As the role of AI in retail and ecommerce continues to grow, Algolia has once again partnered with Coleman Parkes for our annual search trends report to gauge how retail businesses plan to use search and discovery this year alongside the growing role of AI in retail and ecommerce merchandising.
B2C Ecommerce Site Search Trends is produced annually by Algolia. Our aim is to give stakeholders a broad, yet detailed overview of the evolution of search by offering a snapshot of the key developments, trends, technologies, and challenges unfolding in the B2C search and discovery space.
Spanning five key markets, this year’s report is based on the input of 1,100 participants including 550 IT decision makers (ITDMs) and 550 business decision makers (BDMs) working for businesses across the US, UK, France, Germany, and New Zealand/Australia.
Data and insights from the report reveal that business to consumer (B2C) companies predict healthy ongoing investment in search moving into 2024.
New implementations continue to be driven by a need to increase business revenue and respond to competitors. In addition, an integral element of most ecommerce strategies includes improving the user experience through increased personalization.
Notably, respondents viewed AI as an important part of their business's search strategy and a critical technology driving the accuracy and relevance of search results.
The use of generative AI was correlated with providing better and more refined tools that could be applied to drive more tailored and meaningful user experiences and interfaces.
Business profiles
We surveyed IT decision makers (ITDMs) and business decision makers (BDMs) with responsibility in ecommerce search functionality to obtain an accurate view of their organizations’ business maturity and the state of search in key national and regional markets.
The equal split between ITDMs and BDMs provides a robust indication of the increasing and converging importance of search, discovery, and AI, for those with different responsibilities within most B2C organizations.
The 1,100 senior-level respondents included 300 participants based in the US, and 200 each from the UK, France, Germany, and New Zealand/Australia. For the sake of clarity, retailers were divided into two broad and overlapping categories—brick and mortar and ecommerce - based on the value of each of those revenue streams to their business.
Companies doing more than half of their business through online revenue streams were placed in the ecommerce category while those with more than half of their sales volume in physical stores were placed in the brick and mortar category. The study sample resulted in 4 out of 10 respondents coming primarily from the ecommerce online stream and the
remaining 6 in 10 from brick and mortar locations, where the purchasing component of the sales journey took place in physical stores.
Site Search Investment
For B2C companies operating ecommerce or multi-channel retail operations, generating a meaningful customer journey is critical at all points in the sales funnel. Investing in technology that improves the search experience is not just about converting prospects into customers now but getting them to browse, explore, and return as loyal clients into the future.
Given the critical importance of search and discovery for both brick and mortar and ecommerce retailers, it is not surprising that over half (51%) of businesses surveyed said they adequately invested in site search in 2023, with investment touching levels that were slightly higher in 2023 compared to 2022.
Though businesses invested in site search to unlock advantages like better revenue streams and an improved customer experience, there were many that did not take the opportunity to benefit from site search implementation. Forty-three percent of respondents indicated that they have under or not invested in their ecommerce site's search and discovery capabilities.
This may be be attributable in part to budgetary limitations. It may also stem from a partial lack of understanding on how in-site search technology can power product discovery and conversion, and how it serves as an invaluable resource for powerful customer and product analytics.
Factors driving implementation
For those retailers that have put into place search and discovery technology to complement their online presence, the top three reported factors driving search implementation include revenue increase, meeting customer demand, and improving customer experience.
Closing the gap/staying ahead of the competition remains in the list of top 8 factors and is an issue of concern for 16% of businesses, albeit at a slightly lower level than in 2022. This is a reminder that ongoing competitive pressures continue to affect businesses as we move slowly out of an inflationary economic environment.
Satisfaction with search-driven revenue levels
Sixty percent of retailers implementing search selected “very or quite satisfied” when asked about the overall revenue levels they have been able to achieve using the technology. More than half (60%) were satisfied with the revenue their business achieved directly via search. As more businesses start to implement AI-based search features and insight-based optimizations, satisfaction with revenue levels is likely to trend positively.
