Ecommerce Coffee Break - Helping You Become A Smarter Online Seller
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Ecommerce Coffee Break - Helping You Become A Smarter Online Seller
How AI Helps Brands Survive in Ecommerce — Valon Xhafa | Why AI-driven Brands Succeed More than Traditional Ones, Why Knowing Customer Behavior is Crucial, How Behavioral Science Impacts E-commerce and Shopping Habits (#318)
In this podcast episode, we discuss why AI is the key for brands to survive in the future of eCommerce. Our featured guest on the show is Valon Xhafa is the Founder of behamics.com
Topics discussed in this episode:
- Why AI is becoming critical for brands to survive in the increasingly competitive e-commerce landscape
- How the pandemic changed the e-commerce industry, making traditional growth strategies less effective
- What behavioral science means in the context of e-commerce and how it impacts user decisions
- Why understanding external factors like weather, inflation, and competitor data is crucial for predicting user behavior
- How the paradox of choice creates friction in the user experience and impacts conversion rates
- What role web performance plays in user experience and its impact on revenue and ad costs
Links & Resources
Website: https://behamics.com/
LinkedIn: https://www.linkedin.com/in/valon-xhafa-b8ab856b/
Facebook: https://www.facebook.com/behamics
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Claus Lauter: Welcome to the e commerce coffee break podcast. In today's episode, we discuss why AI is the key for brands to survive in the future of e commerce. Joining me on the show is Valon Xhafa. He is the founder of behamics.Com. So let's dive right into it.
Voice Over: This is the e commerce coffee break. A top rated Shopify growth podcast dedicated to Shopify merchants.
Voice Over: And business owners looking to grow their online stores. Learn how to survive in the fast changing e-commerce world with your host Claus Lauter, and get marketing advice you can't find on Google. Welcome. Welcome to the show.
Claus Lauter: Hello. Welcome to another episode of the e-Commerce Coffee Break podcast. Today we wanna find out why AI artificial intelligence is the key for brands to survive in the future of e-commerce, and also what this has to do with behavioral science.
Claus Lauter: Joining me on the show today is Valon Xhafa. He is the founder of Behamics, an AI platform for the entire e commerce ecosystem. Valon has years of experience with AI, machine, machine learning software, and previously worked for Google building data driven applications. So he's definitely the expert to talk to today.
Claus Lauter: So let's welcome him to the show. Hi Valon, how are you today?
Valon Xhafa: I'm good. Thank you. Thanks for having me here.
Claus Lauter: Yeah. Great to have you on the show. Obviously the future of e commerce is AI driven. We see that everywhere. There's more apps popping up every day. Can you unpack for our listeners and explain why artificial intelligence is such a critical factor for brands moving forward?
Valon Xhafa: Yes, for sure. Um, there are a lot of, there are a lot of reasons why is that the case, but the primary reason is that, um, a lot of processes are being done manually and a lot of decision makings are being done. Everyone's best guess. And, um, in a e commerce, which has become very competitive, um, in an e commerce where things have changed a lot since pandemic.
Valon Xhafa: So when pandemic, uh, when pandemic hit, a lot of things have changed before pandemic, um, money used to be cheap, low interest rates, low inflation, and, um, also low ad costs. So for brands to grow, um, there was a straightforward process. It's just throw more money into ads and marketing or more traffic.
Valon Xhafa: Simple strategy, right? That's not the case anymore. Right now, ads are over expensive. Because of all the updates, privacy updates, data protections, and all that stuff. Ads are over expensive. First, money is not as cheap as it used to be. It's actually over expensive. Compared to pre pandemic and for this reason, the simple strategy they used to work for pandemic pre pandemic.
Valon Xhafa: It's not really working that much. Right? And because of that, you can already see this on metrics and revenue across different brands across different platforms that ecom has slowed down since pandemic. So now we're in, we are back to the drawing board. We're back to the drawing board, trying to identify, uh, what strategies should work, uh, what's the future of e comm, um, and how can we build long, uh, sustainable, long term strategies to grow and survive why I'm saying survive.
Valon Xhafa: Because pandemic has changed the rules of the game and we already see some potential contenders worldwide. We see some brands out there that, um, they didn't star as brands. But they started as tech companies, they built the whole tech were advanced. And then these brands use that tech to identify what products to build, what products to manufacture, what products to sell on which channels to which target users, a completely different holistic approach to what we see already in e com.
