AI Fueled Subscription Economy

The marriage of artificial intelligence (AI) and e-commerce is growing stronger than ever before — and it’s changing the way users find and purchase consumer goods across nearly every industry. Largely pioneered by Amazon’s Real-time Product Recommendations, sophisticated AI is used to measure and track a user’s purchasing habits to determine other products they might be interested in buying. These days, retail’s use of data is giving consumers more of what they want, when they want it.

What’s more, companies are increasingly finding ways to cut out the middleman in order to offer their own line of direct-to-consumer goods. Amazon itself already has already amassed more than 76 private-label brands, taking its AI-driven insights into the real world by guiding customers to purchase its own in-house product lines. For products purchased on a regular basis, such as cleaning supplies or toiletries, Amazon boosts its own customer relationship even further through its Subscribe & Save program, offering discounts to users who commit to purchasing on a recurring basis.

These initiatives all add up to a retail bet that’s placed firmly on personalization through direct-to-consumer subscription services. An early wave of this trend was seen with online-only retailers like mattress company Casper. These types of retailers eliminated physical stores altogether in favor of a digital product selection available for in-home delivery.

The next evolution brought forth brands like online beauty sampler Birchbox, which gives users the chance to subscribe to a rotating box of cosmetic products to match a user’s predetermined tastes. Even large, traditional retailers have decided to jump on the bandwagon: One example is babyGAP‘s decision to offer subscription options to its legions of parent shoppers.

But now, armed with insights gleaned from AI, companies are further refining their direct-to-consumer subscription models to offer products meant to appeal directly to a consumer’s interests. Meal kit subscription provider HelloFresh uses machine learning to determine which foods its subscribers prefer, creating a feedback loop that tailors its menu to better recommend meals its customers will enjoy.

And at Yoox, a private label online clothing retailer, the entire business model is predicated on AI. The company combines fashion trends from social media with on-site sales data to curate its very lineup of clothing.

What’s in store for tomorrow’s retailers? It seems the combination of AI, hyper-targeted advertising and the subscription model means that soon enough, retailers will know their customers better than they know themselves.

Article originally published on Medium and reposted with permission from Humans for AI.

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