Tech

Andrew Ng’s Netail offers AI for retailers to ease change from physical to digital

Retail is a 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 now turning to AI and analytics to solve these problems. Andrew Ng is one of the most well-known figures in AI and now he’s aiming to do exactly that with his new venture Netail.

Global retail market value reached nearly $20.3 trillion in 2020. It has grown at a compound annual rate of growth (CAGR) 2.4% since 2015. According to Research and Markets. Market is expected to grow at 7.7% annually between 2020 and 2025 to reach $29.4 trillion by 2025. Global retail sales are expected to grow at 6.3% annually to $39.9 Trillion in 2030. In the same vein, worldwide annual retail spending for AI is expected at $12 billion in 2023 Juniper Research.

Andrew Ng is the founder of DeepLearning AI (Landing AI) and co-chairman/cofounder of Coursera. He is also an adjunct professor at Stanford University. He Baidu’s chief scientist and the founder of Google Brain Project, he was also a founder. Yet, his current priority has shifted, from “bits to things,” as he puts it. Ng seems to be trying to meet retailers in the middle, even though they are heading in the opposite direction.

Netail, which was established in 2022 by Landing AI as part, allows retailers to instantly identify their competitors online, track their inventory, optimize prices, and monitor availability. Netail today announced that it has closed $5 million in seed financing. 

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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 behaviour

“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. His career has seen him in many different roles. VentureBeat spoke with him about his passion for using data and analytics to improve decision-making and competitive advantages. 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 made the decision to leave inline retail recently because he noticed a significant shift in the industry and felt that there were new solutions. He Ng joined Landing AI nearly a year ago. He wanted to create cutting-edge AI-based solutions for the retail market. The team developed solutions which were then validated and tested 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. Netail discovered that all retailers were facing the same problem: shift in 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. These results are now available. Amazon suffered a substantial loss in market value. Many pundits are pointing in the same direction when trying to interpret this and the recent wave of layoffs by Big Tech companies.

Big Tech assumed that COVID-19 and its associated restrictions would have an effect on consumer behavior. They are not permanent, it turns out. Big Tech’s projections are off the mark. The market capitalizations are falling and mass layoffs have been following the hiring sprees. Could it be then that the foundation of Netail’s business model is not as solid?

A major shift in the retail industry is the savvy consumer

Chrystal pointed out that around 80% of retail sales are still made in physical stores worldwide when we were discussing this issue. The trend is now rolling back after a COVID-19 spike. But that’s not all there is to it.

“Consumers have switched their primary decision-making journey to digital environments. You used to go to your local shops, or your local mall, to purchase a product. 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. Chrystal stated that Amazon is having trouble with a certain phenomenon: consumers are becoming more knowledgeable about online shopping, where to shop and how to compare products.

Consumers may not be able to walk down to physical stores, but they know exactly what they want and what each store has to offer. This is probably true for most of us. Chrystal said that this is a significant shift in retail, especially for those that started out as physical retailers then moved into the ecommerce market.

All retailers are facing a problem today: the competition is growing over 1,000fold, Chrystal stated. Shopping is done now through search engines, marketplaces, and social media. Not just five to ten stores located in close proximity to each other are the competition, but all businesses whose products or services can be found online.

Retailers used to compete on the basis of location and rely on window signage. Chrystal believes that really doesn’t work anymore. Retailers must now consider a variety of factors: How does my price compare to these thousands of options? How do the features of my products stack up? How does availability of products compare? What does my customer review score say about the quality of my products and services?

Chrystal stated that Netail created a solution for retailers where none exist. There are already many AI-powered solutions available for retailers. 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.”

Retail data-centric AI

Chrystal stated that Netail developed its own scraping technology in order to collect and track the data. Netail also offers competitive intelligence, price and assortment intelligence, location intelligence, customer intelligence services, and other 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. Then, we can track all the competitors in terms their assortments and 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.

Computer vision and natural language processing are used to gather and analyze relevant data. 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. Chrystal says that AI models are still useful in situations where this is not possible.

Netail’s clients can choose which services they need and subscribe to use one or more of these. The company’s headquarters is in Pittsburgh, which is home to Carnegie Mellon University. It also has a Palo Alto presence. 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.

Magarac Venture Partners and AI Fund co-led the round. They provide early-stage venture capital for entrepreneurs and technology companies in the Midwest. HKSTP Ventures are other investors. Netail will be expanding into APAC by opening an office at the Hong Kong Science and Technology Park.

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