Valon Xhafa: So in e com you already have like, um, we're a traditional brands that have been around for a long time, who. Potentially start as retail brands back in the fifties, sixties, and then they moved to, uh, moved online in the nineties and early 2000, right. But they didn't start as tech companies. But the new brands that are coming in that are actually, um, rolling over the market, I can definitely say that because for a brand with that approach to go from zero to like multi billion dollar company within like two, three, four years, this is something that we don't see in, in, in, in brand growths out there, right?
Valon Xhafa: This really tells you that, um, gives you a bit of glimpse into the future and how the future is going to look like in e commerce. Right. And the future of e commerce is going to start with, with tech is going to start with AI is going to start with information. It's going to start with insights, every decision that you're going to make, it doesn't really matter if it's like what products to sell, it's going to start with knowing the user base, knowing the demand of your consumers, understanding the behavior of your consumers.
Valon Xhafa: You cannot get a product market fit by building the product first, never talking to clients. That's actually rule number one clause. When you build a startup, like don't, don't, don't build a product. Uh, and spend six, seven months in a cave building it without talking to no one and then launching it and hoping it's going to work and then trying to change the market so that it fits your product and not the product fits the market, right?
Valon Xhafa: For that reason, what we usually do in startups is we start talking to potential, um, potential users. We start asking them questions. Uh, what do you like? What are your issues, your challenges, needs? And then based on this feedback, we iterate on the product. So it is a, um, customer client user driven process.
Valon Xhafa: And we see the same process in, in, in e comm right now where specific brands, tech driven, AI driven, one of them also Amazon, it's like the largest one in the world, but there are some, also some new ones coming from, uh, from the far east. And, um, These brands have pulled this tag because you cannot go and ask when you build a product as a startup, you go and ask a few people and then you get a enough sub sample of, of what the users need.
Valon Xhafa: Uh, when it comes to e comm, these companies have built the tag to ask, uh, to, to, to identify the user behavior, the user demand, the user trends, and then build products fitting the needs of these.
Claus Lauter: Yeah. I want to dive a little bit more in this behavioral science part of it, because I think a lot of people understand AI, what they see with chat GPT, large language models, and they're quite different from what you do.
Claus Lauter: And with behemix, you're, you're doing AI for a long time, since 2019, you started much earlier than anyone else out there. So talk me into what behavioral science basically means in the context of what e commerce sellers can do with it.
Valon Xhafa: Yes. Uh, so understanding the user behavior and the user behavior is multi flavored.
Valon Xhafa: In a way that we're talking about demands. We're talking about behavior. We're talking about like the click through rate. We're talking about future interests. We're talking about demographics. We're talking about a lot of different factors, right? Understanding how these preferences, how these demands change over time and what impacts these demands to change these interests to change.
Valon Xhafa: So this is the behavioral science into it, right? So you need to understand, let's say if a specific segment likes some pairs of shoes or jeans, for example, this demand is not going to stay for long. There is no right now in e comm there is, it's very hard to see trends of last four years, like it used to be.
Valon Xhafa: You have. Trends that last for weeks and that's it. You have new trends, right? So the question is what factors out there, what factors in the world, even outside e comm, I'm talking about inflation. I'm talking about weather. I'm talking about temperature. I'm talking about a lot of, a lot of different factors that are not directly related to e comm impact the user behavior.
Valon Xhafa: Because this is the most important fundamental thing that a lot of brands out there, a lot of people who work in e com, um, uh, see e com as an isolated system. They see the brands, they try to bring users. It's a bit more complicated than that. Because, for example, weather impacts the user behavior and then the user behavior impacts the sales on site, right?
Valon Xhafa: So you need to understand how is weather impacting the user behavior. And then you have inflation, for example. Inflation, uh, the cost of living in different countries, different areas. Even within the country have a huge impact on the user behavior and the preferences. There are a lot of studies, for example, that that were done even the eighties and nineties, which show, for example, an interesting fact, which show how inflation or the cost of livings impact the preference for a specific color on shoes or jeans or shorts.
