That data excludes automotive sales. Mastercard SpendingPulse says it measures in-store and online retail sales across all forms of payment and is not adjusted for inflation.

“This holiday season, the consumer showed up, spending in a deliberate manner,” said Michelle Meyer, chief economist at the Mastercard Economics Institute. “The economic backdrop remains favorable with healthy job creation and easing inflation pressures, empowering consumers to seek the goods and experiences they value most.”

Did online holiday sales grow in 2023?

Online holiday sales in 2023 grew from Nov. 1 through Christmas Eve, Mastercard found, and so did in-store sales.

And to give more detail, online retail spending increased at a faster pace than in-store spending. In-store sales grew 2.2% year over year, according to Mastercard SpendingPulse. Yet online retail sales increased 6.3% year over year in the same period, taking “a considerably larger portion of total retail spending.”

“Retailers started promotions early this season, giving consumers time to hunt for the best deals and promotions,” said Steve Sadove, senior advisor for Mastercard and former CEO and Chairman of Saks Incorporated. “Ultimately it was about getting the most bang for your buck as consumers spent on a variety of goods and services, resurfacing spending trends from before the pandemic.”

Online holiday sales growth by category

Mastercard SpendingPulse broke out year-over-year data for key retail categories. It did not differentiate online and in-store sales growth and declines. Instead, it provided year-over-year changes in total sales for each category.

Among the five categories it broke out, restaurants grew the most, at 7.8%. Apparel grew 2.4%, closely followed by grocery at 2.1%.

That grocery sales growth extended to web sales as well. Online sales accounted for 11.7% of total weekly grocery spending in the last week of November, according to data from the monthly Brick Meets Click and Mercatus Grocery Shopping Survey. United States online grocery sales reached $8.1 billion in November. That’s 5.2% growth over November 2022’s online grocery sales, which reached $7.7 billion.

Conversely, Mastercard found, electronics sales decreased 0.4% year over year, and jewelry sales decreased 2.0%.

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The data, from fraud management and chargeback protection services vendor ClearSale, found a decrease in attempted fraud between Black Friday and Cyber Monday. Notably, whereas ClearSale data showed attempts at fraud (or fraud avoided) decreased 37% year over year, order volume and order value also fell among the same group of online retailers.

Bruno Farinelli, senior director of risk at ClearSale, said there are a couple feasible possibilities for the decreases in order volume this year. The first is that many online retailers started their Cyber 5 sales and promotions weeks—and in some cases months—before the actual Black Friday weekend.

“This could have spread out the order volume that would normally happen in one weekend to a broader number of days,” Farinelli said. “The other very reasonable assumption that we could make is that the economic slowdown and the interest rate hikes in the U.S. and across the globe have seen shoppers more cautious in their spending and more frugal with their wallets during seasonal shopping.”

ClearSale’s network includes more than 35 online retailers in the Top 1000, including eight that rank among the largest 100 retailers. The Top 1000 is Digital Commerce 360’s database ranking the largest ecommerce retailers in North America based on their web sales. ClearSale ranks third in the Payment Security and Fraud Prevention category in Digital Commerce 360’s new report, 2024 Leading Vendors to the Top 1000 Retailers.

2024 Leading Vendors to the Top 1000 Retailers Report

Analysis of the leading vendors that serve North America's Top 1000 online retailers. Includes rankings of the Top 10 leading vendors across 24 categories, including Customer Relationship Management, Ecommerce Platforms, Fulfillment Services, Marketing Automation Platforms, and more.

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Fraud decreases from Black Friday to Cyber Monday

ClearSale found that from Black Friday to Cyber Monday, order volume decreased 41% year over year. Order amount decreased, too, down 27% year over year.

The percentage of fraud attempts in relation to total orders also decreased slightly, according to information shared by ClearSale. It decreased to 1.5% of orders being fraud attempts during the Cyber 5 in 2023, from 1.75% last year.

“While fraud is extremely dynamic, economic pressure is one of the drivers behind it, which is why we are seeing a general increase over the last couple of years of attempted fraud in ecommerce,” Farinelli said.

As a rule of thumb, he said, an increase in order volume and value means an increase in fraud, and vice versa. This year’s data followed this formula, he said, but the overall rates of fraud are increasing.

Watches and glasses led as the categories with the highest percentage of fraud attempts during the 2023 Cyber 5, according to ClearSale. 12.83% of orders in the category were subjected to fraud attempts. The next-largest category was computers, at 4.84%. That’s about a third of the rate of the watches/glasses category.

The top categories of fraud attempts in 2023:

1. Watches/glasses: 12.83%
2. Computers: 4.84%
3. Phones/Electronics: 4.47%
4. Digital: 4.44%
5. Jewelry: 2.71%

Three of those categories were also in the top five last year, according to ClearSale data. However, none of the categories ClearSale tracked in 2022 reached 10% of its orders being fraudulent.

The top categories of fraud attempts in 2022:

1. Accessories: 7%
2. Computers: 5.49%
3. Jewelry: 4.56%
4. Phones/Electronics: 4.52%
5. Luxury apparel (over $200 ticket value): 3.14%

The computers, jewelry, and phones/electronics categories all remained in the top five this year. However, the rates of fraud for each decreased year over year, with the jewelry category’s fraud decreasing the most.

