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AI technology driven e-commerce platforms – boon or bane for consumers?

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Remember a time when salespeople used to go door to door selling products? From then on, technology has grown leaps and bounds only to make buying products convenient, affordable, and cost-saving for consumers. No doubt, all 3 play a crucial role in making our busy lives more comfortable. While on the one hand, we should thank technology but on the other, are we aware of how this is impacting us? Are consumers exploiting the technology, or is technology influencing the consumers? Is AI technology – a boon or a bane? Read on to see if you can arrive at a decision.

In the first series of the article, we understood what AI technology is and saw a quick glimpse of how retailers leverage AI technology using consumer buying patterns. In this article, let us explore the consumer side of the story. How are the e-commerce platforms impacting consumers like you and me?

Research by the World Retail Congress organization (www.worldretailcongress.com) says 35% of google product searches by consumers turn into a transaction in 5 days. India is expected to see the highest online growth rate between 2018-22.  Out of the top five countries with the highest online shoppers, four are in Asia. The E-commerce industry is a hotbed for building wealth in the upcoming years.

Did our Jeff make fair use of it? What happened to his online store? Did Seema move to the online platform to buy milk? If you don’t follow anything I just said, read the first part of the series Artificial Intelligence powering the golden era for Retailers – Part – 1 real quick!

 Trust me. You will enjoy this article much better! 🙂

For those who have read part 1 of AI technology, you would remember how Jeff leveraged the AI technology and built his pricing strategy. Let’s see what happened to Jeff, Seema, and Dinesh in 5 simple scenes like the first part!

Part 1 Conclusion: What happened Jeff after he launched his online store?

We ended part 1 with Jeff launching his promotion campaign for his new online store.

jeff's action plan to implement Artificial Intelligence

Seema grabbed the opportunity and took up a 1-year subscription. Within a month Jeff’s promotion went viral in the neighborhood. Although Jeff sold milk at a lesser price than the price, he sold at his store. His customer base grew to an average of 3,000 active subscriptions. At the end of the year, his sales shot through the roof, and he ended the year earning nearly five times more. At the same time, Dinesh, who was not inclined to move ahead with technology, lost his customer to Jeff, and his sales nosedived to the bottom.

Outcome of Amaze Store New Business Strategy

Did you know? Flipkart website receives around 1.5 billion visits per month and reported a 45% growth in monthly active customers.

Scene 1:  Sunday – Fast forward three years since Jeff opened his online store for selling milk

On a fine Sunday morning, Seema opened the newspaper while going through the technology news section. She was amazed to see “Amaze Online Platform” valued at 100 million dollars, and there it was Jeff in a crisp suit beaming with pride about his flourishing business. Seema took some time to come to terms with what she had just read. The person who sold milk in a small convenience store is now on a newspaper headline with the title “Upcoming Businessman.”

Seema had moved to a different city a year after Jeff opened his online store. After that, she had not followed Jeff’s story until she saw him on the newspaper cover. After reading the newspaper, she got very curious about how Jeff made this happen. She opened her laptop and searched for “Amaze Store Online.”  She discovered that the Amaze store now not only sells essential commodities, but the categories had expanded to electronics, apparel, daily household, and the list went on.

Amaze Online store 3 year journey

Did you know! Flipkart started with 4 lakh funding in 2007 and was valued at 1 Billion at the end of 3 years.

 

Scene 2:  Sunday- Seema curious to explore other categories to buy online

Seema remembered the convivence of buying milk online. She was eager to check out what “Amaze Online Store” had to offer now. She quickly browsed through some categories, and some dresses caught her attention. She was impressed with the collection and variety “Amaze Online Store” had. She promptly created her login through Facebook ID and added few to Wishlist, hoping to buy them.

After the initial excitement subsided, she pondered over the quality and fit of the dress. No matter how good they looked in the picture, she was not entirely confident about moving the dresses from Wishlist to the cart. She was tired fighting this thought, and finally, she decided to close the browser and get on with her day.

Seema curious to explore other categories to buy online

Did you know!  The E-commerce industry tracks the number of times a person abandons the cart. On average, 7 out 10 people abandon the cart during checkout. 56% of shoppers abandon carts due to hidden costs.

 Retailers and E-Commerce brands lose over $18 Billion in sales revenue each year because of cart abandonment

Scene 3: Monday – Introduction to Nudge theory and Seema typical working day

“A ‘nudge’ is a term used to describe any change in the environment which steers an individual’s behavior predictably while preserving their freedom of choice. It is not a push, nor a shove, but a gentle nudge.”

The following day Seema went back to her work. She had completely forgotten about the dress she wanted to buy.  She opened her g-mail to check her emails, and there she finds an email from the “Amaze Online Store,” asking if she would like to finish her shopping, and in bold, there was a callout saying a 15% discount on the first purchase. There was also an underlying message on her Wishlist products, “Selling Fast.”

Seema was “Nudged” twice if you noticed.

  • 15% Discount to lure her back to the site
  • “Selling fast” message to create a sense of scarcity (Remember, we always value scarce things).

