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In this episode of Lehigh University’s College of Business ilLUminate podcast, we are speaking with Rebecca Wang about holiday shopping trends, particularly online, and the role that online reviews and artificial intelligence, or AI, play in how we make shopping decisions.
Dr. Wang is an associate professor of marketing in Lehigh's College of Business. Her research reflects her interest in marketing, data science, and technologies, and focuses on digital and mobile channels, social media, and data-driven marketing.
Wang spoke with Jack Croft, host of the ilLUminate podcast. Listen to the podcast here and subscribe and download Lehigh Business on Apple Podcasts or wherever you get your podcasts.
Below is an edited excerpt from that conversation on the role that AI is already playing in online shopping, and what the future may hold. Read the complete podcast transcript [PDF].
Jack Croft: It's only been a year since ChatGPT kind of came out of nowhere for a lot of people and introduced us to this idea of generative AI, and kicked off this debate about whether the benefits outweigh the potential harm. So I'm wondering, what role is AI and particularly generative AI-- and maybe you could explain briefly what that is, the difference between the artificial intelligence we've had for decades now and this new generative AI. What role it's playing and how it may impact shopping in the future.
Rebecca Wang: We've had AI for a long time. So anytime you receive a personalized email, how Amazon knows what offerings you are more likely to buy, when you go to Amazon's webpage and immediately — let’s say you're shopping for a jacket — immediately lands the default on your favorite color. All of that is predictive AI. Based on your purchase histories or your browsing histories, it's able to, well, predict what your behaviors are going to be, and it's trying to match its offerings to that prediction.
Similarly, a recommender system, right? When you do a search term, what items come up first, ranking systems. Or when you go into the web page and you're looking at, let's say, a jacket, and it tells you, "Customers who buy this jacket also buy other products." These type of systems have been in play for, I would say, perhaps a decade or two now. And this is predictive AI.
Generative AI basically uses the same statistics, the same type of machine learning techniques, but it goes a little bit further. It pulls from a lot of data, more than just your own personal history or your customer base's history. We're talking about the entire web, right? It pulls in a lot of data, and then the goal is no longer just predictive. It's trying to generate, it's trying to create content.
ChatGPT right now is a language model. It creates language, it creates texts. But you have similar systems that create images, for instance, and even videos. So that's what we mean by generative AI. The mathematics behind it, it's essentially the same, but the data that it uses, it's much more powerful, much larger data set than the application. Therefore, the application can be creative rather than simply just predicting what's going to happen. So that's what we mean by generative AI, really.
I think, for the most part, generative AI and these advanced technologies offer benefits of cost savings and more personalized offerings, which hopefully can turn into better loyalty, higher shopping frequency, bigger basket. So the original intent is a win-win.
I think the downside really is data privacy issues and this notion of, "Is my privacy being violated?" And I think that's a moving target that we're all trying to resolve. … I think there are a lot of these regulations or a lot of these recommendations coming out from all sorts of parties - the White House, the EU - literally every day now. So we'll see how that works and what the guidelines are going forward.
That said, I want to point out that I think there's a lot of hype around how AI is going to change shopping entirely. So I don't know if you've seen the movie Minority Report with Tom Cruise. [laughter] So in that movie, you will walk into a store and the store will pronounce your name and make product recommendations in a robotic voice while tracking your eye pupils for arousement or excitement to see if you are interested in buying this product. And then you walk by a wall and the wall wakes up and turns into a billboard and shows you a personalized ad while calling out your name and asking you, "Where do you want to go?"
I don't think it's going to be like that in the future, right? [laughter]
I think, to the customer, any changes because of AI, it's going to be gradual. It's almost like an augmented feature, a nice-to-have function that makes the products just a little bit better or the fit just a little bit better. Maybe the ad you see on the screen is more pertinent to what you're interested in. Maybe the clothing is a better look and fit. Maybe the makeup color is a truer match.
This is not just in online retail, right? It can also be used in offline retail, particularly in terms of frontline personnel, service personnel, how they interact with you. I mean, maybe there is an AI app that the personnel can now look up your information, know your preference, and perhaps the AI app can even give the personnel cues as to how to interact with you. And because of that personal touch facilitated by AI, your entire shopping experience is a little bit better.
So I think a lot of these are nice changes, and hopefully, all these nice changes add up and the customer becomes a more loyal shopper. But it's not life-changing. That's what I'm trying to point out.
However, for the retailer, that could mean millions of dollars of difference if you add everything up. It's not just about the customer experience, after the product is already being offered. They can also allow for new product developers to look at not just analytics, but also interact with this AI system to think about what the R&D direction should be, "What kind of new products should I be developing next?"
And the AI system not only can do predictive AI, but it can also help the developers to brainstorm new ideas. So I think, for the most part, generative AI is going to be beneficial to companies with respect to their operations, their services, their product offerings, their R&D development, their innovations. I think the customers will experience these changes in bits and more gradually, and you'll feel like your needs are getting addressed more efficiently than before. But it's not going to be like Minority Report, right?
Croft: That's good to hear.
Wang: Yes. [laughter] And here's the kicker. Let's say every company implements generative AI successfully. How would companies differentiate themselves? It will then ultimately come down to the so-called traditional marketing, like good customer service, the brick-and-mortar decorations, the human touch, the holiday atmosphere, right? It's going to come down to that, if everyone implements AI successfully. So I don't think it's an either/or, or perhaps humanity is going to end one day because of AI. I don't think it's going to come to that at all. I think it's just one piece of what retailers are doing to hopefully optimize the shopping experience for the customers.