Data consistency

The decrease in fraud during the Cyber 5 is consistent with data from Signifyd, another cybersecurity vendor. Signifyd’s network includes 115 retailers in the Top 1000. It found that fraud attempts during the Cyber 5 decreased 20% year over year.

J. Bennett, chief customer officer at Signifyd, said that’s because last year, there was a big and sophisticated wave of fraud attempts engineered by a crime ring in Southeast Asia, and that has not been repeated this year.

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That was a mistake—and not one he plans to repeat. 

“I was trained and worked for very big global brands for a very long time. And I think I took a bad habit from working with them: They don’t do promotions,” Dousset says.

Before founding his lab-grown diamond company, Dousset worked for jewelry retailers Chaumet, Boucheron, and Van Cleef & Arpels.

Jean Dousset sells luxury jewelry primarily online, though it just opened a showroom in West Hollywood in September. The retailer has exclusively sold lab-grown diamonds since April 2023.

Dousset learned that just because a retailer sells luxury products, that doesn’t mean promotions and discounts shouldn’t be part of the plan.

“While I consider myself a luxury brand because of the content and the quality [of the products], I’m not a global brand like Chanel, and I should absolutely use promotional levers for the growth of the business,” he says.

Jean Dousset reconsiders promotions

Though Jean Dousset didn’t run any promotions specifically tied to Cyber 5, the retailer did briefly test a promotional strategy at the beginning of November. The jewelry retailer offered new customers 10% off their first order if they shared their email address. The results were “shockingly positive, to the point where I should have done this many moons ago,” Dousset says.

The promotion led to Jean Dousset’s highest sales month since it started selling lab-grown diamonds in 2021. The conversion rate increased by about 200%, he says without revealing the exact rate. Dousset considers the promotion “extremely effective.”

Jean Dousset also offered the same promotion to subscribers, with different results. Customers who were already part of the email subscriber base also got an offer of 10% off their next purchase. However, it was much less successful, he says. 

Still, the success with new customers was enough to convince Dousset that he should engage in the heavy promotional period next year when Cyber 5 rolls around.

“I’m a changed man,” he says. 

“Promotions don’t devalue brands,” Dousset says, contrary to his prior belief. “It’s part of the retail landscape.”

The vast majority of retailers used promotions over Cyber 5

Cyber Monday is one of the biggest shopping days of the year, and retailers traditionally offer large discounts to entice consumers. This year, 92.0% of  Digital Commerce 360’s panel of 100 online retailers from the 2023 edition of the Top 1000 advertised some type of offer on Cyber Monday. That was an increase from 79.5% of retailers offering promotions in the control period two weeks earlier. 

Jewelry retailers aren’t exempt from promotions, either. Three out of four jewelry retailers in the panel held promotions on Cyber Monday. And jewelry retailers saw large sales over the shopping period. Adobe Analytics found that online jewelry sales on Black Friday were up 114% over sales on an average day in October. On Cyber Monday, sales were 99% higher than the average day.

Among retailers offering Cyber Monday promotions, a percentage off the stated price was most popular. 87.0% offered a percentage-off promotion, with discounts ranging from 3% off to 90% off. The median smallest discount was 25%, and the median largest discount was 50% off. Jean Dousset’s promotion, which did not fall during this period, was outside the median at 10%.

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Parentheses indicate the merchant’s ranking in the Top 1000.

Amazon.com Inc. (No. 1)

Amazon recorded its highest operating income ever in its fiscal third quarter ended Sept. 30. Operating income nearly quadrupled year over year, growing 343%.

Read more about Amazon’s earnings here.

Bath & Body Works Inc. (No. 56)

Bath & Body Works reported net sales declined 2.6% to $1.6 billion in its fiscal third quarter ended Oct. 28. The retailer has a “strong profitable digital business,” CEO Gina Boswell told investors without sharing specific details. However, the retailer sees opportunity to expand its digital footprint by “moving from a largely transactional website and app, to more personalized, experiential, and integrated platforms,” she said. Conversion, including the use of BOPIS (buy online, pick up in store), grew 4% in Q3 over Q2, the retailer said.

Brilliant Earth LLC (No. 201)

Brilliant Earth reported net sales grew 2.5% to $114.2 million in the third quarter ended Sept. 30. Order volume increased 17%, the jewelry retailer said. So far, Brilliant Earth is seeing “strong momentum” at the start of the holiday season, CEO Beth Gerstein said.

The Gap Inc. (No. 20)

Gap reported net sales decreased 7% to $3.8 billion in its fiscal third quarter ended Oct. 28. Online sales declined 8% and made up 38% of total sales. Old Navy had the highest net sales of the retailer’s four brands, at $2.13 billion, down 1% year over year. Gap, Banana Republic, and Athleta sales declined 15%, 11%, and 18%, respectively.

Grove Collaborative (No. 281)

Grove Collaborative reported net revenue declined 20.6% to $61.8 million in the third quarter ended Sept. 30. Direct-to-consumer orders declined 26.2% to 917,000 in the quarter, though net revenue per order decreased. The decline was due to lower advertising spending, the retailer said. 

The Home Depot Inc. (No. 4)

Home Depot reported sales declined 3% to $37.7 billion in the third quarter ended Oct. 29. Online sales grew 5%, the retailer said without revealing more. Nearly half of online orders were fulfilled by stores, Home Depot said.

The retailer also noted it achieved record Halloween sales both in stores and online.