Valon Xhafa: It has to do a lot with psychology at the end of the day, at the end of the day, economy, the world economy, it's all about driven from user behavior, right? We buy stuff, the economy keeps going. We don't buy stuff, we get stagnation and we get a lot of other issues, right? So that's why for, uh, for the economy to grow, the consumers have to spend.
Valon Xhafa: And then you have this, this sustainable cycle out there, right? And that's why understanding how users are feeling, how users are behaving and the factors, external factors, inflation, weather, cost of living competitor, uh, data, for example, prices is where important to understand the user behavior, because this is where.
Valon Xhafa: The user journey starts in Econ. It doesn't start when the user lands on your store, and we have seen that, and we have measured it mathematically and statistically and also with AI, that if you want to, if you, let's say, try to predict the user behavior, what the user is going to do on site, just based on the clickstream data, it's not going to be as accurate.
Valon Xhafa: As for example, incorporating external, all of these different factors that are externally.
Claus Lauter: Hey, Klaus here, just a quick one. If you like the content of this episode, sign up for our free newsletter and become a smarter Shopify merchant in just seven minutes per week. We create content from more than 50 sources, saving you hours of research and helping you stay on top of your e commerce game with the latest news insights and trends.
Claus Lauter: Every inbox, a hundred percent free. Join now at newsletter. ecommercecoffeebreak. com. That is newsletter. ecommercecoffeebreak. com. And now back to the show. Maybe you can give our listeners a real life examples how your system with causal AI is helping e commerce brands to identify and to overcome sort of where they get stuck with the user behavior.
Valon Xhafa: Yes. So, um, within e com, because traffic is driven from different channels. And there are like different times of the day and then you have also, um, the, that performance of the side on its own. You have the products and let's say the sizes that are available. So there are a lot of factors. So the user behavior is not only, uh, let's say a function, a factor of.
Valon Xhafa: a list of variables outside the store, but also inside, right? So if, if a product is a top selling product, but the main size is unavailable, you know, like it's not going to sell because the demand is for a specific size. And this is usually the case all the time. So the power of law, this, this kind of like curb or the long tail, as you also call it is all over the place.
Valon Xhafa: It's with the sizes that are being sold, with the revenue, a few products account for a huge portion of the revenue, for example, it's the same sort for the user behavior, a few users spend the most of the time, if you account the whole time that users spend on your store, right, it's very common there. So, um, because of this, there are different friction points.
Valon Xhafa: First of all, it's the behavioral part where users have so many options clause to choose from. So, um, Let's say you go and buy, you want to buy t shirts. You have 20 different t shirts on the first page, and then you click to the second page, you have another 20 different t shirts and they kind of like look similar.
Valon Xhafa: They look the same, maybe sometimes price change and this and that. So what happens is that you have this, this paradox of choice, which is called the behavioral science, where you have so many options to choose from, uh, and you get just stuck. It's very hard. We as users, we as humans in this case, are not that good at making decisions when we have a lot of options to choose from.
Valon Xhafa: It's better, it's better to have this or that, instead of like, here you go, 10 different options. And let alone what happens in Econ. So this, this, Paradox of choice, but there are so many other cases that happen when it comes to users interacting with all of these different options. And then you have prices, for example, users ask themselves, okay, why these products look the same, but this product is a bit more expensive than this one, but the expensive product has less reviews than the one that has a lower price, you know?
Valon Xhafa: So A lot of questions that arise from you clicking around some of them you have consciously some of them you have subconsciously and this creates friction from the behavioral perspective from the psychological perspective. The other friction is, for example, clause, um, is the VAP. Experience that experience is huge in terms of impacting the user behavior, impacting your ad costs, impacting a lot of different factors that relate to revenue, and it's not just.
Valon Xhafa: Loading time, but there are errors. For example, there are a lot of errors, images they don't load. Um, there are some products that have missing pictures because there were placeholders for three pictures and the brand uploaded only two pictures and then it doesn't look good. So there are a lot of.
Valon Xhafa: Friction points when it comes to the BAP. And the interesting part is that when we browse online clause, I can imagine also for you, what I usually do is like you go on Google, for example, you write shoes sorts, and then you click the first. One, uh, online store. The second one, you open multiple tabs and then you compare products, you compare prices, subconsciously you compare experience to you compare, you see, okay, this store looks legit.
