Introduction

Searching for products can be a daunting task for shoppers, primarily because of the large number of near-identical products available. This in turn can create disinterest among consumers. In addition, shoppers have become increasingly fickle, and the shopper journey has transformed to include numerous channels to search for a product. The increase in search channels and better mobile connectivity have led to an abundance of information, which, in turn, has increased the complexity of decision making. This is about more than just browsing and comparing online: Shoppers switch readily between online and offline channels. For example, a shopper might see a product in the store but instead of buying it there, instead takes a picture to research and buy online later. With trends such as these, it’s more important than ever for retailers to give shoppers relevant, personalized and seamless experiences across all shopping channels. Retailers can leverage artificial intelligence (AI) and machine learning to enhance search results. Meet Visual Search Visual search is based on images rather than text. It enables customers to address questions that can be difficult to convert into text, such as “show me items similar to this” or if they simply are unsure of how to accurately describe a product. Visual search works through a combination of computer vision and machine learning, two hardware developments and evolving AI capabilities that have primarily contributed to the development and increasing accuracy of visual search. How Can Visual Search Help Brands and Retailers? Visual search can simplify and shorten the shopper journey. AI-powered visual tools help retailers, marketplaces and brands better connect with shoppers by delivering more accurate search results – making it easier for consumer to find the products they want to buy. Visual search can also give shoppers with a more personalized experience through smart mirrors and a “shop similar” feature, which increases conversion rates, basket size and drives customer loyalty. Report Overview This report is part of our Innovator Intelligence series, which focuses on emerging companies disrupting retail and fueling innovation across the retail value chain. In this report, we present an analysis of the key trends in the shopper journey which can be improved with the help of visual search. We also examine Syte, a company that specializes in AI-enabled visual search for the retail industry, and which offers a complete visual product discovery system. Online platforms, retailers and brands have already adopted Syte technology, such as Tommy Hilfiger, Farfetch and Venca.

Industry Overview

Product Research Involves Multiple Channels Consumers mix social media, brand and retailer websites and physical stores as part of the shopping process:

• In Coresight Research’s recent Holiday 2019 US Shopper Survey, we found social media was the second most preferred option for US holiday shoppers to browse, compare products/prices or get ideas. Usage is naturally higher among younger shoppers: Fully 85% of US Gen Zers use social media to learn about new products, according to a November 2016 survey by Bluecore.
• Some 87% of global shoppers begin product searches online, according to a 2018 survey by Salesforce and Publicis Sapient.
• Physical stores remain a top channel for browsing and researching products. In our holiday survey, we found 68% of respondents stated they expect to visit physical stores to compare products and prices or just to get gift ideas.