Macy’s Inc. (No. 17)

Macy’s reported net sales declined 7% to $5 billion in the third quarter ended Oct. 28. Digital sales and brick-and-mortar sales declined at the same rate. Macy’s online marketplace is growing, with GMV (gross merchandise volume) up 22% over Q2, the retailer said.

The average customer “continues to be under pressure and discerning and how they spend in discretionary categories we offer,” CEO Tony Spring told investors.

Sally Beauty Supply LLC (No. 522)

Sally Beauty reported net sales declined 4.3% to $921 million in its fiscal fourth quarter ended Sept. 30. Net sales declined 2.3% to $3.7 billion for the year. Ecommerce amounted to $87 million in Q4 sales, 9.4% of net sales. It also made up $348 million in annual sales. 

Target Corp. (No. 5)

Third-quarter sales declined 4.9% for the mass merchant, to $25 billion from $26.12 billion in its fiscal third quarter ended Oct. 28. Meanwhile, Target online sales decreased 6% year over year. Moreover, Target online sales declined 6.7% year over year for the first nine months.

Read more about Target’s earnings here.

TJX Cos. Inc. (No. 69)

TJX reported net sales grew 9% to $13.3 billion in its third quarter of fiscal 2024 ended Oct. 28. Comparable store sales grew 6%, driven by increases in traffic, the discount retailer said.

“Customer traffic was up across all divisions, our overall apparel sales remained very strong, and home sales were outstanding and accelerated sequentially versus the second quarter,” CEO Ernie Herrman said in a written statement.

Ecommerce remains a “very small percentage” of TJX’s total business, Herrman told investors. He said the retailer was pleased with ecommerce sales trends on its brands’ websites in the third quarter without revealing more. TJX shut down its ecommerce arm for HomeGoods in October.

Walmart Inc. (No. 2)

Walmart reported that U.S. online sales grew 24% for the fiscal 2024 third quarter ended Oct. 27. Global ecommerce sales grew 15% over the same period, while international ecommerce declined 3%.

U.S. comparable sales grew 4.9%, and total revenue grew 5.2% to $160.8 billion.

Read more on Walmart’s earnings here.

Williams-Sonoma Inc. (No. 22)

Williams-Sonoma reported net revenue declined to $1.8 billion in its fiscal third quarter ended Oct. 29. Comparable brand revenue declined 14.6%. The retailer didn’t share specific ecommerce figures, but it noted plans to improve the online experience for potential customers.

“We see many opportunities for our business from developments from AI. And as early adopters of integrating AI, we look forward to leading the retail industry in this area, and we will focus on quality, authenticity, and responsiveness of this new technology,” CEO Laura Alber told investors. 

So what does it mean?

• Retailers offering discounted prices, like Walmart and TJX, are still reporting growing sales and customer acquisition. That shows inflation and budgets remain top of mind for many consumers.
• Retailers, especially those selling discretionary items, are counting on holiday purchases in Q4 after lackluster quarters.

Ecommerce earnings calendar

Here’s when to expect other ecommerce earnings this quarter:

• Amazon.com Inc.: Oct. 26
• Best Buy Co Inc.: Nov. 21
• Chewy Inc.: Dec. 6
• Costco Wholesale Corp.: Dec. 14
• The Gap Inc.: Nov. 16
• The Home Depot Inc.: Nov. 14
• Lowe’s Cos Inc.: Nov. 21
• Macy’s Inc.: Nov. 16
• Target Corp.: Nov. 15
• Walmart Inc.: Nov. 16

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The OpenAI consortium released its generative AI bot ChatGPT for public use during Q4 2022, and it quickly became the hottest topic around. Months later, everyone in the online retail industry is still buzzing about generative AI, but how many businesses are actually using the technology today? And how many would want to talk to us about it?

Turns out, quite a few.

While many merchants we talked to are still just piloting and exploring how best to use the burgeoning technology, many brands have live generative AI programs up today. This Strategy Insights, “6 ways retailers are using AI right now and how generative AI will change ecommerce,” showcases examples of many large retail brands (and a few smaller ones) and how they are using generative AI right now.

Below is just a sampling of examples you’ll find in the rest of this report. Download the entire Strategy Insights here.

1.) Stitch Fix taps generative AI to write  ad headlines and product descriptions

Apparel retailer Stitch Fix uses generative AI to write headlines for Facebook and Instagram ads. In the past, it would take about two weeks to develop a creative campaign and draft copy. But now, human copywriters can evaluate a headline created by the generative AI system in less than one minute — and they approve the machine-created content 77% of the time, Stitch Fix says.

2.) Babylist uses generative AI to write email subject lines

Baby products marketplace and registry says its marketers are expected to use generative AI to help create ideas, content and copy, says Lee Anne Grant, chief growth officer. Babylist finds that ChatGPT-generated subject lines increased open rates for marketing email in half of their tests. It concluded that ChatGPT is a “great resource for when the team needs subject line inspiration or help writing one,” Grant says.

3.) J’evar uses generative AI to create product models

Online-only jewelry merchant J’evar has its product designers use generative AI to speed up how it creates custom jewelry pieces. Instead of going through dozens of product mockups over the course of weeks, genAI can help its designers produce product samples in minutes, says J’evar founder and CEO Amish Shah.

