EXPERTS ADVISORY

‘Tis the season of holiday shopping—an appropriate time to explore the dramatic changes consumers have seen as traditional retailers adapt to the industry standard set by online marketplaces. What’s more, artificial intelligence is working its way into retailers’ toolkits, and not always with optimal results.

Three business experts from the University of Michigan—Jun Li, Joline Uichanco and Lennart Baardman—survey the retail landscape and share insights on how Big Tech is shaping decisions by both buyers and sellers. They appeared on the latest episode of the podcast Business & Society, a joint production of the Ross School of Business and Michigan News.

Excerpts are below.

Lennart Baardman:

“I think Amazon has basically made the entire retail space much more omnichannel, much more data-driven, and not just in the areas where you expect it,” he said. “So when you talk about an area like grocery shopping, online retail wasn’t very big in that space for a long time because people want to make sure they buy the milk that has the best expiry date, the freshest vegetables, they want to make sure that the fruits they get look good.

“But in the last few years, and I guess this is partially due to the pandemic, we have seen double-digit increases every single year in online grocery shopping. People are really adopting that as a thing they do. And the tech side of that is huge. So online grocery shopping is very expensive, it is difficult to do. And so there’s new developments such as micro-fulfillment centers, where basically very small local warehouses are being used to pick the products and deliver the products in a very cheap and efficient way to the customer.

“I think that that trend will not just help grocery shopping. It will be everywhere in the retail space.”

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Jun Li:

“An overall impression that I get is more and more retailers are using more
analytics,” she said. “This not only includes the big ones like Amazon or Walmart, this even includes the much smaller retailers.

“In the past, they probably focused more on everyday operations, but now they are focused more on technology. So definitely increasing use of machine learning in their everyday decisions.

“I also realized that there are retailers applying machine learning (and) if you blindly run many of these tools, you get to a point in realizing that this doesn’t make sense—if I just make a decision based on (that), it does not seem to be a right decision to make.”

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Joline Uichanco:

“You have online fulfillment that only traditional brick-and-mortars can do that Amazon cannot do,” she said. “For instance, you have the buy-online, pick-up-in-store option. You can basically buy online, park your car and someone would bring your groceries to you.

“So I think traditional brick-and-mortar retailers can offer value-added services that companies like Amazon cannot. But at this point it’s like David against Goliath. You still have Amazon having a large proportion of the online sales, whereas the other retailers, even if you add the next 10 up, it still doesn’t beat Amazon. Yeah, so I feel like right now it’s still Amazon’s game.”

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Business & Society is co-produced by JT Godfrey of the Ross School of Business and Jeff Karoub of Michigan News. The audio engineer is Jonah Brockman. Listen to all episodes of the podcast here.