Machine Learning Provides Competitive Edge in Retail


(Image: jordache/Shutterstock)
(Image: jordache/Shutterstock)

A simple concept behind machine learning is proving that computation software can access a dataset and create results from that access. That concept also serves as the most crucial element in providing meaningful personalized service for customers.

In marshaling its resources, Amazon has begun to school retailers and search engines on how crucial an element machine learning is to a competitive environment.

Several Amazon advertising services are starting to rival Google in a significant business model for Google, online advertising. Amazon has been long offered Product Display Ads that feature product images and text that relate to people's searches. It just launched a few advanced advertising services such as a cloud-based header bidding service, according to MarTech.

More to the point of machine learning, Amazon is now beefing up services related to this technology. The company has announced a new program that will allow developers to build and host most Alexa skills using Amazon Web Services for free. It also introduced three new AI services -- Amazon Rekognition, which can perform image recognition, categorization, and facial analysis; Amazon Polly, a deep learning-driven text-to-speech (TTS) service; and Amazon Lex, a natural language and speech recognition program. The initiatives will bolster Amazon Web Services (AWS) against Microsoft and Google.

These product milestones for Amazon occur as the retail industry -- the most frequent users of personalization ads -- confront a complex puzzle of tech and trends. Retailers face a massive distribution transformation. Retailers are shifting away from their traditional locations. For instance, mid-level malls are losing stores such as JCPenney's, Sears, and Macy's. Other retailers are experimenting with smaller stores and kiosks in an effort to adjust their floor space. Even once online-only retailers such as Warby Parker and -- you guessed it, Amazon -- have added small brick-and-mortar stores to establish a cohesive consumer experience.

Changing Consumer Behaviors

Changing consumer digital behaviors are adding to the challenge for retailers. Behaviors such as "webrooming" and "showrooming" have become more popular over the last five holiday shopping seasons, and now have become standard activities. Webrooming and showrooming are when shoppers visit physical stores but use their smart phones to comparison shop and check competitive prices, and even place orders with a store's competitior. The adoption of these behaviors meant retailers had to improve their mobile sites, launch apps, examine beacons, and consider virtual reality to create a customer experience that supports the brand and retains sales.

All of this has raised the bar for correlating data variety for trends -- new sources, new contexts, and new intentions, all at different times. Managers who had just converted to the church of analytics now must listen to a new measurement sermon: where does machine learning fit within their business? And because of Amazon, retail managers are experiencing an urgency to learn machine learning protocols and also plan how to execute strategy in a world becoming dominated by a giant competitor.

Through its operational prowess, scale of services, and inroads into IoT devices and cloud solutions, Amazon has positioned itself to make a myriad of correlations between business metrics and technical metrics. I mentioned in recent posts that nascent search activity emerging from Amazon site visitors is rivaling search engines as a consumer starting point for researching products and services. Amazon can now take significant advantage with machine learning. Much of machine learning relies on data preparation, addressing data quality such as treating missing variables. Amazon has an opportunity to provide better context with the search conducted, and play a central role with partners who want to better understand how their products are received.

Amazon can then leverage its discoveries into meaningful customer and business value. A potential example is implementing tactics influenced by BizDevOps, a blend of front-end software development with business development and operations tactics. Its purpose is to align app development to customer and business value in upfront planning. That alignment has become critical as analytics has shifted from singular inferences from website activity into a central measurement of various activity across digital media and IoT devices. If you do a Google search, you'll find more than a few posts on the topic of BizDevOps mentioning Amazon as a model example.

Retail's Machine Learning Future

Amazon's potential with machine learning is a long way from the early years when Wall Street analysts criticized the once-only-a-book retailer about its quarterly losses. Amazon's machine learning potential also has far reaching implications.

Amazon's interest in personalization ads and growing machine learning prowess is tantalizing to supporters of programmatic advertising, which aims messages and gains access to highly targeted, highly valued audiences. Marketers can better predict how ad creative, products, and services can be combined to better appeal to customers in different cycles of the customer experience or a sale. Amazon can ultimately play a central role with platform partners who want to better understand how their products are received.

If this Amazon news makes your strategic team feel that they are behind the curve, take heart. The good news is that machine learning is in its early stages with retailers seeking ways to integrate data and devices that produce the data. Retailers turn to Google for search and paid ads because it covers a large number of industries, so Amazon will remain a retail niche for now.

But if business managers want to find potential success like Amazon has found, they must look internally with technology teams to see how machine learning techniques can be the operational glue between business resources and personalized experience for customers.

