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Retail is big business. But like many other sectors it’s undergoing a transformation, largely affected by the shift of consumer behavior from physical to digital. Many retailers are looking to analytics and artificial intelligence (AI) to help them cope with the challenges. Andrew Ng, among the most prominent figures in AI, is now turning his sights to doing precisely that with his new venture Netail.
The global retail market reached a value of nearly $20.3 trillion in 2020, having increased 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 in 2025. The global retail market is expected to reach $39.9 trillion in 2030, at a CAGR of 6.3%. At the same time, global annual retail spending in AI is expected to reach $12 billion by 2023 according to Juniper Research.
Andrew Ng is founder of Landing AI and DeepLearning AI, co-chairman and cofounder of Coursera, and adjunct professor at Stanford University. He was also chief scientist at Baidu and a founder of the Google Brain Project. Yet, his current priority has shifted, from “bits to things,” as he puts it. As retailers are going 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 enables retailers to auto-identify competitors across the internet and track their assortments and availability and optimize prices in real time. Today, Netail announced the closing of $5 million in seed funding.
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VentureBeat connected with Ng, who serves as Netail’s chairman, as well as with retail veteran Mark Chrystal, who is Netail’s CEO, to discuss the changing landscape in retail and Netail’s offering.
A shift in consumer behavior
“We started the Netail journey when we realized that many retailers of all sizes were struggling with the same major problem: adapting to the shift of consumer behavior from physical to digital. This is not just a trend towards ecommerce purchasing, but a large shift towards digital decision-making through online product research,” said Ng.
Chrystal is a 23-year retail veteran of a number of multinational brands, like Victoria’s Secret, Disney Store, American Eagle Outfitters and David’s Bridal. In that career he has served in many different roles. As he told VentureBeat, his passion is applying data and analytics to drive decision-making and competitive advantage. He has supported that 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 step out of inline retail because he saw a major shift happening in the space and felt that new solutions were needed. He joined Ng at Landing AI about a year and a half ago aiming to develop cutting-edge AI-based solutions to bring into the retail space. The team ideated solutions that were then tested and validated with retailers.
Chrystal chose not to share the names of Netail’s early adopters, but he did say they include names ranging from the largest retailer in the world to companies making less than 1% of that retailer’s revenue. What Netail found was that all retailers were struggling with the same problem: the shift of consumer behavior from physical to digital.
Interestingly, Amazon’s Q3 results happened to have been published just a few days before the conversation with Chrystal took place. Following those results, a significant loss of market value occurred for Amazon. In trying to interpret this, as well as the recent wave of layoffs from Big Tech companies, many pundits point to the same direction.
Big Tech counted on the effects of changes of consumer behavior due to COVID-19 and the associated restrictions as being permanent. It turns out that they are not, hence Big Tech’s projections are off the mark. Market capitalizations are declining and mass layoffs have followed the hiring sprees. Could it be, then, that the key premise that Netail is built on is not as solid as they think?
Savvy consumers, a major shift for retailers
When discussing this point, Chrystal was quick to point out that globally, about 80% of retail sales still happen in physical stores. There was a spike during the COVID-19 times, but now this trend is rolling back. But that’s not all there is to it.
“Consumers have switched their primary decision-making journey to digital environments. It used to be that if you wanted to buy a product, you would go to your local stores, your local shopping center. You’d walk around if you’re buying a pair of jeans, you’d go and look at two or three different jeans retailers, you’d try them on, you’d compare them.
That’s not how shoppers and consumers behave anymore. They go to the web and they do a search on what’s the right product, what’s the right price, what are the reviews on the product. One of the phenomena that Amazon is struggling with, for example, is that consumers are becoming more savvy about where to shop, how to shop online, all the options and where they can do this kind of comparison of products, Chrystal said.
Ultimately, consumers may walk down to physical locations, but they already know what they are looking for and what each retailer has to offer. Empirically, that probably rings true to most of us. That is a major shift for retailers, Chrystal noted, especially those that were born as physical retailers and then grew into the ecommerce space.
The problem for all retailers today is that the competition has grown over a thousandfold as shopping is now done through search engines and marketplaces and social media, Chrystal said. The competition is not just the five or 10 stores that are physically located near each other, but anyone whose products and services can be discovered on the web.
Retailers used to compete based on location, and count on things such as window signage. Chrystal believes that really doesn’t work anymore. Retailers today need to figure out a number of things: How does my price stack up against these thousands of other options? How do my product features stack up? How does my availability of products stack up? How does the quality of my product and my services stack up in my reviews?
Netail built a solution to help retailers, where no solutions really exist today, Chrystal said. In reality, there are many AI-powered solutions for retailers in the market already. Nevertheless, Ng expressed his confidence in the Netail team and said they “found a solution that we feel is extremely compelling and has delivered strong results for our early adopters.”
Data-centric AI for retail
In order to collect the data that Netail uses, Chrystal said the company has developed its own scraping technology that can capture and track data at scale in real time. On top of that, Netail offers competitive intelligence, price intelligence, assortment intelligence, location intelligence and customer intelligence services.
“We have a solution that goes out across the web and can find, for any particular retailer, who their competition is at a product level. We match the products to understand what’s competitive head to head. And then we can track all of the competitors in terms of their assortments, their availability. We can optimize prices in real time and we’ve seen really dramatic results in terms of improvements in web traffic and profits and revenue from the solution,” 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 domain expert feedback to fine-tune its intelligence services. Chrystal claimed that Netail’s AI can look at products the way a human would, looking at images, descriptions, sizes, weights, quantities and a number of properties that are factored into determining relevance.
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. Where domain experts are available, they are incorporated in the process and tailor-made models can be developed for Netail’s clients. Where that is not the case, the AI models can learn on their own and they are still useful, according to Chrystal.
Netail’s clients can choose which services they need and subscribe to use one or more of these. The company is headquartered in Pittsburgh, the home of Carnegie Mellon University and a technology hub, while retaining 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 early-stage venture capital to entrepreneurs and technology companies throughout the Midwest, and AI Fund. Other investors include HKSTP Ventures. Netail will also be expanding to the APAC region by opening an office in the Hong Kong Science and Technology Park.
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