Although a relatively small deal, Jeffs’ Brands had a big reveal this past summer: it was acquiring a majority stake in an AI marketing platform, giving the retail world yet another reminder that the future is now.
After all, buying a controlling interest in B24Chat, an AI-based customer service platform, would give Jeffs’ Brands, a Tel Aviv-based e-commerce company, something revolutionary yet of the moment – chatbots capable of conversing fluently with customers about their specific needs.
Meanwhile, fast food giants are all using AI to one degree or another. Starbucks uses AI for scheduling. McDonald’s, having acquired Aprente a few years ago, is using voice-AI in its drive-through menus as a tool to suggest extra items.
The trend seems to be proliferating across a spectrum of retail subsectors.
“Companies providing customer-facing services are seeking sophisticated software tools like AI to differentiate themselves,” says Erik Szyndlar, managing director, technology, at Harris Williams.
Adds Harris Williams’ Ed Arkus, head of the consumer division: “In terms of customer service, our clients are using AI to help operators deliver the right responses to complex questions.”
Both cited hotel reservation call centers as a prime example.
Retails Can’t Ignore AI
Generative AI systems that are capable of creating text, images and audio are exploding, and are here to stay. Retailers across an array of consumer-facing sectors, from hotels to grocery stores, need to embrace AI in order to stay relevant, industry members insist.
“It’s hot and heavy,” says Toby Malbec, managing director at ConStrata, a hospitality consultant, describing the current wave of interest among high-end resort managers eying AI-abetted concierge.
A German company, QuickText, has already rolled out Velma, a universal hotel assistant that speaks 30 languages, facilitates reservations and can speak to more than 1,100 points of information, managing requests (how late does the bar stay open?) before and during a guest’s stay.
“I think the highest-end, luxury brands are going to be the first movers but with labor shortages, you could see this trend take hold across all categories very quickly,” Malbec says.
Skyrocketing Adoption
According to a VB Lab Insights report (sponsored by Microsoft), the retail sector is “stocking up on AI.” VB Lab analysts say the sector’s spending in 2023 will outpace all others with the exception of banking.
A 40 percent adoption rate is projected to double to 80 percent by 2025, “making retail the industry most heavily invested in intelligent technology,” VB Lab says.
Chatbot mania began toward the tail end of last year as the world got its head around Microsoft’s ChatGPT. AI-related dealmaking activity began to perk up simultaneously.
Pinterest in 2022 announced it would acquire The Yes, an AI-based shopping platform offering a personalized feed to users based on style and size preferences.
In January of 2023, digital engagement firm Relationshop acquired Stor.ai, an e-commerce platform for regional grocers. (Stor.ai also has its roots in Israel.) The goal is to create an intelligent data platform for grocers, one that combines “data analytics and omnichannel engagement capabilities to increase transactions, enhance loyalty and grow sales,” says Relationshop’s CEO Galen Waters.
If regional retailers expect to compete with Walmart or Amazon, they need technology solutions, Waters says.
See all of our coverage on artificial intelligence in M&A.
This past spring came news that real-time analytics stalwart 1010data, focused on helping store managers crunch data, will be acquired by SymphonyAI. The latter company says it is building the leading enterprise AI Software-as-a-Service (SaaS) company for digital transformation across almost every conceivable vertical: retail, consumer packaged goods, finance, manufacturing, media and IT.
In May, digital workflow company ServiceNow signed an agreement to acquire AI-powered platform G2K to “transform retail” by better connecting data streams back into central IT operations to bridge physical and digital worlds.
Wall Street Biggies on Board
Blackstone’s Martin Brand, global co-head of the private equity investing behemoth’s technology group, calls generative AI a “mega trend” with the potential to “redefine private markets.”
This past August, Morgan Stanley in a report predicted AI will be transformational across industries and will be “one of the most important secular investment themes over the next decade.” Additionally, Goldman Sachs predicts AI adoption will likely start to have a meaningful impact on the U.S. economy sometime starting around 2025.
“As we find ourselves in the midst of this AI-induced frenzy, it could be useful to take a step back and see just what we are dealing with here,” writes TechCrunch. “Is there actually an AI market in the pure sense, or is it enabling technology that will soon be built into everything, making how we view it less clear?”
Hospitality is definitely the consumer-facing sector leaning most heavily into AI at the moment, emphasizes Malbec, pointing to numerous industry reports touting AI as a tool for improving hotel operations. This includes automating booking and check-in processes, freeing up staff to focus on providing personalized service to guests. AI can also enhance customer service through the use of chatbots and virtual assistants that can assist guests with booking enquiries and reservation changes.
AI can even improve housekeeping room assignments and maintenance by using sensors and cameras to monitor guests’ coming and goings. Hotels are applying AI to dynamic pricing as well, according to Harris Williams’ Arkus.
He emphasizes that from a dealmaking perspective, AI can generate more opportunities to drive growth and efficiency.
“It’s becoming clear that businesses that invest in their platforms and take advantage of AI can see stronger growth, demonstrate that they are better platforms, and drive strong multiples and valuations when they exit,” he says.
Szyndlar echoes this sentiment while cautioning it is still relatively early in terms of testing and implementing AI, “so it has not yet had a significant impact on consumer-industry M&A outcomes.”
However, Szyndlar adds, those businesses that can leverage AI — and demonstrate its impact on growth and margins — will likely see an advantage in terms of future M&A demand.