4.) Newegg uses generative AI to summarize customer reviews

Online electronics retailer Newegg built a generative AI tool in house that creates one product summary for a product based on all of the published customer reviews. This review is published at the top of all the reviews. Reviews are an important feature for Newegg, as 20% of Newegg.com shoppers read reviews, and these shoppers spend 40% more money on the site than non-review reading shoppers, says Andrew Choi, director of brand and website experience for Newegg.

5.) UrbanStems creates images with genAI

Online flower merchant UrbanStems is using generative AI in multiple ways, including having it create images of potential products it wants to sell. For example, the brand can tell its generative AI software to create an image of a 10-stem red and white arrangement of peonies in a glass vase and white background — and send that image to its merchandising team to create the product in real life. This helps the brand quickly experiment with new designs, without having to purchase flowers and conduct a photo shoot just for a design mock up, says Katie Hudson, content director for UrbanStems.

6.) EBay enables its marketplace sellers to use genAI to write product descriptions

Marketplace giant eBay built a tool based on Open AI’s ChatGPT that creates a product description based on data sellers provide about a product’s category, condition, color, brand and more. Roughly 20% of sellers shown the generative AI tool use it, and of those, 90% accept at least part of the description, says Xiaodi Zhang, vice president of seller experience at eBay.  

Download the free Digital Commerce 360 October Strategy Insights, “6 ways retailers are using AI right now and how generative AI will change ecommerce” here.

—April Berthene, Editor, Strategy Insights

Additional reporting from Digital Commerce 360 editors Don Davis, Gretchen Salois and Abbas Haleem.

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The tool allows J’evar’s jewelry designers to input information about the product’s materials and specifications, and the generative AI will produce an image of that product. The tool saves the brand weeks of manual design time on products, says Amish Shah, founder and CEO of the direct-to-consumer brand of jewelry featuring lab-grown diamonds.

J’evar began using its jewelry product AI generator last year in 2022. The retailer feeds metrics and images into a knowledge bank — or a database of text, images and metrics for materials that include the weight of gold and silver, among other key details — for the generator to refer to before it produces an image. Shah jokingly refers to it as “JevarGPT 1.0” and “AI for Jewelry 1.0,” the former a reference to OpenAI consortium’s ChatGPT.

For example, Shah says if he wanted to make a bangle, he could input a text prompt to the generative AI, specifying how much the weight of gold should be for that piece, how thin or wide it should be and what design style he would like. He can even ask it to produce 50 iterations from that single prompt. In return, the generative AI will output complete designs, some of which might be ready to turn into tangible products. Other product designs the AI outputs require J’evar designers to modify the design until it can be producible.

Shah says one key reason J’evar can’t produce all the designs is because of the inability to cut diamonds into the shape the AI generates. But even this ability is coming soon with new machinery, he says.

Exploring generative AI for design

“You’re looking at optimization, efficiency, speed — which is of course going to lead to cost reduction in the longer term,” Shah says about using generative AI. “But importantly, from an output perspective, we’re looking at precision and a higher level of creativity.”

In the past few years, developers have trained artificial intelligence to do more than analyze data and tell its users what to make of the data. They’ve trained AI to generate writing, images, videos and sounds. This is called generative AI, and online retailers have already begun to design new products and produce new variations of existing products — and do so quickly. With generative AI, retailers can create and test multiple product ideas in just minutes, much faster than the weeks or months it might take to design now. Online retailers, including J’evar and Auricle Technology, are learning how to use generative AI to assist their product designers, making the process more efficient. But because generative AI is still new, it has limitations on what it can do.

J’evar uses its own generative AI technology to help its human designers speed up the creative process.

Gen AI’s value outshines its current limitations

While generative AI is excellent for learning and processing massive amounts of data, it is not yet at a point that it can understand movement through space, says Brendan Witcher, vice president and principal analyst at research firm Forrester. It doesn’t think about engineering and structural elements or physical viability yet, he says. Although generative AI is not at that point yet, he says, that doesn’t mean it can’t be eventually.

“You want to design a shoe. Great,” Witcher says. “Well, a shoe’s a shoe until you put it on and have to run in it, then it falls apart on you because you didn’t think about the physics of how movement happens.

“The big question is when do we bridge the gap between the work that needs to be put into generative AI to understand the movement through physical space that objects need to go through often, and the commercial viability of doing that.”

Informed assessments

However, even with its current limitations, Witcher says generative AI’s value comes from the assessments it already has learned to make. He says people do their jobs based on the knowledge they receive in their training, and “AI kind of works like that too.” But generative AI “takes it to the next step” and looks at more data than humans can process, and then make assessments about what the best subsequent steps are. It can also come up with ideas humans couldn’t or wouldn’t think of because the human mind doesn’t process information the way artificial intelligence tools can, he says.

“We can’t absorb that much data and extract from it an idea. It’s just impossible for us,” Witcher says. “It shouldn’t be lost that just developing an image of something that you wouldn’t be able to think of because you weren’t trained to think that way has huge possibilities.”

Witcher says generative AI’s value extends beyond production speed to unique creations.

“A lot of people talk about generating imagery with AI, but what to me is most important is the ability to do it over and over and over again until you get something you like,” Witcher says.

Will generative AI replace human designers?

Generative AI is not here to replace humans in the design phase, Shah says. Especially not in the jewelry industry.

