Can Businesses Become Recession-Proof by Tackling the Competition with AI?

Are you wondering how your company can compete during a recession? Read ahead to learn about the incredible technology that will boost your business.

Whether you’re an established small business or are just dipping your toes in the water, you’ve probably found a few retail giants that you perceive as the “pinnacles” of success.

Whether that’s ASOS, eBay, or Etsy, it’s tricky to pin down exactly what makes these corporations tick.

Part of their success is down to an excellent team of marketing experts that cost a pretty penny (and that’s putting it lightly!). 

But these companies simply couldn’t succeed without the next-level data-driven insights provided by artificial intelligence algorithms which are designed to track consumer behavior.

Although you can try and keep up with the competition by painstakingly following consumer purchasing patterns, it’s easier to appeal to potential buyers using automation and personalization technology than employing a dedicated team of experts.

Oh, and did we mention that it’s far cheaper too? Talk about a win-win.

So, if you’re worried about weathering the storm of the upcoming recession and cost of living crisis, we’ve got you covered.

Not only will we reveal the tried and tested AI tactics used by successful retailers in today’s modern world, but we’ll let you know how YOU can play the field too.

Now, before you panic, it’s worth noting that you won’t need to overhaul your entire marketing approach. Instead, you’ll be taking small steps toward technological advancement that will make a huge difference in your overall ROI figures.

Just trust us on that one.

What Are The Frontrunners in Retail Getting Right?

It goes without saying that there's been a huge evolution in the marketing world in recent years.

From publishing high-quality content to the supersonic rise of influencers, it’s become clear that the retail space has become more consumer-focused and online-based than ever before.

But the unbeatable reach of enormous retail corporations isn’t entirely based on top-notch business-to-consumer marketing efforts.

In fact, a lot of their success can be attributed to world-leading technology and artificial intelligence tools that offer data-driven insights that humans simply can’t.

From brand recommendations and product matching to superb personalization and image tagging systems, let’s take a quick look at what retail’s frontrunners are completely nailing.

They’re focusing on data-driven insights and personalization

The main thing to consider when you’re trying to measure up to retail giants is how much capital they can invest into acquiring top-notch machine learning algorithms.

With ASOS alone able to spend approximately £223.5 million on marketing every year, it’s unsurprising that they’re able to source and retain reliable customers. Throw in the £250 million technology and infrastructure budget, and you’re really cooking.

But you don't need to have sky-high marketing and technology budgets to glean invaluable insights from consumer purchasing patterns or returns metrics. Neither are they crucial for image-tagging and keyword research strategies that are guaranteed to draw in potential buyers.

All you need is to connect with your customers and know what they want from your business. And that’s exactly what the data scientists at ASOS have become experts at!

If you’re an up-and-coming retailer, you’d probably be over the moon to replicate even a fraction of ASOS’s burgeoning success. With their annual revenue sitting at an impressive £3.91 billion in 2021, it’s certainly easy to see why!

So, what exactly are businesses like ASOS getting right?

They have a seriously sophisticated product recommendation algorithm

In our opinion, it starts with their use of Microsoft Azure which is a hybrid cloud and computing platform responsible for all personalization and recommendation tactics.

The brand’s recommendations API takes past browsing behavior into account and lists suitable items that customers may want to purchase when they return.

Although they do many things right, this “personalized shopping journey” truly hits the motherlode by using something called collaborative filtering. This essentially enables ASOS to make ridiculously accurate product recommendations that customers will automatically be drawn to (as it’s based entirely on their previous purchases!).

Better yet, it directly aids with link-selling by tempting potential buyers into purchasing matching accessories, shoes, and everything else under the sun.

Ah, the glory of consumerism.

They stay ahead of the game with returns by running Fit Assistant and Style Match

Now, it's no surprise that returns are a huge issue for many retailers.

With free returns being expected by most customers in 2022, it’s believed that for every 1 billion dollars in sales, the average retailer incurs an eye-watering $166 million in returns. To make things even worse, retailers lose approximately $10.3 to return fraud for every $100 of returned merchandise accepted back.

For this reason, it’s certainly not smooth sailing for clothing retailers, as they need to strike the delicate balance between keeping customers happy with a hassle-free returns system and potentially damaging their profit margins beyond repair.

You’ll be pleased to know that ASOS isn’t immune to this issue thanks to their generous return policy. 

But they minimize the possibility of returns with incredible AI tools like Fit Assistant that enable customers to make informed purchasing decisions. 

Not only does this help the company estimate potential profits more easily, but it makes the customer experience seamless as buyers can almost guarantee that a garment is going to fit. Considering everything from hip and waist measurements to height and preferred fit, AI swoops in and suggests a size that should fit like a glove.

