When I look at the next decades for global e-commerce, the two innovations that will drive its evolution will be AI and subscription retail models…and the link between the two.
The starting point for understanding this dynamic is the mindset of the modern shopper. For 40 years, the Internet has been driving a step change in customer preferences, making the ability to offer greater choice and convenience even more critical for e-commerce brands. But, we are now seeing customisation emerge as an equally vital component, with shoppers not only expecting easy access to a plethora of product options but also wanting partner brands to distill vast amounts of information into sensible recommendations that closely match their preferences. The elevated importance of customisation is driving a fundamental shift in how customers want to engage with retailers, developing deeper relationships with partner brands, not just engaging in ad hoc transactions. At the same time, cost-effectiveness has never been more important, especially in western economies characterised by inflation and rising interest rates.
AI’s transformative impact on consumer customisation
AI is the single technology that allows us to meet all of these evolving customer requirements through its unique ability to log and learn customer habits, understand trends in that data, and then filter through millions of product options to find the specific opportunities that best align with those patterns and preferences.
To evidence the impact of the technology, we are constantly evaluating the impact of upgrades to our AI capabilities. Today, our AI models make over 1.3 billion MBL predictions every day, processing more than 100 million daily user searches, and provided 9 billion different travel itineraries, combining travel options from nearly 700 global airlines. In e-commerce, investing in data science is key to achieving a truly personalised experience. Our continued investment in this area has allowed us to significantly improve the accuracy of our AI-powered predictions. As a result, the majority of travellers are now booking the first travel option recommended by our AI engine. This shows just how successful the technology has been at meeting the needs of 21st century travellers, driving greater customisation, reducing the time travellers spend researching trips and distilling millions of travel options into intelligent information which aligns with the individual’s preferences. Progressive companies across all sectors of retail are making similar investments in this game-changing technology and those that aren’t risk being left behind.
Combining technological advancement with customer experience innovation
Under the bonnet, AI provides a new engine for the evolution of e-commerce, with almost limitless potential for driving efficiencies and improving the customer experience. But without a radical step change in how we engage with consumers, we waste the potential of this revolutionary technology. The subscription model is what makes the connection between the backend technology and a better customer journey in the front-end, allowing us to combine technological advancement and innovation in customer experience to more closely match our understanding of what modern consumers want.
This is because subscriptions are fundamentally better at driving closer relationships through regular data sharing. Through their memberships, customers establish long-term partnerships with brands, rather than engaging in one-off transactions. As these relationships develop more data is shared, the algorithms learn more about what motivates each individual customer, and the brand is better able to provide accurate tailored recommendations over time. In this way subscriptions still provide vast choice, but are far more effective at rationalising that information for consumers. At the same time, accurate personalisation drives efficiencies, reducing the time requirement on the customer, and, as the algorithm continues to learn, more and more processes can be automated creating a far more convenient customer journey, along with a more personalised experience and increased choice around product and price. This rationalised choice, along with economies of scale with product providers, means subscriptions are also uniquely placed to provide bespoke deals and offers to lower price points for members for which this is a priority. This is another reason why these models are increasing in popularity as living costs rise worldwide.
The future of e-commerce – AI-powered subscription shopping will become the primary model for global retailing
I believe subscriptions will, in relatively short order, become the primary way products and services will be purchased worldwide. A study we undertook recently showed that only 1% of shoppers now wouldn’t consider themselves to be ‘subscribers’, while 87% plan to maintain or increase subscription spending over the next year. This is despite the global economic headwinds, evidencing how highly members value these services, both for the improved customer experience and the cost saving potential subscriptions can offer. The travel sector serves as a perfect case study. Of those that already subscribe to travel services, nearly 90% said they would either increase or maintain spending on travel subscriptions while travel emerged as the most popular product area for potential new subscribers. At eDreams, our Prime subscription service, the first membership platform launched for the travel sector, has 3.8 million members worldwide, and is continuing to grow. This growth is only possible because of the symbiotic relationships between subscriptions and AI.
It is a no-brainer that AI-backed subscription e-commerce models are far better suited to meeting consumer needs in the 21stcentury. That is why we are continuing to invest in our AI capabilities, for example by pushing on with our plans to expand our global tech workforce by 50%, with much of that investment going into new AI and innovation roles. It is also why we are continuing to pivot our business model to one that is primarily subscription based, to capitalise on shifting retail habits and how we expect the market to change in decades to come.
