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Amazon looks to gain a machine learning advantage (AMZN)


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Amazon will open an R&D hub in Barcelona in early 2018 that will specialize in machine learning research, VentureBeat reports. Machine learning drives many of Amazon’s capabilities, so investing further in this nascent tech makes a good deal of sense for the e-commerce titan.

Here's how the new hub could benefit Amazon's machine learning efforts across its business:

  • Amazon’s product recommendations are largely driven by machine learning, as the company utilizes its huge database of consumer purchases to predict what specific items customers would be interested in. As the company extends its business into other areas, via its Whole Foods acquisition, for example, it will need machine learning algorithms that can parse increasingly diverse data sets.
  • Machine learning and natural language processing (NLP) are at the core of Amazon’s digital assistant Alexa. The new R&D lab could help improve Alexa’s functionality, which is especially important as its accuracy currently lags behind Google Assistant’s.
  • Amazon's logistics business is heavily reliant on machine learning. There are thousands of factors in each individual order fulfillment, so employing artificial intelligence (AI) that can reroute, change delivery arrival times, and make other adjustments accurately and efficiently is extremely valuable. Additionally, Amazon’s interest in drone delivery is well known, and machine learning is what enables drones to fly autonomously. As such, further research in the area could bring Amazon closer to employing a fleet of drones.

Amazon may be trying to make machine learning its new competitive advantage. Amazon’s patent on one-click payments is set to expire this year, meaning the company will lose exclusivity on one of its earliest features that drove it to prominence, but machine learning could provide Amazon with a new advantage. In fact, Amazon has filed a number of machine learning- and AI-focused patents recently. If these prove nearly as valuable as one-click has been, they could help Amazon fend off competition from retailers deploying one-click options. Additionally, the company may even be angling for a new revenue stream, as it has discussed making its machine learning and AI available to other companies through Amazon Web Services (AWS).

One of retailers' top priorities is to figure out how to gain an edge over Amazon. To do this, many retailers are attempting to differentiate themselves by creating highly curated experiences that combine the personal feel of in-store shopping with the convenience of online portals. 

These personalized online experiences are powered by artificial intelligence (AI). This is the technology that enables e-commerce websites to recommend products uniquely suited to shoppers, and enables people to search for products using conversational language, or just images, as though they were interacting with a person. 

Using AI to personalize the customer journey could be a huge value-add to retailers. Retailers that have implemented personalization strategies see sales gains of 6-10%, a rate two to three times faster than other retailers, according to a report by Boston Consulting Group (BCG). It could also boost profitability rates 59% in the wholesale and retail industries by 2035, according to Accenture. 

Stephanie Pandolph, research analyst for BI Intelligence, Business Insider's premium research service, has written a detailed report on AI in e-commerce that:

  • Provides an overview of the numerous applications of AI in retail, using case studies of how retailers are currently gaining an advantage using this technology. These applications include personalizing online interfaces, tailoring product recommendations, increasing the relevance of shoppers search results, and providing immediate and useful customer service.
  • Examines the various challenges that retailers may face when looking to implementing AI, which typically stems from data storage systems being outdated and inflexible, as well as organizational barriers that prevent personalization strategies from being executed effectively.
  • Gives two different strategies that retailers can use to successfully implement AI, and discusses the advantages and disadvantages of each strategy.

To get the full report, subscribe to an All-Access pass to BI Intelligence and gain immediate access to this report and over 100 other expertly researched reports. As an added bonus, you'll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. >>Learn More Now

You can also purchase and download the full report from our research store.

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