“Human intelligence supersedes artificial intelligence, at least I can say that for jewelry,” Shah says.

Generative AI is more like an assistant to human designer, Shah says. It’s not the technology that’s telling designers when a piece has been finalized. It’s a human making that decision, Shah says. Just like Adobe and Corel are graphics software tools for designers, generative AI is a design tool, not a human replacement, he says.

“Once we get the initial output, it is then modified to be producible,” Shah says.

Forrester’s Witcher agrees that AI should be used as a tool and not a replacement for creative individuals.

“If all the people learn how to do things on generative AI, then no one learns how to do it beyond generative AI,” Witcher says. “Over time, you start weeding out the expertise from the low-level individuals and nobody becomes a high-level individual.”

Witcher adds that the majority of AI use isn’t leaving artificial intelligence “to its own devices.”

“It’s more assisted intelligence — the AI standing for assisted intelligence — where we’re using it to be more productive in our own jobs that we currently do today,” Witcher says.

J’evar uses generative AI to speed up the design process

Traditionally, Shah says, jewelry design is a long process that can take a few weeks or even more than a month. In the case of commissioned designs, J’evar designers would first have to understand what kind of product a customer wants before going into iterations. In the example of designing a bangle, the designers would have to first determine if a customer wanted a wide cuff or something they could stack, something lightweight or heavy, thick or thin, if they wanted diamonds or gemstones, and so on.

Then, the designers would do initial mockups to ensure they understood the customer’s request correctly. This process would typically be one to three weeks of showing designs to the customer and sketching accordingly, Shah says.

In one case, Shah says he and his team had gone through 55 variations before a customer said, “I love it.” After that, his team would then go to computer-aided design (CAD). From there, it would go to rendering.

“By using AI, we are able to take that process down to pretty much hours and in some cases, literally within minutes,” Shah says.

Moreover, when working manually, the designer has to move every single diamond into place, making sure they are in the correct position. AI speeds up that process, Shah says. In milliseconds, the generative AI processor can move diamonds and gemstones, raise or lower gold weight, or change the width or thickness.

“It’s almost like putting a thousand designers and the type of work they would have done into the knowledge bank and then letting the system do a combination from those thousand designs to give you back results,” he says.

J’evar fed years’ worth of jewelry data into its generative AI platform. The platform produces images that human designers then adjust in the design phase.

Developing a custom generative AI processor

Shah says his family’s 90-year history in the jewelry business gives him an advantage over others in developing custom generative AI technology for J’evar.

“It sounds complex, but you have to keep in mind: We’re in the business,” Shah says. “We’re in the jewelry business, so the core bank or the core information that’s required is sitting with us. It’s not something I have to go outside and source.”

J’evar feeds text and imagery into its generative AI to teach it what to output. When inputting prompts, J’evar designers primarily use text to generate an image.

“That knowledge bank is sitting there,” Shah says. “Now, it’s all about organizing it and feeding it into the system in a format that can then be analyzed and the GPUs can run and start combining things and getting them back to you.”

Iterations at scale

Sometimes, what generative AI produces needs less human modification than others. For example, Auricle Technology uses generative AI tools to swap out logos and colors on its different products.

Auricle Technology founder William Cooksey says he created his electronics accessory brand out of necessity. He uses Apple AirPods for long hours most days, and the hard plastic begins to hurt his ears after a while. That led him to create AirPod skins made from silicone that are softer and anchor better into his ears.

When his manufacturer sent back prototypes, it printed Auricle’s logo on them. That led Cooksey to realize the importance of branding and how he can “pivot and get into the licensing game.”

The direct-to-consumer brand launched in 2021 now creates customized merchandise including AirPod skins, AirPod charging case skins, phone cases, wireless chargers and mouse pads. And through licensing agreements, it prints these products with logos for more than 90 teams in Major League Baseball, the National Hockey League and Major League Soccer, as well as about 130 college teams.

Rather than have a designer manually change the colors and logos for each team, the brand has integrated generative AI into its design process, Cooksey says.

Unlike J’evar, however, Auricle does not have the budget nor the in-house capacity to develop an all-new generative AI engine. Its business model is also different, focusing on customization rather than new product development.

New technology, but make it affordable

Cooksey instead works with Goals Media Group to use generative AI into its product iterations. Goals uses technology Microsoft for Startups provides, says Goals founder and CEO Aubrey Flynn. This means it receives access to Microsoft’s resources, including technology and tech experts, among other benefits. Microsoft has announced it would invest $10 billion into OpenAI — the company behind text-based generative AI brand ChatGPT and image-based DALL-E.

Cooksey says his lead designer and Flynn determined generative AI was the way to go from designing products with one team logo to hundreds “in a short period of time without breaking the bank.”

Auricle also uses Goals and its generative AI offerings to develop marketing materials like images for social media that highlight products from different teams at different stadiums. The generative AI creates an image complete with Auricle branding, the team’s branding, and any copy it needs.

“Being a small business, not having a lot of capital, it’s really exciting me that we can still come up with quality images without breaking our budget,” Cooksey says.

“When you deal with those leagues, they want you to be able to launch all the teams at the same time,” Cooksey says. “I just wouldn’t have been able to afford to do that.”

Generative AI’s impact on metrics

Goals has about 650 clients and nearly half are online retailers, Flynn says.

