E is a fashion marketplace firm, known for its exclusive selection of items from local brands and designers. It’s also recognized for its technological advancements such as the incorporation of advanced AI algorithms in its platform. In online retail, artificial intelligence (AI) has emerged as a game-changer, particularly in the fashion industry. Among the vanguards, E has harnessed the power of AI to help consumers easily find items they probably like. This article explores the intricacies of AI and particularly recommender systems, the logic behind these algorithms, and how these technologies can be used to “forecast” interaction and sales probabilities in real-time and enhance customer engagement.
The AI Revolution in Online Retail
The integration of AI in online retail has transformed the way businesses operate, offering unprecedented insights into consumer behavior, optimizing inventory management, and personalizing the shopping experience. At the heart of this transformation are AI recommender systems, which analyze vast amounts of data to predict the likelihood of a user interacting with a product. These systems are designed to enhance customer satisfaction, increase conversion rates, and ultimately drive sales.
Understanding AI Recommender Systems
AI recommender systems are sophisticated algorithms that suggest products (or movies, posts, images, ads etc.) to users based on a variety of factors, including past purchases, search history, and user preferences. These systems employ several techniques to analyze data and make recommendations:
Collaborative filtering is a method that makes automatic predictions about the potential interests of a user by collecting preferences from many users and “learning” similarities. The fact is that if user A has the same opinion as user B on an issue, A is more likely to have B’s opinion on a different issue than that of a random user.
Content-based filtering recommends items based on a comparison between the content of the items and a user profile. The content of each item is represented as a set of features, typically the words, price, categorical data that describe the item. The suggestions for a given user are built based on items that have similar characteristics with the items the user has interacted with in the past.
Matrix factorization is a technique used to discover latent features underlying the interactions between two different kinds of entities. One common scenario where matrix factorization is applied is in recommendation systems, where the goal is to discover the latent features underlying the interactions between users and items.
This method focuses on identifying the top K items that a user is most likely to interact with. It involves factorizing the user-item interaction matrix into lower-dimensional matrices, capturing the latent factors associated with users and items.
Deep Learning-based Recommendation Systems
Advancements in deep learning have led to more sophisticated recommendation models, including:
Wide and Deep Learning: Combines linear models with deep neural networks to improve the recommendation quality by capturing both memorization and generalization aspects of data.
Deep Factorization Machines (DeepFM): Integrates factorization machines for recommendation with deep learning for feature learning in a single model.
Neural Collaborative Filtering (NCF): Utilizes a neural network architecture to model the user-item interaction, surpassing the limitations of traditional matrix factorization methods.
Deep and Cross Network (DCN): Efficiently captures feature interactions at different orders, enhancing the recommendation’s accuracy.
Deep Learning Recommendation Model (DLRM): Combines categorical and numerical features to predict click rates or user preferences.
Graph Neural Networks for Recommendations: Leverages the graph structure of user-item interactions to make more accurate and relevant recommendations.
AI in Fashion Retail
Artificial Intelligence (AI) has appears as a powerful tool to address challenges online fashion retail, through sophisticated recommender systems. E leverages various AI techniques to analyze data, predict consumer behavior, and personalize the shopping experience. Here, we explore the general methodologies employed in fashion retail, shedding light on the logic and functionality behind AI recommender systems.
Personalized recommendations are the cornerstone of enhancing customer experience and engagement for an e-commerce business with thousands of product SKUs. Two primary AI techniques facilitate this personalization:
- Collaborative Filtering: This method predicts a user’s preferences based on the collected preferences of many users. The underlying assumption is that if users agreed in the past, they will agree in the future. It’s particularly effective in identifying items that a user might like based on the preferences of similar users.
- Content-Based Filtering: This technique recommends items by comparing the content of the items with a user profile. The content here refers to the attributes of the items, such as style, fabric, or trend, while the user profile is built from the items the user has shown interest in before. This method tailors recommendations to the user’s specific tastes and preferences.
Real-Time Sales Prediction
AI technologies go beyond mere recommendations to predict real-time sales, a critical capability for inventory management and marketing strategies. Techniques such as matrix factorization, deep learning-based recommendation systems, and graph neural networks play pivotal roles:
- Matrix Factorization: It uncovers the latent preferences of users and the latent attributes of items from known ratings. The technique predicts unknown ratings through the dot product of the latent features of users and items.
- Deep Learning-Based Recommendation Systems: These systems, including Wide and Deep Learning, Deep Factorization Machines (DeepFM), Neural Collaborative Filtering, Deep and Cross Network (DCN), and DLRM, offer advanced prediction capabilities. They can handle vast amounts of data, learn complex patterns, and improve recommendation quality over traditional methods.
- Graph Neural Networks for Recommendations: By modeling the complex interactions between users and items as a graph, these networks can capture the intricate structures of data in online retail. They provide a powerful tool for making recommendations based on the relational context in the data.
Enhancing Customer Engagement
The ultimate aim of employing AI in fashion retail is to enhance customer engagement. By delivering personalized recommendations and accurately predicting the likelihood of purchase between a user and the products of a store, AI systems create a more engaging and satisfying shopping experience. This not only fosters customer loyalty but also drives sales.
E, initially established in 2019 as a local denim brand in Athens, has since evolved into a pioneering fashion marketplace in 2022, dedicated to showcasing exclusive and handmade items from small-scale local brands, designers, and artisans. Recognized for its commitment to supporting early-stage designers, E offers a diverse range of unique fashion items that cater to a variety of tastes. With a mission to bridge the gap between talented designers with limited resources and fashion-forward consumers, E has created a platform where lesser-worn fashion products can be discovered. Embracing technology, E aims to create a more sustainable and efficient production cycle, by incorporating innovative solutions to test demand, enhance the shopping experience and predict consumer trends.
The Future of AI in Fashion Retail
The use of AI in fashion retail is not just a trend but a fundamental shift in how businesses understand and interact with their customers. AI technologies continue to evolve, and the ability to predict consumer behavior and personalize the shopping experience will only become more sophisticated. For companies like E, this means an ongoing opportunity to innovate and stay ahead of the curve, offering customers a curated shopping experience.
In conclusion, the integration of AI in online retail, particularly through the use of recommender systems, (still) represents an innovative way for businesses to engage with their customers, with all the benefits this comes with.