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Retail is big business. But like many other sectors, it is undergoing a transformation, largely affected by the shift in consumer behavior from physical to digital. Many retailers are turning to analytics and artificial intelligence (AI) to help them meet challenges. Andrew Ng, one of the most prominent figures in AI, is now turning to this with his new venture Netail.
The global retail market reached a value of nearly $20.3 trillion in 2020, having grown at a compound annual growth rate (CAGR) of 2.4% since 2015 according to Research and Markets. The market is expected to grow at a CAGR of 7.7% from 2020 to reach $29.4 trillion by 2025. The global retail market is expected to reach $39.9 trillion by 2030, at a CAGR of 6. 3%. At the same time, global annual retail spending on AI is expected to reach $12 billion by 2023 according to Juniper Research.
Andrew Ng is the founder of Landing AI and DeepLearning AI, co-president and co-founder of Coursera, and adjunct professor at Stanford University. He was also chief scientist at Baidu and founder of the Google Brain Project. Yet his current focus has shifted from “pieces to things,” as he puts it. As the retailers go in the opposite direction, Ng seems to be making an effort to meet them somewhere in the middle.
Netail, founded in 2022 as part of Landing AI, is a technology that allows retailers to automatically identify competitors on the Internet, track their assortments and availability, and optimize prices in real time. Today, Netail announced the closing of a $5 million seed funding.
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VentureBeat reached out to Ng, who is president of Netail, as well as retail veteran Mark Chrystal, who is CEO of Netail, to discuss the changing retail and supply landscape. by Netail.
A change in consumer behavior
“We started the Netail journey when we realized that many retailers of all sizes were grappling with the same major problem: adapting to the shift in consumer behavior from physical to digital. It’s not just about ‘a trend towards buying online, but a big shift towards digital decision-making through online product research,’ Ng said.
Chrystal is a 23-year retail veteran of several multinational brands, including Victoria’s Secret, Disney Store, American Eagle Outfitters and David’s Bridal. During this career, he has held many different roles. As he told VentureBeat, his passion is applying data and analytics to drive decision-making and competitive advantage. He backed up this passion with three master’s degrees focused on analytics, machine learning, and AI, and a Ph.D. focused on consumer behavior in digital shopping environments.
Chrystal recently made the decision to pull out of online retail because he saw a major shift happening in the space and felt new solutions were needed. He joined Ng at Landing AI about a year and a half ago with the goal of developing cutting-edge AI-based solutions to bring into the retail space. The team imagined solutions which were then tested and validated with retailers.
Chrystal chose not to share the names of Netail’s early adopters, but said they included names ranging from the world’s largest retailer to companies making less than 1% of that retailer’s revenue. What Netail found was that all retailers were grappling with the same problem: changing consumer behavior from physical to digital.
Interestingly, Amazon’s third quarter results were released just days before the chat with Chrystal. As a result of these results, a significant loss in market value has occurred for Amazon. In trying to interpret this, as well as the recent wave of layoffs from Big Tech companies, many pundits are pointing in the same direction.
Big Tech was counting on the effects of changes in consumer behavior due to COVID-19 and associated restrictions to be permanent. It turns out that’s not the case, so Big Tech’s projections are irrelevant. Market capitalizations are down and massive layoffs have followed hiring. Could it be then that the key premise on which Netail is based is not as solid as they think?
Informed consumers, a major shift for merchants
In discussing this point, Chrystal was quick to point out that globally, around 80% of retail sales are still in physical stores. There was a peak during the time of COVID-19, but now that trend is receding. But that’s not all.
“Consumers have shifted their primary decision-making process to digital environments. It used to be that if you wanted to buy a product, you would go to your local stores, your local mall. You walked around if you bought a pair of jeans, you went to two or three different jeans retailers, you tried them on, you compared them.
This is no longer how buyers and consumers behave. They go on the web and they do a search on what is the right product, what is the right price, what are the reviews on the product. One of the things Amazon is grappling with, for example, is that consumers increasingly know where to buy, how to buy online, all the options, and where they can do that kind of product comparison, Chrystal said. .
Ultimately, consumers may go to physical locations, but they already know what they’re looking for and what each retailer has to offer. Empirically, this probably rings true for most of us. This is a major shift for retailers, Chrystal noted, especially those that were born as brick-and-mortar retailers and then expanded into the e-commerce space.
The problem for all retailers today is that competition has increased a thousandfold as shopping is now done through search engines, marketplaces and social media, Chrystal said. The competition is not just the five or 10 stores that are physically located next to each other, but anyone whose products and services can be discovered on the web.
Retailers competed based on location and relied on things like window signage. Chrystal thinks it really doesn’t work anymore. Today, retailers need to understand a few things: How does my price compare to those thousands of other options? How do my product’s features stack up? How does my product availability stack up? How does the quality of my product and services rank in my reviews?
Netail has built a solution to help retailers where no solution really exists today, Chrystal said. In fact, there are already many AI-based solutions for retailers in the market. Nonetheless, Ng expressed confidence in the Netail team and said they “have found a solution that we believe is extremely compelling and has delivered strong results for our early adopters.”
Data-Centric AI for Retail
In order to collect the data used by Netail, Chrystal said the company developed its own scraping technology that can capture and track large-scale data in real time. In addition to this, Netail offers competitive intelligence, price intelligence, assortment intelligence, geographic intelligence and customer intelligence.
“We have a solution that spans the web and can find, for any particular retailer, who their competition is at the product level. We match products to understand what’s competitive head-to-head. And then we can keep up with all the competitors in terms of assortments, availability. We can optimize pricing in real time and we’ve seen really dramatic results in terms of improved web traffic and solution profits and revenue,” Chrystal said.
In order to collect and evaluate relevant data, a combination of computer vision and natural language processing is used. Netail’s platform also ingests catalog data from retailers and uses feedback from domain experts to refine its intelligence services. Chrystal claimed that Netail’s AI can look at products like a human would, looking at images, descriptions, sizes, weights, quantities and a number of properties that are taken into account to determine suitability. .
Netail’s technology is completely separate from Landing AI, but the thought process related to Andrew Ng and the data-centric AI movement is pretty consistent, Chrystal said. When domain experts are available, they are brought into the process and bespoke models can be developed for Netail customers. Where this is not the case, AI models can learn on their own and they are still useful, according to Chrystal.
Netail customers can choose the services they need and subscribe to use one or more. The company is headquartered in Pittsburgh, home to Carnegie Mellon University and a technology hub, while maintaining a presence in Palo Alto. Netail’s $5 million seed funding will be used to enhance product offerings and expand the current team of 13 retail, AI and software engineers.
The round was co-led by Magarac Venture Partners, which provides seed-stage venture capital to entrepreneurs and tech companies in the Midwest, and AI Fund. Other investors include HKSTP Ventures. Netail will also expand to the APAC region by opening an office in the Hong Kong Science and Technology Park.
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