Flynn says that social media marketing creatives that generative AI produced can increase consumer interactions with the ad by more than 35% compared with that brand’s normal creative, according to data from its clients.

This includes creatives entirely generated through AI, visuals that already existed that AI has augmented, and copy that generative AI has helped develop for those types of visuals.

“I’ve seen AI-powered creative outperform to the extent where cost per click on a certain product may have been 30%-40% less expensive based on some of the guidance from AI on the copy and the imagery,” he says.

He adds that brands like Auricle — which lack access to capital, resources, infrastructure and more that large brands have — need to adopt technology like generative AI early on because it’s less expensive than some alternatives like hiring designers or manufacturers from the start.

Early results are insightful, but ‘is this just another buzzword?’

Shah, Cooksey, Witcher and Flynn all expressed the same idea: It may be early, but the application of generative AI in product development is promising.

While some may say generative AI is another buzzword, Witcher says what separates this technology from other tech fads is that companies are already allowing individuals in their organizations to play with, understand and experiment with generative AI.

“They’re almost crowd-sourcing proof of concept,” Witcher says. “It’s a unique characteristic to generative AI that it’s so easy to do and work with that almost anybody can do it.”

Although results are limited in some ways and sometimes imperfect, online retailers are using generative AI imaging to design new products essentially from scratch, customize existing products and develop marketing content. They can develop multiple iterations of these images at once or continue iterating on the same image multiple times until they’re satisfied with how the image looks. They can then take the design that generative AI produces and tweak it manually, saving them the time of doing each iteration manually — and saving them the creative energy it takes just to design a new product iteration.

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Shah launched J’evar, a direct-to-consumer brand, in February. Before that, he learned from years of experience through ALTR, which he founded in 2016 and sells through retailers like Borsheims and Michaels Jewelers. Shah and his team developed an in-house generative AI tool that mocks up designs for new pieces of jewelry. To teach the tool, his team used data from ALTR and 90 years’ worth of jewelry from his grandfather’s business.

J’evar uses diamonds ALTR grows. ALTR grows those diamonds with energy from a solar farm with a capacity of 10 megawatts. It generates 35 to 40 kilowatts of energy each day.

The megawatt is the standard term of measurement for bulk electricity, according to EcoWatch, an environmental news outlet.

“A megawatt measures power on a large scale,” according to EcoWatch. “So one megawatt can power a lot more than one household.”

“We grow our own diamonds, we cut and polish them, we design jewelry, we manufacture the jewelry, and we bring it to the consumer. We use recycled gold for making our jewelry — recycled metals, so gold and silver,” Shah said.

With generative AI-driven design, J’evar achieves a level of precision that Shah says dramatically reduces material waste and boosts the retailer’s sustainability goals. Shah said he expects a 10% to 20% reduction in energy consumption and wasted materials in the jewelry industry because of generative AI.

“Sustainability is actually core to us,” Shah said. “We’ve made sustainability as a part of our DNA rather than a marketing buzzword.”

It all starts on a (solar) farm

Shah’s brands run on electricity from a solar farm in Surat, a city in Gujarat, India. It currently generates 10 megawatts of solar energy, and Shah says he plans to scale that up to 17 megawatts. To put that into perspective, the Solar Energy Industries Association calculates that on average, 1 megawatt of solar power generates enough electricity to power 173 U.S. homes.

The energy is then transmitted through the power grid into J’evar diamond-growing facilities with help from the local government.

“In order to grow diamonds, the single largest raw material is energy,” Shah said. “They’re very high energy consumption. You are basically using solar energy to power the systems.”

And in terms of carbon neutrality for the diamond growth, Shah said, the facility is audited for climate neutrality based on the United Nations greenhouse gas protocol. The protocol holds corporations, organizations, cities and countries to different standards.

Shah said J’evar offices and facilities are both audited for all its energy consumption, from shipping packages to employees traveling and various other factors.

‘JevarGPT’ and generative AI for jewelry design

J’evar’s generative AI tool allows its human jewelry designers to input information about a product’s materials and specifications, and the generative AI will produce an image of that product. The generative AI tool saves J’evar weeks of manual design time on products, Shah said. 

J’evar began using its jewelry product AI generator last year in 2022. The retailer feed metrics and images into a knowledge bank — or a database of text, images and metrics for materials that include the weight of gold and silver, among other key details — for the generator to refer to before it produces an image. Shah jokingly refers to it as “JevarGPT 1.0” and “AI for Jewelry 1.0.” The former is a reference to OpenAI consortium’s ChatGPT.  

For example, Shah said if he wanted to make a bangle, he could input a text prompt to the generative AI, specifying how much the weight of gold should be for that piece, how thin or wide it should be and what design style he would like. He can even ask it to produce 50 iterations from that single prompt. In return, the generative AI will output complete designs, some of which might be ready to turn into tangible products. Other product designs the AI outputs require J’evar designers to modify the design until it can be producible.

J’evar fed years’ worth of jewelry data into its generative AI platform. The platform produces images that human designers then adjust in the design phase.

Technological advances

Shah said J’evar can’t produce all its AI’s designs yet. A key reason is because of the inability to cut diamonds into the shape the AI generates. But even this ability is coming soon with new machinery, he said.

“You’re looking at optimization, efficiency, speed — which is of course going to lead to cost reduction in the longer term — but importantly, from an output perspective, we’re looking at precision and a higher level of creativity,” Shah said about using generative AI.