Valon Xhafa: This. I like this experience, you know, it's all about the experience and the experience comes from the web performance. If a page of an online store takes longer to load, it's going to give a bad experience. So there are cases and it's very common that you buy. Maybe a bit more expensive product on a site that looks a bit more legit, or you have this, this experience, this good experience, smooth experience, that actually going with a product that has lower price, and maybe even it's the same product at the end of the day.
Valon Xhafa: Cause you also think, for example, you have a lot of questions that we ask as humans, um, subconsciously, for example, are they going to return my money? If I, for example, return it back, uh, how weird, how difficult is going to be the returning process, you know, like an all, a lot of other questions, the customer support, it's all about like feeling legit and the VAP.
Valon Xhafa: Performance gives us legit feeling. Then we're talking about the frictions in terms of products. Let's say your top selling product, um, has its size, it's top selling size, it's unavailable. So when you account and combine all these different friction points, we're talking about 15, 20, 25, up to 30 percent in revenue being lost, being left on the table, because this is a lot of money.
Valon Xhafa: If you want to bring this traffic, this revenue by throwing money into ads, it's going to be millions of dollars. And so what a platform does is that it applies AI with high accuracy, because we can achieve that to understand user behavior, to simulate user behavioral in real time and understand and measure these different friction points and perform automations so that the users, they don't have to go through these, um, Um, Paradox of choices through this, um, unpleasant web experiences, for example, and at the end, we also measure the uplift loss off of all of these different automations to prove to provide you to or customers or partners or clients or brands that we are actually delivering and these automations actually increasing revenue.
Valon Xhafa: Otherwise, we're not going to charge. So that's important part.
Claus Lauter: Let me ask you about the automations. Now, a lot of our listeners, most of our listeners have a system or a store on Shopify or on WooCommerce, any of these other platforms. And they're probably not very. Technical their merchants, they want to sell, they want to be don't want to become a data scientist or a web developer from a day to day basis.
Claus Lauter: How does the implementation of behemix look like and what kind of maintenance or homework does a merchant need to do to get it up and running?
Valon Xhafa: Yes, we're a good question. So behemix integration is platform agnostic, so we're not dependent on the platform, right? The installation process is a single line of code.
Valon Xhafa: And maybe the users are going to say, yeah, we heard that before. Uh, you know, and it took like three, four months. Um, well, give me some time to show it to you. If it's, for example, on Shopify, we can literally install behemix in two minutes. You know, it's just a line of code. You copy paste it. It's the same sort of for all the custom built online stores.
Valon Xhafa: It's a single line of code because we already have a lot of information and we already know a lot about your store, even before integrating with you guys. So that's an important part. What we do is that when we integrate, we, um, collect the user data in real time, and then we combine it with, or causal models to identify and measure these revenue bottlenecks.
Valon Xhafa: Right. So that's kind of like the process. So it's, it's a few hours to maximum few days, depending on, on, on, on, on the, the, the process and depending on the process from the client side, um, regarding the effort, we're not an analytics tool where we just say you like, Hey, your conversion rate is 1%. You know, we explained this part.
Valon Xhafa: Why is your conversion rate 1%? We identify these revenue losses, and then you have the list of automations where you can run to tackle all of these different revenue losses, and then being able to measure the uplift generated from all of these different automations, if that, if that make sense.
Claus Lauter: Makes totally sense.
Claus Lauter: One question comes to mind is while the AI automizes processes and optimize the process, is there still a human element in there so where the merchant can go in and do some things that they don't want to do so that they're not have the feeling they're completely based on AI?
Valon Xhafa: Yes, yes. So, so the way it works is we provide a dashboard where they can see all the results.
Valon Xhafa: Um, so. Because there are like different angles, there are different angles and verticals within the online store where the revenue can be lost, where automation can take place. I'm talking about, for example, web performance, I'm talking about product related, merchandise related. I'm talking about psychology related.
Valon Xhafa: So it's not just one angle. If there is a single feature tool that, um, promise you 20, 30%. That's probably too good to be true, right? Because these revenue leakages, they are small and localized, and it's hard to identify. But there are so many of these clauses. So when you combine 2 percent improvement here, 3 percent there, 5 percent here, 6 percent there, you combine all together, you tackle automatically all of these together, you're going to go to that 20 25 percent improvement.
