Last weekend I walked into my local garden centre. I hadn't come to browse, I just needed some compost for my tomato plants. However, the instant I walked through the front doors of the store I was greeted with an attractive offer on garden hoses. I wasn't actually in the market for buying a hose when I left home, but I could hear myself thinking, "It really would make life easier than traipsing around with my heavy watering can", and "It's such a bargain with 30 per cent off for today only...", so I impulsively decided to buy. Instead of being focused solely on going and getting what I needed, I was tempted by another item that I hadn't thought about purchasing, but one that nonetheless perfectly complemented my compost needs.
Bricks and mortar stores have become particularly effective at impulse buying - as any IKEA shopper will testify! The statistics show that 40 per cent of people in the UK and US are spending more money than planned in retail stores. Impulse buying is critical for physical stores as they can generate between 60 and 80 percent of their revenue (depending on product category) in this way.
But what about online? Smart phones and tablets are driving online spend: nearly 21 per cent of all retail spend in the UK is now made online, while in the US online sales grew 14 per cent last year alone. 40 per cent of people in a recent survey said they've picked up extra items in the store versus just 25 per cent who said they've done the same online. That means only about 25 per cent of online consumers impulse buy - a lot less than when they are in store. It's clear that online stores are currently missing a significant revenue opportunity.
Not surprisingly, online retailers have been trying to catalyse their relatively weak impulse purchasing by up-selling and cross-selling, offering bundles and suggesting accessories to accompany items that the customer has chosen. But this only happens when a customer is already engaged on the retailer's website.
Amazon is now going further. It wants to encourage impulsive purchasing online when physically in store, via its new Fire phone. Fire phone users can take a picture of a physical item and the phone will instantly display various options to steer the purchase to Amazon online. Through Amazon's one-click purchasing mechanism, the Fire user can impulsively purchase something online in a few easy steps, moments after something takes their fancy.
While Fire attempts to side-track customers from conventional physical stores and bring them online, it is restricted to Amazon purchases and relies on a person proactively using their phone after seeing something 'in real life'. But what if retailers could actually encourage purchasing by consumers while they are casually browsing content online (such as news or fashion) before they even reach a retailer's website? What if online retailers could craft specific offers that were attractive and relevant to each prospect before they arrived at their online store, rather than basing it on what they purchased previously after they logged in? Or offering the same deal ("30 per cent off hoses today!") to all visitors, just as bricks and mortar stores do?
Imagine if an online retailer could understand in advance that a particular prospect is interested in a new Samsung S5 phone and thus tempt them to visit their site with a bundle discount. Then, knowing that the next customer has a sore back, is able to attract them in with heat rub products, spine support devices or exercise videos to strengthen their core muscles. Recent advances in artificial intelligence (AI) will enable this approach to drive online impulse buying, making it as effective (if not more effective) than in physical stores today.
This particular application of AI is called ambient ecommerce, as it showcases merchandise based on the content of the web page the consumer is currently reading - their ambient surroundings. It's a new technology that catalyses online impulse buying by enabling retailers to pre-determine each consumer's propensity to buy. It leverages recent advances in AI to insightfully examine and understand consumer's interests; to predict the products each will want to buy, and bring them to the online location where they can complete the purchase.
As ambient ecommerce doesn't need to use cookie technology or to track people around the web as they browse, it delivers this 'in the moment' shopping experience that's more traditionally associated with physical stores, without compromising the consumer's privacy. Rather than trying to define future purchases based on previous consumer behaviour, ambient ecommerce focuses on the 'here and now' - the immediate present, stimulating consumer interest 'right now'.
The benefits are clear for retailers and consumers alike; brands can have a dialogue with engaged consumers who want to hear directly from them about the products they want, and for consumers the message is, for once, Big Brother is not watching...