J’evar marries generative AI and sustainability

In the case of J’evar, generative AI can determine exact material amounts before creating an item, helping with sustainability by limiting waste.

“If we are able to predict the exact amount of gold we’re going to need, what the design is going to be, how much cubic millimeters of gold, the wastage will go down dramatically because you know exactly what you’re looking to produce. More importantly, the level of precision from a point of engineering will go much higher,” Shah said. “The amount of gold that is used will be very precise. How and what is printed in terms of the level of resolution will go higher, ultimately lowering the amount of wastage.

“Gold wastage will go low, but yes, that means the speed will go up, which means the energy requirements will go down. The material wastage from wax to silicon to machine usage, everything will go down. From a sustainability perspective, AI is going to have a direct impact on sustainability or improving the reduction of wastage.”

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That’s an improvement from being down 3% in Q1, said Stephen Priest, senior vice president and chief financial officer, on a July 26 earnings call with investors.

EBay active buyers dropped by 1 million quarter over quarter, totaling 132 million, Priest said. Buyer count — for both new and returning buyers — has also grown year over year for four straight quarters, he said. The number of “enthusiast” buyers was stable in Q2 at 16 million, he said. Spend per enthusiast grew year over year, averaging roughly $3,000 annually. However, he did not specify how much that spend has grown.

President and CEO Jamie Iannone also said advertising revenue reached 2% penetration of GMV, “a major milestone.”

“Total ads grew 35%, while first-party ad revenue grew roughly 50 points faster than GMV,” Iannone said.

Iannone added that eBay introduced in its fiscal Q2 a new way to rank ads on search that leverages its in-house artificial intelligence (AI) capabilities. The method optimizes cost per acquisition placements for both conversion and ad rate, he said.

EBay ranks No. 6 in Digital Commerce 360’s new 2023 Global Online Marketplaces Report. The Global Online Marketplaces Database ranks the 100 largest such marketplaces by 2023 third-party GMV.

eBay GMV

In the United States, eBay GMV decreased 4% in Q2, Priest said. International eBay GMV grew 1%, he said.

“Enabled by artificial intelligence, we will fine-tune the breadth of inventory and other aspects of the shopping journey to cater to the varying needs of new buyers, infrequent shoppers and eBay enthusiasts,” Iannone said.

He said eBay began rolling out changes on the consumer-facing side in recent months. Those started with “testing a more modern and intuitive view item page, which is the most visited page on eBay,” Iannone said.

The updated eBay item page offers:

• A streamlined appearance.
• Larger and higher resolution images
• An optimized information hierarchy.

“Early tests indicate a measurable uplift in GMV versus our existing design,” Iannone said.

“EBay has five categories that each generate more than $10 billion annually in GMV, making up more than 80% of volume on our marketplace in aggregate.” Iannone said.

Those categories are:

• Motors parts and accessories
• Electronics
• Collectibles
• Home and garden
• Fashion

Iannone said the marketplace is investing in “improved in-house risk modeling to alleviate transactional friction for sellers and buyers on eBay.” That has lifted conversion, he said without disclosing details. It has also led to “hundreds of millions of dollars of incremental GMV during the first half of 2023 alone,” Iannone said.

eBay embraces AI

eBay has been implementing AI in different parts of its business.

Iannone said over the next few quarters and years, eBay expects advancements in artificial intelligence, including generative AI, to impact “nearly every aspect of our organization.” He said the advancements will drive meaningful efficiency and productivity improvements.

He also said eBay’s recent acquisition of Certilogo will expand eBay’s fashion category. Certilogo provides AI-powered authentication for apparel.

Iannone said Certilogo empowers brands and designers to:

• Manage the life cycle of their garments.
• Protect their customers from counterfeits.
• Encourages ecommerce via QR codes that serve as digital product passports.

Using AI for inventory

Moreover, Iannone announced a new feature called Magical Listing. He said it will make it “significantly easier” for sellers to list their inventory.

“One of the biggest challenges to operating a listings-based marketplace is the burden on sellers to fill in descriptions and item aspects for their products,” Iannone said. Magical Listing launched in May, he said. The feature “dramatically reduces this friction for our sellers via AI-generated item descriptions.”

“We integrated Azure’s open AI API into our core listing flow,” Iannone said.

EBay sellers can choose to have generative AI instantly populate detailed product information, he said. It would use the product’s title, category and any item aspects that have been input, he added.

In Q2, eBay enabled more than 50% of iOS and Android users in the U.S. to test this beta feature. Iannone said he expects to reach 100% in the coming weeks. About 30% of users have tried the feature at least once, he said.

“Early signals have been extremely positive,” Iannone said. “We’ve observed acceptance rates of over 90% for AI-generated descriptions, including those with edits.

“Customer satisfaction is over 80% thus far, which is among the highest CSAT for any new feature launched in recent memory. Sellers have told us that this feature will unlock more of the unique inventory in their closets. And on average, we are seeing description lengths double when gen AI is used.”

Furthermore, Iannone said eBay is “just getting started” with Magical Listing.

“The next iteration of our Magical Listing will leverage our improved image recognition capabilities to provide flows with the option of a more seamless camera-based listing,” Iannone said.

Authentic and certified fashion products

EBay launched Authenticity Guarantee for streetwear in the U.S. in June. It is now authenticating new and pre-owned streetwear items from 20 trusted brands, Iannone said. It has since expanded eligible streetwear in July.