Investment levels in search
Year-over-year investment levels in search and discovery technology remain broadly consistent, with 43% of respondents increasing their investment in site search in 2023 by an average of more than 8% compared to 2022. This trend looks set to continue into 2024 as businesses continue to predict healthy investment in search with more than a third (42%) saying they will increase site search investment over the next year.
Conversely, moving into 2024, just 6% of businesses responded that they are likely to decrease their investment, a slightly higher number when compared to 2022 (3%). This can be attributed in large part to the evolution of retail ecommerce following the pandemic. Many of the critical investments made during that period have reached a level of stability and maturity, generating predictable ROI and requiring no significant modification for the time being.
Post-pandemic investment levels
Although the business environment in 2023 can be described as ‘post pandemic,’ the ongoing uncertain economic climate continued to impact site search investment levels. While 12% of businesses participating in the study invested less, nearly two-thirds (64%) of the businesses invested more in site search in 2023. For almost a quarter (24%) of respondents, the economic climate has had no significant impact on site search investment. Overall, businesses investment in site search remained broadly consistent between 2022 and 2023.
Investment motivators
For those starting to explore the possibility and power of search technology, and its accompanying AI tools, the pressure of an unpredictable economic environment drives a cautious approach. For the rest, an intended increase in site search investment is based on a range of factors that include responding to the competition (53%) and unlocking incremental revenue (24%) with product recommendations.
Just over half (53%) of participants attribute their company's increasing investment levels in search as a way of ensuring that they have an effective response to their competition, while over 40% are using investment to boost customer focus. Forty-four percent are increasing search investment to enable faster search results for customers while 40% are seeking to improve the customer experience and retail journey.
Every second matters in the world of digital experiences. Brands are fighting for eyeballs, and their competitors are doing the same. Keeping up with new technological and merchandising trends remains critically important as retailers strive to deliver accurate and personalized, search and browse experiences to their customers at lightning speed.
For B2C companies operating ecommerce or multi-channel retail operations, generating a meaningful customer journey is critical at all points in the sales funnel.
Search capabilities
Our research demonstrates that B2C retailers continue to pay close attention to the quality and effectiveness of the search technology they employ and are keenly aware of its effectiveness in increasing revenue and converting web users into loyal customers. But the pros and cons of building vs. buying off-the-shelf, as well as the costs involved in either option, are increasingly driving B2C companies to more dynamic and cost-effective intermediary solutions like customizable API technology to enhance their search capabilities.
Developing search capabilities
Nearly half (49%) of businesses surveyed developed their search capabilities in collaboration with a third party and just over a quarter (28%) opted to develop them in-house only. The data remains broadly consistent year on year, with businesses more likely to use in-house or third-party customization to develop their search capabilities and less likely to use off-the-shelf pre-packaged software (22% versus 27% in 2022).
The debates over building vs. buying search and discovery technology remain inconclusive. Though there are many benefits to building bespoke technology, this demands a significant ongoing resource investment. Another option is to tailor solutions using an API-based platform, like Algolia AI Search. This comes with expanded offerings and the ability to customize into the future. The end result generates superior benefits with limited investment.
Given the pace of technological development and its associated costs, in-house development might give businesses more control over their search capabilities. But respondents who ventured down this road also faced a new array of challenges that their businesses needed to overcome.
Over half of the respondents said their business lacks the ability to adapt fast enough to the latest trends and more than 43% said they lacked the expertise needed to develop in-house search capabilities, while over a third reported shortage of development staff.
The benefits of search
Put simply, if the customer can't find it, how are they going to buy it? Ecommerce users increasingly expect powerful and meaningful search and discovery that helps them find not only what they are looking for, but also items they might like but hadn't considered. Quick and accurate search results and tools that make search easier are critical to the ecommerce shopping journey and a top-of-mind concern for B2Cs.
In addition to simply helping customers find what they are looking for, there are a host of different types of search features that businesses implemented or plan to implement in an effort to see better ROI. These range from leveraging AI to better understand user intent to providing refined and personalized search results based on a customer profile and history.