While physical stores are still where most purchases occur, shoppers rely heavily on online sources for inspiration – or even lower prices. [caption id="attachment_98976" align="aligncenter" width="700"] Base: 1,784 internet users aged 18 and above who expect to buy gifts this holiday season
Source: Coresight Research[/caption]   With the help of visual search, shoppers can more easily search for online sites for products they come across on social media. Retailers and brands using visual search can attract and retain shoppers by showing near-similar styles and by recommending complimentary products. Social Media is the New Window-Shopping Destination Social media acts as a seamless visual channel between retailers and shoppers. The average social media user spends around two hours and 15 minutes on social media each day, according to market research company GlobalWebIndex. Companies recognize this potential and are leveraging social media platforms to showcase products to reach a wider audience. For example, Instagram allows businesses to tag products in a post, which users can use to shop for the item with the click of a button – and retailers are increasingly tagging products on Instagram posts that are available online. For example, H&M’s Instagram post below has tagged three products for which the customer can shop directly from its website. In addition, it features similar or complimentary styles under the “More from hm” section. [caption id="attachment_98977" align="aligncenter" width="700"] Source: Instagram[/caption]   Brands and retailers are increasing their reach on social media, which in turn leads to an increase in conversion rates. Visual content on social media has the potential to become the storefront of the future, introducing shoppers to newer styles and brands which they never knew existed: eight in 10 US shoppers purchased a product discovered on a brand’s social media post, according to a 2017 survey by social-commerce technology provider Curalate. [caption id="attachment_98978" align="aligncenter" width="700"] Base: 1,000 US adults aged 18-65; 2017
Source: Curalate/OnePoll[/caption]   Influencer Marketing on the Rise Influencer marketing has continued to grow in the past few years. This growth reflects the decline of the influence of TV and print advertising. Companies are harnessing the growth in social media consumption and are increasingly using Internet personalities to reach consumers. The influencer marketing industry is expected to reach $6.5 billion in 2019, from just $1.7 billion in 2016, having grown at a CAGR of 56%, according to Influencer Marketing Hub. [caption id="attachment_98979" align="aligncenter" width="700"] Source: Influencer Marketing Hub[/caption]   Retailers and brands understand the importance of scale that influencer marketing provides in comparison to official company accounts – and companies are allocating more budget to influencer marketing. According to a 2018 survey of 830 marketing professionals conducted by Influencer Marketing Hub, 86% of respondents intended to dedicate a portion of their budget to influencer marketing, and 63% of the respondents who already do expect to increase spending on influencer marketing. This trend is expected to have a direct and substantial impact on the visual search market, primarily due to increasing content creation. Undoubtedly, retailers and brands that adopt visual search tools will have first-mover advantage as online product discovery becomes increasingly visual. Shoppers Generating Visual Content User-generated content on e-commerce websites such as reviews, ratings and product images can drive shoppers to make a purchase. According to an August 2017 survey of 1,000 US adults conducted by Curalate, 50% of respondents stated that user-generated content would make them more likely to buy a product through a brand’s social channel. The conversion rate increases even if shoppers do not engage directly with it. Product pages with at least one review experience a 354% increase in conversion, according to digital marketing company Bazaarvoice. And, online reviews are no longer limited to text: Photos and videos are increasingly becoming part of online reviews. Bazaarvoice has 1.1 billion monthly shoppers and these shoppers posted a total of 2.2 million photos online in 2018, a year-over-year increase of 25%. Brands and retailers understand that the availability of visual content leads to a better shopping experience as it improves engagement, increases discoverability and strengthens brand trust among shoppers. Some 91% of UK brands and retailers agree that user-generated visual content leads to a more engaging experience, according to Bazaarvoice, while 86% of those surveyed agreed that user-generated visual content leads to increased discoverability of products. [caption id="attachment_98980" align="aligncenter" width="700"] Base: 500 global brands and retailers; the report did not provide a geographical breakdown of respondents; 2018
Source: Bazaarvoice[/caption]   Syte: Key Offerings and Features Syte empowers retailers with visual AI technology that enables them to better connect with shoppers by offering increased personalization. With Syte, retailers increase the reach of the catalog beyond text search: Shoppers can use images to search in-style apparel, footwear or any other items of their choice. We discuss its key offerings under specific categories below. 1. Camera Search What is camera search? With camera search, shoppers click a picture of any product that interests them, or upload from a gallery, Syte’s technology identifies the items in the image and displays visually similar products. What are the benefits of camera search? According to Syte, its camera search technology offers the following benefits:

• The average conversion rate for Syte’s clients has increased by 8-10%, improving customer acquisition, engagement and loyalty.
• One Syte client experienced an eight-fold conversion rate increase when visual and text search were combined.
• With fast and accurate results, Syte technology can increase page visits per session as much as 125%.

2. Deep Tagging What is deep tagging? Syte leverages particle physics technology to tag products in its client’s catalog, assigning extensive detail to each product, which, in turn, increases the accuracy of text search across the platform. How does deep tagging work? Differentiating between two near-similar products can be difficult. This problem can be overcome using Syte’s deep tagging technology.  To leverage the technology, the retailer needs to share the catalog in a CSV, XML or other compatible format. Syte’s technology analyzes the data using AI and conducts an ongoing auto sync from a file transfer protocol (FTP) folder. Furthermore, Syte offers customers an option to choose between Syte’s user experience (UX) design and a customized design: Clients can use Syte’s deep tagging to augment textual tags to all the products in the catalog. [caption id="attachment_98981" align="aligncenter" width="500"] Source: Company website[/caption]   What are the benefits of deep tagging? Syte’s deep tagging can reduce average tagging costs by 90% and provides a conversion rate uplift (on average) between 1% and 11%, in addition to:

• The image to text application programming interface (API) enabling clients to tag products automatically.
• Deep tagging allows retailers to offer visual navigation — an icon-based search tool that allows shoppers to narrow the search results until they find the desired product.
• Deep tagging simplifies the text search process for shoppers: Features such as auto-suggest and spelling correction increase the accuracy of text search.
• Deep tagging improves search engine visibility and ranking, due to the amount of data each product page holds.

3. Recommendation Engines What is a recommendation engine? Recommendation engines help identify products similar to the items the customer is looking for to make recommendations. Syte leverages its technology to allow retailers to showcase the most relevant products throughout the buyer journey, while providing a more personalized experience. Shoppers may come across products they like but might want something similar – but not the same. Recommendation engines show similar products, giving the customer more choices. How does a recommendation engine work? Syte’s recommendation engine allows shoppers to view products similar to the product that they shortlist, shoppers can then easily browse similar products until they find the product that they want to buy. [caption id="attachment_98982" align="aligncenter" width="700"] Source: Company website[/caption]   What are the advantages of a recommendation engine? Recommendation engines increase the likelihood of a shopper making a purchase, primarily due to increased options.