Among the eBay-certified brands:

• Adidas
• Jordan
• Nike
• Supreme
• Kith
• Off-White
• Palace

EBay plans to expand coverage to luxury brands later in the year, Iannone said. Those include Gucci, Prada, and Louis Vuitton.

“This marks our entry into authenticated apparel, a category that has strong overlap with our passionate community of sneaker enthusiasts, adding another layer of trust when they shop,” Iannone said.

EBay also launched a Certified by Brand program in April. Iannone said the marketplace expects this to facilitate more ecommerce in the luxury space. There are already more than 20 brands participating in this program, he said. They offer new and certified preowned inventory across the watch, jewelry and handbag categories.

Listings from this program will show a direct-from-brand or brand-authorized seller badge, which he said brings an enhanced level of trust to these listings similar to visual trust signals for Authenticity Guarantee.

eBay earnings summary

For the fiscal second quarter ended June 30, eBay Inc. reported:

• $2.54 billion in revenue. That’s up 5% from $2.42 billion in the year-ago period.
• eBay GMV decreased to $18.2 billion. That’s down 2% year over year from $18.55 billion.
• eBay active buyers decreased 4% year over year.

Percentage changes may not align exactly with dollar figures due to rounding. Check back for more earnings reports.

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Academy Sports and Outdoors (No. 136)

Net sales were down 7.3% year over year for the first quarter to $1.38 billion. The decline was due to fewer transactions and smaller ticket size, president Michael Mullican told investors. The retailer did not disclose sales data for ecommerce. 

Academy Sports and Outdoors plans to open 120 to 140 stores in the next five years, with the goal of using them to grow omnichannel sales and use them as distribution centers, Mullican said.

Chico’s FAS Inc. (No. 108)

Ecommerce sales were “up low single digits and outpaced stores on very strong traffic,” at Chico’s for the first quarter, chief financial officer PJ Guido told investors. 

Online sales made up just under half, 41% of revenue over the last 12 months, Guido said. 

Designer Brands (No. 78)

Net sales for the shoe retailer declined 10.7% to $742.1 million. Designer Brands did not share specific information about ecommerce sales in the quarter. The retailer is on track for its goal of doubling owned brands between 2021 and 2026, with the recent addition of Keds.

Five Below Inc. (No. 584)

Five Below grew sales 14% to $726 million in the first quarter, the retailer reported. The company didn’t share specific ecommerce sales, but Five Below’s social media presence is growing and driving traffic, CEO Joel Anderson told investors. Recent influencer campaigns also drove engagement, he said. 

Joann Inc. (No. 307)

Ecommerce sales at Joann declined 1% year over year for the first fiscal quarter. Net sales and comparable sales both declined more quickly, down 4% over the previous year. Online sales made up 11.8% of revenue in the quarter. Sewing and craft online sales grew during the period, while craft technology sales declined, the retailer said. 

App downloads have also grown to 15 million, the retailer said, and BOPIS has been especially popular with customers. Joann didn’t disclose what percentage of sales were made through the app.

Kirkland’s Inc. (No. 510)

Ecommerce sales represented 27% of total sales in Q1, down from 28% in Q1 of the previous year, Kirkland’s reported. Total sales across stores and online were down about 4%, driven by lower traffic in stores and online. Stores performed slightly better than online channels, Kirkland’s told investors. 

Rent the Runway Inc. (No. 258)

Apparel rental company Rent the Runway reported Q1 revenue grew 10% year over year to $74.2 million. The retailer reached 145,220 active subscribers, a 15% increase over Q4. 

Rent the Runway is also implementing new AI technology in search in 2023, the retailer announced. 

Roots Canada LTD (No. 668)

Sales were $41.5 million in Q1, down from $43.1 million in Q1 2022. Net loss was also more than in 2022, at $8 million compared with $5.3 million last year. The first quarter typically represents just 15% of annual sales, the retailer said.

A few categories were bright spots for Roots in the quarter. Apparel categories were particularly strong, with dress and skirt sales up “five fold.” Activewear grew 50% year over year, and represented 10% of sales in the quarter. 

Signet Jewelers Ltd. (No. 61)

Signet Jewelers reported ecommerce sales made up 23% of total sales in the first quarter. Ecommerce revenue is up 70% over 2020, the jewelry retailer said. 

Total sales were down 9.3% year over year to $1.7 billion. Part of the declining sales are due to a drop in engagements from the COVID pandemic disrupting dating in 2020, CEO Gina Drosos told investors. 

Torrid LLC (No. 224)

Online sales made up more than half of total revenue in Q1, Torrid said. Net sales decreased 11.8% year over year to $293.9. Traffic was “volatile and challenging,” both in stores and online, CEO Lisa Harper told investors.

“Once our customer finds us, she extends her shopping with us through our online capabilities, resulting in a strong omnichannel,” Harper said. 

Vince LLC (No. 855)

Net sales decreased 18.3% year over year to $64.1 million in Q1, Vince reported. The decline was driven by a 6.3% decrease in Vince brand products, and a 99.2% decrease in Rebecca Taylor sales as Vince winds down the brand. The retailer didn’t share ecommerce sales figures, but CEO Jack Schwefel said stores outperformed ecommerce sales, in line with broader industry trends.

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