“Search all content sources” continues to be a key feature already implemented by over half of businesses, followed by personalization features at 53% and spelling mistake correction (typo tolerance) at 50%. The top search feature businesses plan to implement over the next year is to provide their users with “as-you-type” results.
Consumer expectations have been reset to new standards where shoppers expect to enjoy flawless connected experiences across channels.
Impact of specific search features
Businesses that already implemented search features reported multiple benefits such as revenue increase, repeat customer loyalty, and increased digital traffic. Over half (54%) of those already offering recommendations and related search products have seen an increase in revenue and a 50% increase in digital traffic.
Over a third (36%) of those who are already leveraging AI to understand users’ behavior have seen both an impact on customer loyalty and a more positive impact on revenue increase. This suggests that businesses that have no plans to implement search features in the next 12 months are set to miss out on the potential to increase revenue and improve sales through increased digital traffic and repeat customer loyalty.
Consumer expectations have been reset to new standards where shoppers expect to enjoy flawless connected experiences across channels. Meeting these expectations and converting them into loyalty and sales will require B2C companies to think about using the right types of solutions quickly and effectively.
Quick and accurate search results and tools that make search easier are critical to the ecommerce shopping journey and a top-of-mind concern for B2Cs.
Personalization
One of the most powerful applications of new technology in search and discovery is its ability to improve personalization and help B2C businesses, and the merchandisers on their teams, deliver targeted and curated offerings to their existing and prospective customers. Personalization can be delivered to users in a number of different ways that can range from personalized shopping profiles to targeted email messaging.
Types of search personalization
Over half or 56% of businesses currently offer customers a personalized shopping profile
That’s followed by 46% offering product recommendations based on items searched for or purchased. Forty percent offer subscription to email messaging programs in exchange for a more personalized experience. Over a third of businesses (34%) use a text subscription service for a more personalized experience.
It is important to note the significance and potential of AI: over a quarter (28%) of respondents offer conversational commerce to their customers and more than two thirds of businesses surveyed are planning to implement this functionality over the next year.
Importance of search personalization
Personalization continues to be a significant part of a business’s ecommerce strategy. Seventy percent of those surveyed said that personalization will be an integral or large part of their ecommerce strategy over the next year.
The results can be attributed to customer expectations. Retail customers want to interact and engage in experiences that are tailored to their preferences and specific needs. Customers expect brands to know who they are and what they want.
AI and the impact of Chat GPT
AI is in the midst of becoming a keystone technology in the search and discovery space. It is significantly improving both the search experience and the user journey for customers in the sales funnel. In addition, it is increasingly playing a role as a critical tool in improving the fundamentals of search and discovery technology. This opens a host of new possibilities for B2C companies.
Sixty percent of those surveyed believe AI has an important role to their business’s search strategy compared to the 4% saying that AI doesn’t feature as an important consideration. Thus, AI adoption looks set to offer businesses new opportunities in their search strategy development over the longer term.
Given these results, AI adoption is likely to offer businesses significant new opportunities in shaping their search strategy development in the future.
In terms of AI’s role in augmenting search, more than half (51%) of those surveyed believe that it will improve the accuracy of search results, followed by 45% saying it will improve the relevance of search results.
Interestingly, for more than a quarter (26%), AI will help achieve positive business results at scale. Only a minority at 3% are saying that it’s too early to predict the role of AI in search.
The role of generative AI
Respondents believe that AI can catalyze change in search and discovery solutions. The two most common use cases they cited were to generate product comparisons (51%) and buyer’s guides (46%).
This data is a powerful indication that businesses recognize the importance of using emerging technologies to offer their customers a more personalized shopping experience. While conversational tools have existed for some time, the application of generative AI in search, which remains in testing mode for many B2C companies, is likely to elevate the overall shopping experience for customers.
Merchandising
The convergence of AI and ecommerce heralds a new era for online merchandising. Merchandisers must now balance both product promotion and generate meaningful personalized experiences for their retail online customers. Given their increasingly important role in the era of AI-driven ecommerce, merchandisers must now maximize the power of their companies’ online real estate. Increasingly, AI-based search and discovery technology gives them the tools they need.