These nudges were enough for Seema to open the site again and move a product from “Wishlist” to the cart. Just when she was about to check out and pay for the dress, she was surprised to see additional add-on costs such as “shipping,” “tax”. These costs were equivalent to discounts provided. Seema was just not convinced about buying the dress. Despite an additional nudge of “10 People looking at the dress” flashing. Seema just abandoned the cart.

Introduction to Nudge theory and Seema typical working day

Did you know dedicated apps from a company called Shopify provides several apps that promise to “Bring Back Shoppers” to complete abandoned transactions?  Some of them allow editing your abandoned cart order and adding in “Free benefit” to reach out again via email reminder.

 Another mind blogging app called “Facebook Pixel Integrator” adds abandoned products from cart to the Facebook tracking list which can be is used by brands and retailers to run Facebook ads to remind the user constantly about the exact item they abandoned.

Scene 4: Tuesday – Seema can’t get the dress out of her head

As compared to the casual browsing on Sunday, Seema had invested a lot of time on Monday thinking she would buy the dress. Unable to completely let go of the thought, Seema opened Instagram casually and was scrolling through the updates. Just when she thought she had forgotten about dress; she sees an ad for the same three dresses with the message “flash sale” Buy 2 to get 30% off! This is a classic “Nudge” tactic to create a sense of “Limited Time Offer.”

Finally, 4th nudge did seem to work. Seema again launches the website to purchase the dresses and be done with it! But there was another message called out on the website shop for “Rs 4,999 and get an Rs 899” worth of dress free + avail free shipping!

Seema was now just Rs. 1,779 away from getting another Rs. 899 worth of free products. She had one more dress in her Wishlist that was “Rs. 1,800”. Precisely the difference amount she needed to get an additional Rs. 899 worth of products.

While Seema was processing all this information, there was “Nudge 6”, Amaze store now was showing all “Affordable Fashion Products from Celebrities” that were available to be shopped within Rs. 1,700/-.

Seema can't get the dress out of her head

Did you know:  Instagram offers e-commerce platform ability to showcase  Ads based on “Location” (of consumers), Demographics, Interests (ads that user might have liked while browsing), Behaviors (based on the activity users are interested), Lookalike Audience (this is scary! Find people like existing customer base) Phew! With our every click, Retailers are hunting us down to find us anywhere from Instagram to g-mail to Facebook to keep showing us the products “we had wished to buy”

Scene 5:  Wednesday – Seema choice validation by peers, influencers, and celebrities

Seema was still feeling overwhelmed by the information and promotion. She decided to put shopping off for a while as she had a birthday party to attend. To Seema’s surprise, her favorite dress that she was thinking of buying, one of the guests was wearing the same dress. She noticed that everyone in the room was talking about her.

The following day, she opens Instagram to see all the photos from the party uploaded to Instagram. Guess what, the girl wearing the dress Seema had liked, received the maximum likes. The comments section was overflowing with compliments.

Seema could not decide if the dress made the girl look beautiful or the complete set of accessories, matching shoes, make up that she was wearing! Social validation is also a kind of “Nudge”. Some other types of these “Nudges” are reviews by influencers, likes, and comments by friends, celebrity endorsements.

Today e-commerce platforms are paying tons of money to Celebrities, to people with the highest numbers of followers, influencers to flaunt their products, and repeatedly keep tagging the brand and posting images of the products on social media.

Seema choice validation by peers, influencers, and celebrities

Did you know: According to the list, Priyanka Chopra Jonas, who, as of July 1, 2020, has 54.3 million followers on Instagram, earns $289,000 (₹2.18 crore approximately) per post. 

So, does Seema finally gives in and shops for the whole look, or does she wake up and realize before she spends more money than she has? If a brand or e-commerce platform can pay Rs. 2.18 crore for a single post. You can only imagine how many people on Instagram, seeing the post by celebrities, are ending up buying the product.

In Summary, the e-commerce industry is thoroughly using consumer behavior data coupled with AI technology to ensure every ad, every nudge message, every promotion on the site gets customers one step closer to sale. And it is working, the reason I say that is because today Amazon has valued 1 trillion dollars, Flipkart at 24 billion dollars, and Jio Retail at 55 billion dollars. The list can go on.

But what about us as consumers, is our earnings growing exponentially? Are we spending more than we are earning due to the e-commerce industry? Are we shopping more than we did a decade ago?  The answer to all and more in the final part of the series! Stay tuned to know how AI technology is driving your purchasing patterns.

References:

Preethi Nanda Kumar

Preethi Nanda Kumar, in her latest role as Account Director for leading image recognition technology company Trax, works with top FMCG manufacturers and retailers around the world in their digital transformation journey. She is a passionate advocate of gender equality, believes that every girl can break the glass ceiling if given equal opportunity and representation. In her free time, she likes to write about her travel escapades and motivational anecdotes. Her latest obsession is building positive habits, inspired by the famous quote from Aristotle “We are what we do, Excellence is not an act but a habit”

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