Pierre DeBois, Founder, Zimana

Pierre DeBois is the founder of Zimana, a small business analytics consultancy that reviews data from Web analytics and social media dashboard solutions, then provides recommendations and Web development action that improves marketing strategy and business profitability. He has conducted analysis for various small businesses and has also provided his business and engineering acumen at various corporations such as Ford Motor Co. He writes analytics articles for AllBusiness.com and Pitney Bowes Smart Essentials and contributes business book reviews for Small Business Trends. Pierre looks forward to providing All Analytics readers tips and insights tailored to small businesses as well as new insights from Web analytics practitioners around the world.

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Re: retail
  • 5/17/2017 11:29:28 PM
NO RATINGS

..

Joe writes

 I find that, except for basic things (shirts, underwear, socks, etc.), I usually have to try stuff on -- because different brands/types of pants, shoes, suits, etc. fit differently.  And I don't want to go through the hassle of returning something by mail (I've had to deal with that before).

Moreover, the colors and patterns that you sometimes get when you buy online are often *much* different when the actual product you get in the mail is compared against what you saw on your screen. 

I particularly thought of A2 discussions of the pitfalls of online buying of clothing when I read this article in yesterday's Huffington Post:

These Photos Prove Why You Shouldn't Buy A Prom Dress Online

The photos pretty much say it all.

For the record, I have never ventured into buying a prom dress, on or off line ...

 

Re: retail
  • 5/6/2017 4:01:42 PM
NO RATINGS

Define persuaded... does it mean they'll have discount codes thrown at them? Offered free shipping? "Buy a second ill-fitting pair and save 25%!"

Or will online merchants just wear down any lingering resistance to how the same merchants want to do business?

Re: retail
  • 5/6/2017 3:58:49 PM
NO RATINGS

Right, Joe... there are items like pants that have to be tried on for fit, and usually again when the legs or the waist get tailored. 

Which also explains why I so rarely shop for pants, online or IRL.

Re: retail
  • 5/5/2017 4:42:13 PM
NO RATINGS

@kq - I agree with you that consumers over time will be "persuaded" to not demand trying on clothes before purchase

We won't be fooled by empty promises, though. The individual body models and mass customization will improve to the point that trying things on is a waste of time. You'll already know how it fits - how it really fits - through the image of the item shown on your body.

At least half the population never cared for trying things on in the first place.

Re: retail
  • 5/5/2017 11:03:34 AM
NO RATINGS

I suspect consumers over time will be "persuaded" to not demand trying on clothes before purchase, but rely on the "expertise" and customer service aspects of online retailers and maybe even brink and mortar stores. We'll be led to believe what is shown in a picture is just what we need and don't worry about the fit?

Re: retail
  • 5/1/2017 1:11:55 PM
NO RATINGS

@rbaz: I imagine the problems with slimming margins when it comes to free shipping are made up for by savings in other areas that are inherent to traditional brick-and-mortar supply chains.

Re: retail
  • 4/30/2017 11:56:37 AM
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Joe, I agree that online shopping for clothes has its drawbacks, but availability is the overwhelming positive. Like you, I find it best to view and try on the clothing in person before buying. The brick and mortar stores with online buying options are working hard to make returns and exchanges easier and more convenient. It's a balance and do both buying process on a case by case basis. I do question the long term viability of offering these free shipping and return offers on clothing items. It can't be profitable.

Re: retail
  • 4/30/2017 11:03:00 AM
NO RATINGS

> I also find it much easier to find what I'm looking for in the color and size I need on a site than by strolling up and down aisles in most stores.

Really?  I find that, except for basic things (shirts, underwear, socks, etc.), I usually have to try stuff on -- because different brands/types of pants, shoes, suits, etc. fit differently.  And I don't want to go through the hassle of returning something by mail (I've had to deal with that before).

Moreover, the colors and patterns that you sometimes get when you buy online are often *much* different when the actual product you get in the mail is compared against what you saw on your screen. 

Such has been my experience, anyway.

Re: retail
  • 4/29/2017 1:53:59 PM
NO RATINGS

@kq4ym, variable pricing has been with us in one form or another for some time. Incentives doled out though rebates, coupons and various devices has one shopper paying different prices for the same item. The sophistication of the method to dispense the incentive in order to maximize the impact for the vendor is the change.

Re: retail
  • 4/27/2017 5:03:38 PM
NO RATINGS

I can imagine a future where brick and mortar stores may devise schemes to have flexible pricing depending on the individual shopper's history. Shopping carts or phones will display the price to the individual which may be different that the shopper next to them. I don't think this is a way to do business, and don't like that online we're getting different prices than our neighbors, but it's probably the way things are moving.

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