How algorithms determine what we buy for the holidays – and beyond

We’ve all been there: scrolling through social media and spotting the ads recommending something you never knew you needed, whether it’s the perfect pair of shoes, a gadget to solve an annoying problem, or the ideal Christmas gift for your mother.

As the holidays approach and shopping ramps up, you’re more likely to see gift ideas inspired by and advertised by algorithms, say experts in algorithmic trading and online shopping.

Algorithmic commerce basically means that retailers use technology, including artificial intelligence, to track and analyze consumer purchases and predict or suggest other items to buy, according to Haya Ajjan, associate dean of the Love School of Business at Elon University. Ajjan said the use of the method is growing and artificial intelligence is “reshaping e-commerce and marketing.”

“When I go to Amazon, sometimes I feel like what it’s recommending to me is exactly what I need to buy,” said Ajjan, who teaches machine learning and data mining. “It even removes the search that I was about to start, but the way it is typically done is that the algorithm analyzes my online activities, how I surf the web, where I search, and then tries to anticipate my needs. Some sometimes I think the sites I use kind of anticipate my need, or even a need I didn’t know I had.”

What does this mean for my holiday shopping?

Using algorithms to navigate the endless products for sale on the Internet is like having “a personal shopper for the holidays,” said Beth Ann Kaminkow, the global managing director of brand agency VMLY&R Commerce.

“If you’re buying for people you’re close to, communicate with regularly, and you’re starting your shopping online… chances are you’ll have some personal help in the form of an algorithm to help inspire your gift list! ” she told CBS News in an email. “Less creepy than it might sound, the value of our favorite retail sites learning our shopping behavior, preferences, style, tastes is a big boost when the pressure is on to complete our holiday shopping in (the) remaining days. ”

Most people buying Christmas presents do at least some of their shopping online, according to an October Gallup poll — making it more likely that algorithms will influence their purchases. 93 percent of people told Gallup they would do at least some of their holiday shopping online — only 7% of people said they would not shop online at all.

Social media amplifies the reach of algorithms. On these sites, other algorithms mix relevant videos, images and other content into your feed. Sites like Instagram and TikTok only emphasize the ability to purchase the shared content, with features that allow people to purchase products within the app. And according to Gallup, 33% of shoppers say they will do some of their shopping using social media platforms. Most of these shoppers skew younger, according to the poll, with 48% of 18-29 year olds saying they will do “some” or more of their shopping through social media.

Ajjan compared social media to the Christmas windows of New York department store Macy’s.

“They’re really famous, connected to shopping and engaging audiences and driving our purchase intent. It’s exactly the same way we interact with Instagram or TikTok,” Ajjan said. “Studies show that 62% of consumers report interest in a product or brand after actually seeing it on their story or feed. I think that’s really powerful. 49% of consumers rely on influencers… Social media channels are changing the way we shop. .”

TikTok said that since the launch of its in-app TikTok store, more than 200,000 merchants have registered to sell items there. Over 100,000 content creators share products through their affiliate program where they get a share of the sales. Meta, which owns Instagram and Facebook, did not respond to a request for comment from CBS News.

Video content can be particularly compelling, Ajjan said, because it allows customers to see how a product works. Sometimes these videos are edited or altered, but “visual presence plays a big role in driving purchase behavior,” Ajjan said, and videos from influencers you’ve followed for a long time can sometimes feel like “peer recommendations” from a trusted friend.

Sometimes videos are from influencers’ ads, and while there are rules requiring influencers to disclose when they’re being compensated for mentioning a product or item, these restrictions aren’t always followed. In 2022, Kim Kardashian was fined more than $1.25 million for failing to disclose that she was being paid to promote a cryptocurrency.

Is there any way to avoid algorithms determining my purchases?

Just avoiding shopping online doesn’t mean your shopping won’t be curated by an algorithm, experts said. The effects of algorithmic trading can also be seen in physical stores.

“All retail strategies are becoming increasingly data-driven, with the aim of providing a highly tailored and personalized experience to the customer,” said Ajjan. “This is something you see whether you’re in your Amazon account or whether you go to Nordstrom, or frankly any retailer.”

In these brick-and-mortar locations, retailers use algorithms to determine what people are shopping for, to predict which items will be bestsellers, and even to organize the store in the most efficient and appealing way for shoppers. Ajjan said these algorithms are trained by the “vast amount of data” retailers have collected about their customers, and all retail strategies benefit from the information available.

Despite this, physical shopping is the best way to avoid algorithms influencing your purchases, Kaminkow said. If you shop online and want to avoid that influence, Kaminkow recommends disabling or reducing cookies and tracking across your online activity, but this isn’t a foolproof solution.

“If you’re someone who spends time online between search sites, shopping sites and social sites … your preferences are being tracked” with the goal of helping companies better show users relevant content and recommendations, Kaminkow said.

How can I use algorithmic trading to my advantage?

In addition to using algorithm-based recommendations as a “personal shopper,” as Kaminkow said, these suggestions can help consumers find ideal gifts for loved ones or themselves.

“If you’re someone who buys for others based on what you’re attracted to, what you want (or) want for yourself … all your online searching, browsing and shopping will be informed by algorithms that are getting smarter behind the scenes on your tastes, preferences and shopping habits. If your holiday list includes people you shop for all year, the same applies,” Kaminkow said in an email.

Even if you’re looking for people outside of your normal search behavior, algorithms will still have an impact, Kaminkow said: Recent searches and views will inspire the algorithm, and the algorithms used by retailers and brands will still be used to suggest products and services .

“Starting your holiday shopping and browsing outside of retail sites, such as social platforms, provides great opportunities for algorithm-driven ideas and influence to help shape your gift list this holiday season,” Kaminkow said.

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