How AI Can Help Fashion Retailers Fight Amazon

Alert to fashion retailers: Amazon is coming for you. But you already knew this. In 2016 they started selling private label brands, directly competing with their fashion “partners.” And, although Amazon has never been the go-to site for apparel — especially luxury apparel — it has made it quite clear that Amazon Fashion is a key area for growth. After all, fashion is a $1.2 trillion global industry.

David vs. Goliath

But just how much of a threat is Amazon? According to a Slice Intelligence report, Amazon accounts for about 43% of U.S. online sales, with that projected to grow to 50% by 2021. But it is more than the sales figures that makes Amazon so scary. They rule search too. A 2016 BloomReach survey found that 55% of Americans start a product search at Amazon.com. Not Google.

In the fashion space, they are already a powerhouse. According to The Verge, Amazon sold more clothes to Americans between the ages of 18 and 34 than any other online retailer in 2016. And it currently lists more than 20 million different fashion items for sale on Amazon.com. To be fair, we don’t know what percentage of its sales are items like socks and belts vs. higher ticket items like dresses and coats. But the numbers are daunting, and they are likely to keep growing.

It almost seems unfair. Not only can Amazon undercut retailers on price, offer a better assortment and leverage their world-leading fulfillment system, they are the default site for product discovery. If you are a retailer, how do you compete with such a juggernaut?

AI to the rescue

Could artificial intelligence be the answer? The great equalizer?

We believe so.

While the technology has been around since the 1950s, it has become much more pervasive in recent years thanks to vast improvements in computational power and immense amounts of available data to process. AI is all around us now; from voice activated assistants like Alexa, to smart thermostats, but it is still in its infancy.

According to a PWC study, AI could contribute up to $15.7 trillion to the global economy by 2030; that’s more than the current output of China and India combined. Of this, they believe, $6.6 trillion will come from productivity increases and $9.1 trillion from consumer applications.

Give them what they want

As with any technology, AI is pointless if it doesn’t solve a problem or address a consumer pain point. So before we explore the ways AI can help retailers, we first must ask: what do customers want?

First, consumers want a frictionless shopping experience. And while this is true with apparel, it is not the end of the conversation. Clothing is a personal purchase. Everyone has their own style, their own shape, their own tastes. And the shopping experience is much more than just about convenience. It’s about emotion and connection and understanding; all the things that make us human.

At Markable, we have identified three key areas that can help make that connection and improve the customer experience:

1. Curation — In an age where access to billions of products is literally at consumers’ fingertips, one thing they want and need is curation. Consumers like choice, but too many choices can be overwhelming. So a balance of selection and professionally curated product offerings is really what consumers want.
2. Personalization — Curation can’t stand alone. If someone hates red shirts, they don’t want to be shown a red shirt in an ensemble, no matter who is curating it for them. So consumers want their curated experience tailored to their wants and needs. It is personalization like this that closes the loop and creates a lasting, emotional connection.
3. Visual Content — According to a 2017 Big Commerce study, 78% of shoppers want to see more product photos on ecommerce sites. And 30% want more videos. This is natural since 90% of the information that reaches our brain is visual. So, of course, the more visual interaction a customer can have with your products, the better the experience.

Here are three examples of how companies can use AI to improve curation, personalization and visual content in fashion e-commerce, and win the customer experience battle.

Stitch Fix — Delivering curation and happiness in a box

The five-year-old subscription styling service delivers a box of clothing, shoes and accessories at regular intervals to customers paying a styling fee of $20 per month. These customers keep what they like and send back the rest. It’s a great idea, but it only works if customers like enough clothing that they keep subscribing.

That’s where AI comes in. The company has hundreds of algorithms. One, a styling algorithm, matches products to clients; another matches stylists with clients; and another calculates how happy a customer is with the service.

This blend of curation and personalization is working. They have an intensely loyal following, almost $1 billion in annual sales and just last week filed for an IPO.

JustFab.com — Making it Personal

This online subscription fashion retailer — part of the TechStyle Fashion Group — carries selections of shoes, handbags, jewelry, and denim, offering a personalized shopping experience based on members’ indicated fashion preferences.

JustFab.com strives to deliver the feel of a small boutique in an online setting, a personalization strategy that is the company’s guiding principle. How? Through AI, of course.

When a customer receives a JustFab email she sees product recommendations personalized for her based on her browsing and purchase history. JustFab also personalizes the send time of these emails so no two consumers receive their email at the exact same time. Their algorithm learns from user history and other factors to send emails at the time of day that the given customer is most likely to open and convert.

This highly effective use of AI, may not be obvious to the customer, but it gets results. The seven-year-old company is heading toward an IPO in the near future.

Markable — Helping Retailers See Differently

At Markable, we’re putting visual content to work. With the help of computer vision AI, we have developed applications for retail clients that make photos and videos shoppable. And it promises to shape the future of e-commerce and digital advertising.

Currently, images and videos on e-commerce and publisher sites are static. Any interaction with this content is made possible by manually tagging and linking them to product pages. What if that was done in real time, with no human interaction?

The Markable Lens can do just that and more. We can not only make photos and videos shoppable, we can make them more engaging. We can make social media sites shoppable, bringing your online store to the customer. And we can help manage all of your visual content so your marketing and merchandising teams can spend more time strategizing and less time hunting for the right image.

Our deep learning algorithms can detect specific items in photos and videos and link them to your fulfillment system. With a pricing model based on usage, any size brand or retailer can gain access to state of the art computer vision AI, giving them capabilities even Amazon doesn’t have.

AI is not optional

AI is still in its infancy. But its importance can’t be understated. In a recent Wall Street Journal interview, Andrew Ng, a Stanford professor and former Baidu scientist called AI “the new electricity.” Soon, it won’t be a novelty, it will be a must. This means that retailers and brands must adjust their mindset to embrace the technology; making it a central part of their organization.

The companies that embrace AI today and take a long-term approach will be in a much better position ten years from now. Those that don’t, will likely be gone. And I’m sure Amazon would be happy about that.