Search engines are driving £31.4bn in annual non-food UK retail spend, but retailers are underestimating the power search can have on their revenue.
Retail Week looks at an exclusive report by Retail Economics and Upp.ai to explore the opportunities in search and how AI can drive this further.
While physical retail has come back with a bang post-Covid-19, the UK is still a nation that loves to discover and shop online.
Digital channels are continuing to play a role in customers’ shopping habits, with £131bn of annual retail spend directly influenced by online discovery.
The new report reveals that 51% of non-food purchases start from digital touchpoints, compared to 33% from physical retail and 16% from traditional media such as TV.
As various methods of shopping are becoming more sophisticated, Retail Economics chief executive Richard Lim says search remains the most important and most-used channel in customers’ path to purchase.
“While new digital channels continue to emerge, search remains a trusted and intent-driven gateway that connects consumers with the products and brands that meet their needs,” he says.
In fact, 65% of consumers have trust in search engines as a path to purchase, and £31.4bn of non-food retail spend starts from consumers discovering brands or products via this method – more than online marketplaces, traditional media, retailers’ websites and social media.
Search is a clear standout for consumers as a way to start off the buying and discovery journey, but retailers are underestimating its impact.
For consumers, search came out on top as the most influential for brand discovery, whereas retailers ranked this as the fourth most influential behind their own website, online marketplaces, and social media.
The data highlights that retailers are overlooking “an estimated £6.7bn in annual sales, or £146 per shopper”, by not prioritising online search.
Consultants at Retail Economics and Upp.ai say search is “highly competitive” and causes brands to “fight for visibility” so they mostly turn their attention to areas that give them quicker returns and greater control like their own websites. Underinvesting can however, mean missed opportunities.
Leveraging AI
Paid search is a method retailers should be exploring, as the research reveals that 73% of retailers reported that paid search outperforms organic search in driving traffic. A further 59% said it often or always leads to increased conversions.
AI is also proving crucial in the role of search. Lim says the rise of AI represents a “transformative shift” to take search from passive discovery to a more “intuitive, personalised, and predictive experience”.
This will also help retailers re-evaluate customer engagement to keep relevant and competitive.
The report outlines ways AI is integral to search. It delivers personalised results based on “preferences, past behaviours, and values”, and can predict what consumers need next, offering proactive suggestions.
AI can also “refine campaigns dynamically” to combine real-time consumer insights with product data, allowing for “smarter ad spend and better alignment with shopper intent.”
Upp.ai senior vice president of client and industry engagement Steve Warrington says AI is the present and future of search.
“AI now represents the next stage in the development of search marketing,” he says.
“It operates within ad platforms managing campaigns, refining targeting and optimisation and dynamically responding to consumer intent in real-time. This level of automation and adaptability simply wasn’t available before.”
With retailers missing out on a potential £6.7bn in annual sales by not investing in online search, it seems the time is right for some to overhaul their digital strategies with AI.
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