Types of search personalization
More than two-thirds (68%) of businesses have a dedicated merchandising team and 54% have a dedicated solution in place for their merchandising needs.
Overall, responses suggest that businesses are more advanced in having full-time, committed merchandising teams on their payroll than dedicated tools and solutions for those teams. A large part of this can be attributed to the evolutionary growth of digital merchandising. In the recent past, merchandising teams have been at the front lines of driving ecommerce as well as brick and mortar consumer experiences and revenue.
Businesses that have dedicated solutions in place for their merchandisers indicate that customization is important for them to effectively reach out to their customers.
For 51% of those interviewed, the available merchandising solution they were using had comprehensive capabilities and customizable functionality. Just under a third (32%) used out-of-the-box solutions. The data reflects the dynamic nature of ecommerce: no two businesses are alike. Every ecommerce business must tailor functionality to suit its particular needs.
Limits to out-of-box ecommerce merchandising solutions
There are limitations to out-of-the-box solutions. These include fewer capabilities or a lack of relevant features that may be required by specific sub-industries. This further reinforces the need for customization, as further illustrated in Figure 18.
Only around a third (32%) believe that the out-of-box solutions can fully meet their needs. For the remaining 68% of respondents, these out-of-box merchandising technologies are partially or wholly inadequate.
Investing in merchandising
While 68% of respondents are working in B2Cs that have a dedicated merchandising team, nearly two- thirds or 64% of the businesses that were part of our research plan to hire more merchandisers and 73% plan to invest in an IT developer team to support merchandising efforts.
These numbers highlight the growing importance of merchandising tools in the ecommerce business space. It is also important to note that over half (52%) of those interviewed plan to implement AI powered tools to help merchandisers. The investment in tools and technologies to improve the merchandising function is a strong signal of the increasingly central role these teams are expected to play, especially when it comes to making an impact on revenue using data-driven strategies.
Different approaches to ecommerce merchandising
The data shows that businesses’ approaches to merchandising vary with different stages of AI implementation. Nearly half of businesses (49%) employ a combination of manual and automated merchandising processes. Thirty-three percent indicate they are already fully automated and just under 18% remain fully manual. Implementing AI-powered tools as businesses plan to help merchandisers across the year has the potential to improve their merchandising strategies and enhance automated processes. In order to execute the best strategies for their businesses, merchandisers need to have access to manual and AI functionality, with the ability to fully control and intervene as needed.
Businesses planning to help merchandisers implement AI-powered tools over the next year have the potential to improve their merchandising strategies and enhance automated processes. In order to execute the best strategies for their businesses, merchandisers need to have access to a mix of manual and AI-automated functionality. They must also have the ability to fully control and intervene in processes as required.
Measuring merchandising impacts and strategy
The top metrics used to measure merchandising impacts are team productivity at 54%, speed to change merchandising products at 42%, and revenue uplift at 38%. This is a clear indicator of the exhaustive list of jobs to be done by merchandisers and the area most benefited.
The breadth of these three variables is a clear indication of the broad scope of activity involved in the merchandising function and its accompanying roles.
Data and analytics play a critical role in merchandising strategy. Merchandising decisions are based on applying available data and analytics for more than half (53%) of respondents, while 44% continue to use brand-oriented thinking. Surprisingly, nearly a third (30%) claim to rely on intuition. Automation also has a place with just over a quarter (27%) using automated optimizations when applying merchandising strategy.
While intuition-based campaigns can lead to short-term gains, they lack predictability especially when scaling. Additionally, it is nearly impossible to replicate results when the consumer is constantly evolving. Data from a brand’s business is the most valuable input in determining strategy. In particular, click and conversion metrics help merchandisers build and modify their strategies for continuous impact.
Customer experience
Creating a positive and delightful shopping experience is an important element in the retail business proposition for B2C companies. However, delivering this is a constant challenge. Data from the research suggests there are a gamut of variables at play. AI-driven search and discovery ecommerce technology has an important role to play in fulfilling customer expectations.