Valon Xhafa: And that's the important part. So our users, the clients, they can go to the dashboard. They can see all the results they can see, um, because these automations are measured with AD testing. We have a control that measures the impact, right? We don't want to say, Oh, the automations are running. So that's pretty much it, right?
Valon Xhafa: We want to actually prove to our partners and clients and brands that these automations are running. actually are driving revenue. And at that level, 15 to 20%, they will also be able to see it on their Google Analytics dashboard or Shopify dashboard, right? Because it's a very noticeable difference.
Claus Lauter: I'd like to mention that this kind of optimization process is coming from various parts of your business.
Claus Lauter: So it's not the one big thing that you change. And then one of a sudden your conversion rates goes up. And I think there is no,
Valon Xhafa: there is no clause. There is no like in the world, in the world. There is no magic stick. Okay. If, if one believes that with just a single change, you're going to increase revenue for 20, 30, 40%, right?
Valon Xhafa: I don't think that's plausible. Not from, and this is coming from, and this is coming from, uh, from an AI person who measures and analyzes the user behavior on daily basis around the clock. Right. If you see something that promises you that this goes in the direction of like. Get rich fast schemes. So this is something that's, it's, it's, we're important, right?
Valon Xhafa: And, uh, but what is really important is that this is also in terms of the future of AI, not only in e comm, but in, in worldwide, right? Um, AI is going to change so many and automate and improve so many different parts of the industry. So for life, that when this is accumulated and combined together, It's going to have a huge impact, right?
Valon Xhafa: So that's, that's important part. For example, uh, for example, when smartphones were invented, you know, like the big deal was not because you could talk to somebody and take pictures. Cause we already had cameras before. The big deal is that you have so many different apps, so many different options, so many different things that you could do with this.
Valon Xhafa: That would improve your life in different angles that this whole process combined. Had a huge impact on, on changing our lives. And that's the same story with, with e comm, for example. Um, there are a lot of revenue leakages we call revenue leakages, right? Uh, there are a lot of issues, for example. So let's, let's take, let's take an all day, uh, interesting example, because we do measurements all the time of different platforms and site speeds of performance and all this stuff.
Valon Xhafa: It's very important for us to understand. Uh, for example, let's say Shopify for all the Shopify users out there. Um, Shopify has. It's probably one of the slowest loading platform out there. And, um, this is so obvious. It's not like one, two, 3 percent different. It's like 30, 40, 50 percent difference. And because of this loading time clause, loading time is, is probably one of the most important factors out there that impacts literally everything.
Valon Xhafa: It not only impacts your revenue on site, it impacts your ad spending, ad costs, because Google measures. Loading time, it impacts organic traffic because it's one of the most important factors for SEO. So the impact is multidimensional. Having a, um, a well performing online store, website, in this case, is the starting point.
Valon Xhafa: And then you have different angles. When I talk about the psychology, the paradox of choices, we have a revenue leak is just in terms of, um, product merchandising, all what's come with it, but when you combine all these things, different, different things together, then you're going to get the good number that you're hoping for.
Claus Lauter: Yeah, absolutely. I think you gave a masterclass on the overview of what behavioral science actually, the huge impact that it has on e commerce. So tell me, Behemix, what, who's your perfect customer?
Valon Xhafa: We primarily work with starting from the low end of, Of midsize, so it's mid enterprise, uh, but we do, uh, we do also want to help brands that are close to the midsize to get on the, on the mid market at this stage.
Valon Xhafa: We don't work with, um. You know, like small moms and pop shops on Shopify, um, primarily that's, that's kind of like the focus. Um, so yeah.
Claus Lauter: Okay. How does your pricing structure work?
Valon Xhafa: It's, uh, it's performance based. It's performance based. Um, so we're not going to charge, we're not going to charge unless we prove that we're generating revenue for you.
Valon Xhafa: That's that's important part, right? As I said, there are a lot of automations, which combined are going to recover this money that is being left on the table. And we're going to measure that and then we're going to charge based on the performance.
Claus Lauter: Okay. That's legitimate. I think that's, that's a good plan.
