The word ‘algorithm’ gets thrown around a lot these days, with supposedly an algorithm for everything - a seamless way to improve your digital marketing and online offering. But what exactly are algorithms? And how are they applicable to fashion companies? Apparel spoke with Paulo Sampaio, the Senior Data Scientist at EDITED, a retail technology company analysing over 660 million product SKUs in real-time. EDITED help global retail businesses utilise data in order to ensure they have the right product at the right price at the right time - so needless to say; they’re algorithm experts!

To put it simply, an algorithm is a step by step recipe to solve a problem. Algorithms can perform a set of processes or calculations, leading to the desired result. In the apparel retail industry, for example, algorithms can extract information from product names, descriptions and even product reviews to more accurately categorise items. Algorithms can also extract information such a colour, pattern or details from a product image, which can then suggest specific or similar products to a customer. This is the technology which is behind the recommendations which large e-tailers such as ASOS often make to consumers. In the advertising realm, different types of algorithms are already being used through targeting advertising based on consumer profiles and preferences.

Algorithms and data science techniques are also very good at identifying patterns when the data is highly structured. “There are a slew of insights that companies can gain from this data, such as identifying consumer buying habits or understanding what products are trending and the average price point of these items,” said Sampaio. When implemented properly, algorithms can analyse huge sets of data at lightning speed, allowing companies to make informed retail and business decisions based on concrete data and analysis.

Today, the success of online shopping revolves around three factors: personal experience, ease-of-use and convenience, which are all being addressed by artificial intelligence and deep analytics. The latest technology advancements are making it simpler for people to shop with a few easy mouse clicks or taps on their phone. It’s now common for e-commerce sites to suggest products to boost sales, such as by providing customer-styled images through greater product categorisation, or through customer reviews. “The greater the options are for both retailer and consumer to filter the results to align with their needs, the better the experience will be for the user,” added Sampaio.

Unfortunately, algorithms aren’t a magic way to increase your merchandising and marketing effectiveness. “Algorithms are only as good as the data they need to analyse,” explained Sampaio, “the higher the volume of the data and the more straightforward the information is, the better it will be in understanding patterns and providing insights.” However, if the data is new or novel, it's still critical for humans to be involved in the process. EDITED employs a team of data scientists who work alongside their retail experts to make sense of the terabytes of information surrounding product pricing, discounts, assortments and other datasets to deliver accurate insights to customers.

For retailers who are not yet global players (or not aiming to go down that route), algorithms can still play a significant role in furthering the business. All retailers these days are awash in data, so companies of all sizes can benefit from algorithms. For smaller businesses, it makes sense for them to find a technology partner who can help them make better sense of the data that’s available to them so that they can gain a competitive edge in the market. That may be a local, New Zealand data and analytics company, many of which have been popping up recently. Typically, these firms offer a high degree of personalisation and boutique service - which may be a one-off cost to a fashion business.

So with such a strong emphasis on e-commerce and digital marketing, does Sampaio see bricks and mortar as a relic of a bygone mall-shopping era? It’s not so black and white…E-commerce has clearly proven to be a lucrative channel for many brands and retailers, and a cornerstone of its success has centred around the availability of real-time data to effectively target the savvy consumer.

“We see traditional bricks and mortar still having a clear place in the retail sector,” added Sampaio. Just like algorithms, brands with a bricks and mortar presence will also evolve this facet of their business. This evolution will undoubtedly revolve around finding ways to improve the customer experience and provide greater personalisation to the shopper - two things which are of increasing importance to Millennial shoppers.