For all the businesses surveyed, remaining focused on the customer is a critical concern and one of the main drivers for any intended increase in investment levels.
Businesses focus on a number of areas when it comes to customer experience. More than half (58%) of respondents highlight the importance of quick and speedy delivery of goods. This is followed by recommended products at 52%, payment experience at 50%, and personalization at 42%.
Future state of search
Some of the consumer trends anticipated over the next year include increased demand for more payment options, more AI-driven activity, and more special offers during the shopping process.
Additionally, with the increased usage and acceptance of AI, more than a quarter (27%) of respondents expect that AI will play an increasingly mainstream role in search experiences in 2024. This is in addition to demand for more voice-activated search functionality.
Sales Events
Outside of Black Friday, Cyber Monday and Christmas, Easter is seen as the biggest sales event for B2C ecommerce businesses surveyed. Following Easter, the biggest sales are in January and at Halloween. In terms of country specific events, Easter sales are popular in the UK, while in the US, Labor Day is a big event. In France, Paris Jazz Festival season is a key sales period, while in Germany, Oktoberfest sales days emerge as an important part of the shopping calendar.
Key insights
Site based search and discovery technology will continue to be a critical element in the B2C online space as we move into 2024. The data suggests that as the technology advances and incorporates increasingly powerful AI tools and functionality, retailers will be able to better shape the business offering. In turn, customers will benefit from an enriched and more personalized shopping journey across the sales funnel.
64%
Respondents view AI as a key technology driving the accuracy and relevance of search results. Nearly half associate generative AI with improving product comparisons and buyer’s guides.
61%
of respondents indicated they are able to accomplish revenue goals with search. Nearly half believe revenue is a strong driving factor for search implementation and 61% are satisfied by the revenue achieved via search. Overall, revenue satisfaction remains fairly high.
70%
of those surveyed said personalization will be an integral or large part of their ecommerce strategy over the next year. Personalization remains a significant part of B2C ecommerce strategy and this will continue over the next year.
NEARLY HALF
of businesses employ a combination of manual and automated merchandising processes.
Merchandising will continue to play an increasingly important role in the retail ecommerce space as we move into 2024. As merchandising tools and technologies become easier to use and businesses take advantage of the increasing automation that AI technology can provide, data shows that businesses will continue to combine manual and automated merchandising processes to shape the customer journey and drive sales.
58%
said quick delivery of goods is the most important part of a great customer experience. Not surprisingly, having goods in hand remains a top-of-mind concern for online shoppers. As a result, the data overwhelmingly demonstrates that for most respondents, the quick delivery of goods is an essential focus when it comes to ensuring a positive customer experience.
With the pressure on ecommerce players to incorporate the latest AI technologies and respond to customer needs at lightning speed, tools like Algolia Search and the Merchandising Studio can help B2Cs streamline processes and deliver world class customer centered solutions.
Site based search and discovery technology will continue to be a critical element in the B2C online space as we move into 2024.
Conclusion
Forbes reports that 82% of global brands seek to deliver value through improved customer experience—the customer journey, then, remains a critical element in the value proposition for any B2C company. Powerful search and discovery technology like Algolia's Search solution and Merchandising Studio deliver solutions that maximize B2C companies’ ability to effectively orchestrate the art and science of modern online retailing.
As the respondents in the study affirm, AI, along with generative AI, are integral in the evolving ecommerce landscape. Ensuring that B2C companies have the tools they need to harness and use the technology to shape customer journeys and apply data and analytics to drive business decisions has become the new normal.
Online merchandising is at the heart of this new dynamic. Merchandisers must now be able to harness an array of available technological solutions. Their goal is to understand customers, channel conversions, increase sales, and ultimately improve ROI. In such a fast-paced and competitive retail landscape, generating new ways for customers to shop virtual retail spaces will always be a challenge.
As we enter 2024, using the right tools helps deliver B2C outcomes that enable progress and drive valuable results. It lets retailers focus on the dynamic, creative, and customer-centered solutions that will set them apart from the competition.
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