Claus Lauter: Um, the more you grow, then obviously you take your cut, but it's really performance makes sense. Before our coffee break comes to an end today, is there anything that you want to share with our listeners that we haven't covered yet?
Valon Xhafa: There is a story that I usually always bring with, um, when I talk to brands and people in e commerce, and, um, there is a story that already happened in other industries, and this only shows you the future, a glimpse of the future of AI and e com or the future of e com.
Valon Xhafa: So back in the seventies, uh, Klaus, um, start trading. Was done completely manual on phone calls. There were a lot of stock traders and all this stuff, right? And, um, there were some pioneers who saw the future of stock trading, that it's going to be algorithm driven. It's going to be with computers, the first computers they just came out and they started building the first algorithms for stock trading.
Valon Xhafa: The issue was that they had a hard time getting access to data because there was no internet back then there was no database, so they had to go and look for books and get these numbers manually and write down and create CSV files to train these algorithms. And we see the same story right now in e com, we had in the beginning, such a hard time finding quality data, which is the basis quality data, even from different data providers, the data was not That high in quality.
Valon Xhafa: So we had to get from different sources and process and analyze and clean and all this stuff, because it was very hard. But what happened to stock trading is that these people who started the algorithm tradings. No, these firms are the largest firms in hedge fund management and high frequency trading and all this stuff.
Valon Xhafa: And there are almost no stock traders who do that manually. There are stock traders who manage computers, but there are very, very few. 0. 1 percent of what they used to be. And right now, if you want to build an algorithm trading firm for stocks, it's going to cost probably half a billion to a billion. And it's not guaranteed.
Valon Xhafa: You're going to make money off of it because the industry has developed so much that it's very hard to get in this game. It's already consolidated. And based on the data that we see based on the trans based on some of these insights and the power of AI we do see that it's gonna be the future of ecom is gonna go in this direction so if you really wanna be there in the future and then survive and grow.
Valon Xhafa: This is the right time to, to, to jump in, because if you're not going to do that, someone else will, and we already see who are literally doing this. We have Amazon, we have Walmart. We have the big guys who are, for example, hiring machine learning engineers for SEO. So this is also, for example, a trend, an interesting trend.
Valon Xhafa: You can just go to job postings. You will see machine learning engineer for SEO. Think about it. Think about where SEO is going to be in the future. It's going to be fully automated. It's going to be on a level like the algorithm tradings, you won't be able to do anything manual. They'll just lose money.
Valon Xhafa: It's not going to work. It's not going to be efficient because all the firms have, have advanced this field so much with hiring machine learning engineers and AI people to work on SEO. So think about it.
Claus Lauter: Oh, I totally agree. I think you just proved a couple of opinions that I have on SEO, on apps, on the future of e commerce.
Claus Lauter: And I'm sure that's what you just said is going to happen very, very quickly. And we will see a huge shift in the market and the user behavior and how you interact When you're shopping online, as we come to the end, where can people find out more about you guys?
Valon Xhafa: Um, on our landing page, Behaviors. com, or they can reach out to me directly on LinkedIn.
Valon Xhafa: Um, and then I'd love to, I'd love to share, uh, with them a glimpse of the future of e commerce and especially you mentioned the SEO part. Um, we have, uh, we have a product that we are launching soon. That goes in direction of optimizing organic traffic with AI and based on the initial results that we actually see right now is going to be going to be 1 of the 1st.
Valon Xhafa: Industries to be fully automated on the same levels as high frequency trading, because the level of automation that we're able to achieve with this new product that we're launching soon is something that is not seen in the market. So we see that coming and it's going to come from different direction, which is good efficiencies of the market, but it's very important to, you know, like jump in when it's not late.
Claus Lauter: Absolutely. I will put the links in the show notes that our listeners can reach out to you. I think that was a very deep and interesting dive into the future of AI and what AI can do already today. So Valon, thanks so much for your time and I hope a lot of people reach out to you.
Valon Xhafa: for having me Klaus.
Valon Xhafa: Take care.
Claus Lauter: Hey, Klaus here. Thank you for joining me on another episode of the e commerce coffee break podcast. Before you go, I'd like to ask two things from you. First, please help me with the algorithm so I can bring more impactful guests on the show. It will make it also easier for others to discover the podcast.
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