• Recommendation engines enable retailers to increase the visibility of products on the website.
• Recommendation engines enable online marketplaces and retailers to automatically showcase items similar to products the shoppers are looking at, making it easier to find new products.
• With image search technology, shoppers can look for anything they see in a picture. For example, a shopper might be interested in a specific item shown in an image containing several objects. Now, the shopper can find all products similar to those in the image using the “shop the look” feature.
• Syte enables clients to pair relevant user-generated visual content on social media with products in the catalog, which makes almost every style shoppable.

4. In-Store Smart Solutions What are in-store smart solutions? In-store smart solutions are designed to offer shoppers a more seamless omnichannel shopping experience. Syte offers in-store smart mirrors stylist apps under its in-store smart solution offering. How do in-store smart solutions work? Syte’s in-store smart mirrors enable retailers to use features such as visual search and similar style recommendations. For example, a shopper can scan an image from a magazine, brochure or phone to look for the same or similar items in the store. Similarly, the customer can snap themselves in any outfit of their choice and the smart mirror will then suggest additional items that go with the outfit. The recommendations are based on results derived from running visual AI algorithms run across social media platforms. Syte’s clientelling / stylist app empowers store associates to give shoppers better service, as associates can also make relevant suggestions to shoppers – just like an online tool. Associates simply click a picture of any product the shopper wants and then uses the app to suggest related items. Associates can also offer styling recommendations based on AI analysis of online looks that get positive engagement. After the associate takes a picture of the product, the associate can recommend other complementing items and accessories from the store catalog and even show looks on social media of people wearing similar items together. What are the advantages of in-store smart solutions? In-store smart solutions increase product visibility to the shopper. Using in-store smart solutions, retailers can benefit from technologies such as “shop similar,” which are otherwise available online only. These solutions improve in-store product discovery and increase basket size by providing more suggestions.

Syte: Selected Case Studies

Farfetch Online luxury fashion retailer Farfetch wanted to increase the visibility of lesser-known brands with similar styles. Other main objectives included a comparison of visually similar items on the basis of price and brands and higher shopper engagement. Farfetch partnered with Syte to introduce visual search on its platform, allowing Farfetch to offer customers simplified and redefined product discovery – and to develop a deeper understanding of shopper needs to offer a more personalized shopping experience. Venca Spanish apparel and fashion retailer Venca gets 70% of total sales online – up from just 30% only five years ago. This dramatic growth in online was a boon, but with over 25,000 SKUs at a given time, Venca needed to improve product visibility, in addition to streamlining inventory tagging and increasing customer loyalty. Venca partnered with Syte to leverage its visual AI technology, primarily because of the completeness of the solution. After partnering with Syte, Venca’s conversion rates increased 3.79 fold for shoppers who interacted with the visual search technology than for customers who did not. Shoppers who used visual search also spent nearly four times more time shopping than those who did not. Moreover, the cumulative conversion rate of visual and textual search increased eight-fold, implying that the two searches are complementary to each other and not substitutes. Boohoo British online fashion retailer boohoo.com wanted to improve the shopper journey with visual search but didn’t want to devote a large amount of resources to do so. Additionally, boohoo expected the technology to improve its tagging structure. Conversion rates climbed 85% for customers who used Syte’s camera search technology versus users who did not. Furthermore, the conversion rate doubled for shoppers who engaged with similar styles compared to shoppers who did not. Average order value also increased 12% — mainly because of a 135% increase in page views per session for shoppers who engaged with similar styles.

Competitive Advantages

Syte believes it benefits from the following competitive advantages:

• Accuracy: Syte says it provides 95% accuracy for its visual search results, which can be as much as six times more accurate compared to similar technologies.
• Hight speed: Syte offers near-zero latency search results, making it especially effective for retailers with a large number of SKUs.
• Multi-Object Detection: Syte’s visual search technology detects all shoppable products in an image with a single upload, eliminating the need to edit and upload multiple images.

Business Model and Upcoming Events

Syte is a software-as-a-service (SaaS) provider that offers one-year contracts, with pricing based on the products selected and monthly online traffic.

Coresight Research View

The retail industry is undergoing transformation with shoppers expecting a personalized shopping experience across all retail touchpoints, which is complimented with increased choices and a broader availability of visual content on the internet. With increasingly fickle shoppers, it has become more necessary than ever for retailers to effectively showcase products, who can be inspired by popular social media influencers or by a product they come across in a physical store. In the coming few years, visual search tools may become mainstream. Visual search technology providers such as Syte are strongly positioned to benefit from the changing market landscape. We think Syte is one of the few companies that offer a complete visual search solution ranging from online offerings to in-store smart technologies.

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Company Contact Ariel Geifman Head of Marketing ariel.g@syte-vc.com +972-52-786-6300