Key Takeaways:
- AI-powered search engine Perplexity, Instagram’s new personalised algorithm option, and Walmart’s retail advertising opportunities add further weight to the idea of a sea change in how consumers find and purchase products online – requiring sellers to adapt quickly.
- Despite the advances made in the ease and experience in online shopping, shoppers are still returning to physical stores, especially during the holidays, due to their experiential appeal and personalised service. The old “omni channel” adage remains as relevant as ever.
A new report from MMGNET, in partnership with The Interline, highlights that fashion businesses will be focusing on customer acquisition, forecasting accuracy, and driving profitability in 2025 – all fundamental business concerns. But the holiday shopping season of 2024 is likely to be a critical period for brands and retailers to get a feel for consumer sentiment, as well as to see the effect of all the changes in online search and product discovery that The Interline has been documenting this year.
Kicking off the week’s news, on Monday, AI-powered search engine Perplexity began rolling out what the company is calling a “first-of-its-kind AI commerce experience.” And what we would probably call an attempt to add value to an AI service of otherwise fairly dubious utility when Google itself is now primarily an AI search engine, and when ChatGPT incorporates its own ad-free search option.
Users can now use Perplexity to research products via conversational prompts and image inputs, checkout with one click, and even get free shipping on purchases (for those with a Pro membership, that is.) This is, technically speaking, not part of the AI sector’s push towards “agents,” but it does represent a prime example of AI platforms wanting to become capable of managing – and eventually automating – more parts of people’s everyday lives.
Perplexity’s shopping assistant enables users to ask shopping-related questions and receive comparisons presented in plain language, complete with reviews and “objective” answers. The assistant also provides product cards featuring the most relevant specifications and items, carefully selected by AI rather than sponsored content. Users can also use the “Snap to Shop” feature, which allows them to upload a photo of an item and have Perplexity visually identify and suggest similar products, much like Google Lens.
Does this make Perplexity a retail gatekeeper? That question is usually answered through scale, with Google and other giants falling foul of regulations. But it does, at the very least, represent further fragmentation and uncertainty around what it means to sell online – and where products are going to show up for consumers, particularly around busy shopping seasons.
Especially relevant for fashion businesses, Perplexity is also introducing a merchant program. According to Perplexity, if merchants enrol in this program, they’ll have a better chance of being a recommended product because the company will have more complete information in its index, rather than relying on the typical AI scraping and crawling. Which, at least to The Interline’s eyes, looks very much like populating any other big marketplace – most of which are now also using AI to curate, personalise, and recommend.
There is, in the publishing and content world, a word for this ingestion and cyclical regurgitation of text and images: “slop”. And there is, in the same communities, a very real fear that the content ecosystem of the internet slowly eats its own tail to the point where the majority of content is recycled and homogenised in this way. This fear, though, should not be confined to publishers: brands and retailers now face a very similar proposition, and will, it seems, need to take an active role in adding their products to AI discovery services if they’re to avoid disappearing down that spiral.
This holiday season is likely to see the same hectic in-person shopping as usual, which will prompt a lot of headlines about which physical locations outperformed others. Behind that visible frontier, though, this race to make sense of AI search is perhaps an equally important battleground for brands and retailers. With each passing month, the landscape of product search and discovery grows more complex and, to coin a bad word, sloppier as technology companies continue to integrate AI into the mix, as well as change things up to maximise user experience.
Instagram, for instance, this week announced that it is testing a way for people to “reset the content recommendations they see in Explore, Reels and Feed when they want a fresh start.” Recommendations will then start to personalise again over time, showing new content based on the content and accounts you interact with. When resetting, users also have the option to review the accounts they follow and unfollow any that share content they no longer want to see.
This is not unlike social media site Bluesky, who is also building a business model around people having more control over what they see – something that in the hands distinguishes the site from X and other rival social media sites. Instead of a single overarching algorithm, Bluesky offers a more tailored experience for the user, providing three main feeds: one for accounts you follow, another for what your friends follow, and a “discover” feed that highlights posts related to your interests.
Bluesky also offers the opportunity to sell and buy algorithms, approaching federation and persistence at the user level. What does that mean for companies that rely on the algorithmic feed as a way to serve ads and appear in relevant feeds?
More personalised algorithms on platforms like Instagram could substantially impact how users discover new products and how influencers and creators engage with their audiences – further altering the shifting space of digital marketing and content discovery.
For another indicator of just how tightly wound-up eCommerce and cross-channel online discovery are, observe Walmart, who has seen their e-commerce business grow 27% this past quarter (now making up 18% of Walmart’s business) alongside their global advertising business that has increased 28% since last year. These digital ads offer a way to guarantee some level of visibility on Walmart’s large, competitive platform (around 150,000 active sellers), something that may not happen organically when shoppers use the site.
So what about brick-and-mortar stores? In its Holiday Outlook report, PwC has found that nearly half (45%) of consumers will shop in stores over the holidays, up 2% from 2023. The reason for this is that, especially over the holidays, physical stores offer a particular experiential appeal. The top three factors influencing consumers’ decisions to visit physical stores during the holiday season are holiday displays and store atmosphere (22%), holiday-specific products (21%) and making an event out of the shopping trip (17%). Alongside this, the EY Future Consumer Index (FCI) from July 2024 – that surveyed more than 23,000 consumers across 30 countries – found that 32% of consumers still want the personal service that only in-store shopping can provide.
The same survey found that In terms of AI, 68% of consumers said they were happy to receive and trust offers and promotions that have been personalised by AI, but 49% are frustrated by smart chatbots that are not effective in resolving their queries. A further 33% are concerned that AI-generated recommendations are biased toward products or brands that may not be in their best interest.
Knowing this, over the coming holiday season, fashion businesses can emphasise making the in-store shopping experience enjoyable and festive, with excellent customer service, while also addressing the customer service gap in the digital shopping experience. The prioritising of responsive, informed and empathetic customer care – both online and off – and lay the groundwork for a cohesive, integrated strategy that aligns in-store experiences with technology, creating a strong foundation for long-term success even as things fluctuate over time.
Best from The Interline:
We kicked off this week speaking to PTC’s GM of Retail Business Unit about the importance of measurable sustainability goals, data-driven decision-making, and PLM’s role in centralising and leveraging sustainability data for fashion brands and retailers.
Sylvia Ng writes on the scale of the planetary cost of industry-wide high return rates. She asks what it will take for fashion to move the needle and realise sustainability doesn’t have to come at the cost of business growth.
Closing out this week, TradeBeyond’s CEO on helping fashion brands prioritise sustainability initiatives, manage complex supply chains, and address challenges in implementing AI.