see Internet-only retailers lead the charge, we expect mass-market, multichannel retailers to adopt AI in the near future, too. As smartphones continue their march into retailing, personalization is rapidly moving from a “nice to have” add-on to an essential tool in e-commerce.