Generative AI and Tech Takeover in E-commerce: Insights from McKinsey

News 29 Nov 2024

In a survey among 500 companies from the USA, Europe, and other countries, McKinsey & Co. found out that as 2024 approaches, e-commerce technology began to be identified as a critical priority for both B2B and B2C buyers. Stepping into the limelight as the most valuable tool for new value creation, AI is currently headed by B2B firms who also lead the adoption of generative AI (gen AI), which will form the cornerstone of future e-commerce advancement.

Generative AI: The Market Is Clearly Segmented between the Technology Leaders as well as the Tech Laggards

McKinsey’s survey divided companies into ‘leading’ and ‘trailing,’ and what was shocking was that only 20% of leading organizations have made gen AI their top priority in e-commerce. On the other hand, considering the laggards’ case, less than 5% of them consider this as their priority area of specialization, which is cutting-edge technology. Leaders are also willing to commit large amounts, with 30% willing to dedicate more than 10% of their e-commerce spending to gen AI in the next year. As seen on the chart, leaders are willing to dedicate more than 25% of their total budget to this area, with 10% of them ready to invest even more, while laggards are much less ready to spend on the subject.

B2B vs. B2C: Details of Budget Allocations Make the Story

Standing out, the survey indicates that more B2B and fewer B2C companies are currently using generative AI. B2B firms are currently allocating a higher percentage (11% – 25%) of their total e-commerce budget towards gen AI than their B2C counterparts. This trend is not unusual as B2B e-commerce investments are on the rise, as McKinsey’s B2B Pulse Survey denoted.

Managers in various sectors consider generative AI an enabler. McKinsey states that leading organizations are twice as likely as slow movers to make the technology the cornerstone of their plans.

Key Findings: Marketplaces, Social commerce, and Shopping events

Marketplaces and Social Commerce: Leaders prevail in the online marketplaces by 60% and 54% among laggards, direct-to-customer platforms by 56% and 48%, and social commerce by 63% and 50%. While 70% of best-in-class B2C organizations are escalating their spending on social selling, only 56% of laggards do the same. For B2B companies, they divide it with 55% in favor and 47% against.
Revenue from Shopping Events: While over 40% of leaders receive more than 10% of their annual e-commerce revenues from shopping events like Black Friday, this is true for only 25% of laggards. Shopping events are pivotal for growth in the B2B space since almost a third of leaders claim that those generate revenues similar to those from conventional shopping.
Budget Focus on Shopping Days: Thus, a little less than half of large Chrome consumer brands dedicate over 10% of their e-commerce budgets to Black Friday and holiday promotions. In the same vision, 42% of small consumer firms and 30% of B2B firms invest a similar amount.

Implication for Market Leadership

The survey reveals a concern about the increase in technology-integrated e-commerce. Managers use generative AI to enhance customer experience and cut costs while increasing revenues. However, anchors and slow movers are vulnerable to becoming trapped as the latter underemphasize these revolutionary technologies. Social commerce and direct-to-customer websites are still vital strategic fields of interest for companies that strive for improved customer satisfaction.

Sales days like Black Friday are also still critical. Businesses in all industries are pursuing these high-revenue opportunities more aggressively, and many have stated plans to step up their spending more in the next year.

Thus, focusing on technology shows how leaders can transform the e-commerce environment and thus has relevant lessons for others who want to succeed in bridging the gap.

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