Beyond the Silver Bullet: Embracing Algorithm Orchestration in E-Commerce Merchandising

18 Jun 2024
Imran  Choudhary  profile image
Posted by Imran Choudhary

In the ever-evolving landscape of e-commerce merchandising, the quest for the perfect algorithm has become something of a holy grail.

We seem to be in a market of vendors all battling against themselves to proclaim they have the best AI and many announcing their algorithm to be the cure for all ills.

Merchandisers are equally trying to find their way through the marketing bingo to understand how AI can be practically implemented to address all their product assortment and recommendation needs. They would love to reach the promised land of increased sales, improved customer engagement, and overachievement of target KPIs. But here's the truth: there's no silver bullet, no one-size-fits-all solution that can meet all the diverse and ever-changing requirements of e-commerce merchandising.

Instead, what we need is a paradigm shift — a move away from the notion of a single ‘best’ algorithm towards a more nuanced approach that embraces algorithm orchestration, an appreciation that testing and optimization is to be expected, and an ability to find the right combination of algorithms to drive the best outcomes.

The Myth of the Silver Bullet Algorithm:

In the search for the perfect algorithm, many e-commerce teams have fallen into the trap (albeit from vendor marketing!) of believing that there exists a single solution that can meet all their merchandising needs. The reality is that e-commerce is a complex ecosystem with diverse customer preferences, behaviors and needs. There is no single algorithm that can address every use case effectively.

Embracing Algorithm Orchestration:

Algorithm orchestration is the practice of combining multiple algorithms in a strategic and systematic manner to achieve the best results for a given e-commerce use case. By leveraging a diverse array of algorithms — rather than choosing a vendor’s solitary, ‘magical’ algorithm — e-commerce teams can create a dynamic and responsive recommendation engine that adapts to changing customer preferences and market trends. Crucially, they can control the direction of the output, be it against a business KPI or strategy. The balance of choice between which algorithm fits best to a use case and where manual control can be implemented to guide — this is where the real silver bullet analogy can become a reality.

The Power of A/B Testing and Optimization:

But how do we know which combination of algorithms is the most effective? That's where A/B testing and optimization come into play. By systematically testing different algorithm combinations and analyzing key performance metrics, e-commerce teams can uncover valuable insights and refine their approach accordingly. This includes the basics of conversion rates, click-through rates and average order value, through to the more complex like average revenue by converted profile or number of items by converted profile. But there’s a problem: vendors are attempting to build their own closed ecosystem and, in turn, ‘lock in’ customers and build a walled garden. This will ultimately stifle innovation, limit choice to just that vendor’s algorithm roadmap and hamper performance for the customer.

The fact is the AI ecosystem is moving at a faster rate collectively as opposed to a single vendor’s roadmap. An open ecosystem is what’s needed to truly help the industry and its customers succeed.

Moving Towards an Open Ecosystem:

In order to fully realize the potential of algorithm orchestration, we need to move away from an industry that proclaims their AI as the best and towards a more open ecosystem of collaboration between AI vendors and e-commerce teams. This means embracing interoperability and standardization, enabling seamless integration between multiple algorithms from different vendors and the ability to mix, match, and blend them openly and easily to drive the right outcomes for individual use cases. Vendors need to be more open to collaboration, provide greater visibility into how their algorithms work and open the gates to connect with one another for the benefit of better outcomes.

Unlocking the Full Potential of E-commerce Merchandising:

By moving beyond the myth of the silver bullet algorithm and embracing the power of collaboration, experimentation and innovation, we can unlock the full potential of e-commerce merchandising.

E-commerce teams developing their own algorithms brings additional complexity as vendors — if not sharing between themselves — need to embrace those teams which are creating their own.

So let's leave behind the quest for the perfect algorithm and instead focus on creating a more dynamic, responsive, and effective merchandising strategy that delivers real results for businesses and delights customers at every touchpoint.