If Fit Assistant wasn’t innovative enough, ASOS also launched Style Match in 2018, which allows users to upload a single reference photo to find similar products across their enormous database.

With ASOS stocking up to 85,000 products on their website at any time, being able to whittle down the results to pinpoint the ultimate designer handbag dupe has proven a godsend for customers.

And it certainly hasn’t hurt ASOS’s revenue figures either!

As this feature is built directly into the search bar, it acts as a “welcome style guru” that has been perfected by data scientists to directly boost sales, build brand credibility, and improve customer satisfaction.

The ultimate retail trifecta if you will!

Although humans can try and replicate this feature, the speed and accuracy of these two AI algorithms prove that the company’s current approach is simply unmatched. As a result, this technology continues to be a huge boon for companies looking to streamline their marketing approach and improve user experience tenfold.

It’s worth noting that retail giants have yet to create algorithms that can predict upcoming trends before they happen. 

But who knows what the future might hold?

They’re staying ahead of the pack with next-level technology that instantly improves user experience

If we turn away from ASOS and look to another successful online retailer, we can further drill down on the importance of embracing artificial intelligence to boost a user’s shopping experience.

For example, eBay has taken things one step further on the personalization front by tracking a user’s interests as they browse and presenting a homepage packed with product suggestions.

If that wasn't impressive enough, they also use AI to improve search diversity and directly improve how relevant all results will be. 

Gone are the days of trawling through pages of unwanted bric-a-brac, and in comes everything you’d ever hope to find right on the first page of search results.

For folks shopping in non-English speaking countries, things have also improved tenfold. Thanks to eBay’s sophisticated translation algorithms and natural language processing systems, exports, and international trade figures have risen by an impressive 17.5%.

So, language barriers between buyers and sellers are a thing of the past, as international sellers are now able to process orders far more quickly than previously. For smaller businesses who rely on international orders, this is a welcome change that could truly turn the tide.

And there's more good news for sellers who rely on large catalogs of images to sell their wares. Not only has eBay invested in excellent image processing and enhanced product classification algorithms that allow users to remove backgrounds from photos, but image-tagging algorithms allow entire catalogs to be labeled in minutes.

Luckily for you, this isn’t an algorithm that’s exclusive to eBay’s burgeoning marketplace. With Smarter’s automated tagging tool, you can easily tag your image catalogs in a cost-efficient and scalable way.

And believe us when we say that the poor intern who would have spent an entire year doing it manually will thank you for it! 

Better yet, it’s certainly lighter on the company budget than an entire annual salary and can scale far more quickly.

Hey, it’s all food for thought, right?

How Can Smaller Businesses Compete With the “Big Boys” of the Retail World?

Although the methods used by retail giants like eBay and ASOS are mind-blowing, we understand that this approach can’t be replicated by smaller companies with tighter budgets.

It’s also unlikely that SMEs will be handling quite as much inventory, the same level of returns, or an equal number of customer service inquiries.

To drive this home further, when you look at the fact that a typical ASOS data scientist costs £69,706 for a single year, throwing together a team of the same size to bring these ideas to life simply isn’t plausible for most companies.

But that doesn’t mean you can’t benefit from the beauty of AI by using pared-down and pre-trained solutions that just WORK.

With the right customer retention and marketing strategies that are built for small businesses, there’s every chance that you’ll be able to play with the big boys.

So, how do we become recession-proof?

If the sweet smell of success wasn’t enough to drive you towards technology, perhaps the looming cost of living crisis will.

Thanks to economic turmoil, rising energy prices, and a tricky political situation, it’s understandable that the average shopper is starting to tighten their belt.

With even ASOS experiencing weaker sales and an operating loss of nearly £10 million in August on account of shoppers cutting back, it’s more pertinent than ever to focus on investing in smaller solutions that won’t break the bank.

Luckily for businesses, Christmas is just around the corner, and it’s said that Brits spend almost £740 more during December than at any other point during the year.

So, if you're prepared to go all guns blazing into the holiday season with top-tier product recommendations, a wonderful web experience, and perfectly tagged images – you might just escape the worst of it.


Although retaining customers and making sales is always going to be more complicated when the economy is in flux, smaller businesses have a far better chance of reducing churn with data-driven insights than without them.

If nothing else, technology will undoubtedly help your company weather the storm by keeping you abreast of consumer behavior and allowing you to adjust your approach accordingly.

We never want to be all doom and gloom.

But if companies don’t lean into the curve by investing in appropriate technology, larger companies will simply dominate the market share before smaller companies have the chance to make their mark.

We know it's tough out there, but as they say – fail to prepare, prepare to fail.

So, it’s time to get to it!


Lewis Lovejoy

Lewis Lovejoy

26 November 2022


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