Artificial intelligence is disrupting everything around us, and that’s not necessarily bad. In fact, in 2022, 35% of companies worldwide adopted Artificial Intelligence (AI) at different levels of their business. The use of AI in eCommerce is, in particular, expanding.
This article will explain how online store retailers and managers use AI in eCommerce and explore how it affects the digital shopping landscape.
You’ll learn from brands already applying AI and its positive and negative effects. We’ll also provide you with tips on how to incorporate it into your eCommerce strategy.
What is AI in eCommerce?
AI and machine learning in eCommerce involves using artificial intelligence technology in operating an online retail business.
It means applying advanced algorithms to enhance various aspects of the eCommerce experience, such as product recommendations and customized marketing campaigns.
In eCommerce, AI helps business owners streamline their operations, create profiles of their customers based on shopping patterns, and enhance their digital assets to improve buyer experience.
By applying the technology of AI and machine learning in eCommerce, online sellers can personalize product offers, automate basic customer services, and even prevent fraud.
How is AI Applied in eCommerce?
AI is now omnipresent in eCommerce business operations. Entrepreneurs include it in their inventory, fulfillment, marketing, customer service, and HR strategies.
The AI use cases in eCommerce are constantly expanding, and businesses that embrace it are guaranteed a competitive edge.
Big data is the major contribution of AI to eCommerce. Its ability to process vast amounts of information fuels wise business decisions encompassing the entire online store operations.
Here’s how AI is transforming eCommerce as we know it:
1. Virtual Shopping
By analyzing the wealth of consumer data on buying behavior, preferences, and price sensitivity, AI algorithms can suggest relevant products to shoppers. These personalized product recommendations increase the likelihood of a purchase.
Additionally, AI-powered virtual shopping assistants can provide buyers with customized offers and a more interactive shopping experience.
Automated checkouts, on the other hand, facilitate a faster purchase journey with zero human error, less number of clicks, and simpler checkout forms.
This also benefits online store owners as seamless checkouts decrease abandoned cart incidents.
2. Customer Assistance
AI is transforming customer service with automated chatbots that never sleep, can answer queries 24/7, and resolve issues instantly.
That means human customer service representatives can provide more high-level assistance to buyers with more complicated issues. Meanwhile, customers save time when their concerns are addressed immediately.
Employees can focus on other important tasks by reducing time spent on repetitive and basic tasks.
Juniper Research forecasts more than $100 billion of online transactions via chatbots in 2023.
MORE: Customer support tools.
3. Inventory Management and Pricing Strategy
Inventory management and demand forecasting are two other areas where AI benefits enterprises. It makes supply chains work more efficiently toward meeting accurate expectations.
Predictive analytics allow businesses to accurately forecast demand, avoid stockouts, and prevent wastage based not only on past data but also on future events.
On the other hand, warehouses can boost productivity through computer vision, a product recognition AI technology that enables workers to locate items precisely.
AI also empowers businesses to be dynamic with pricing strategies, ensuring they are competitive in the market without sacrificing profitability.
4. Marketing Campaigns
AI enables more tailored advertisements to individual customers based on their browsing and purchasing history.
Consequently, businesses can shift from traditional ads that cast a wide net to AI-inspired ones which target individuals most likely to buy. This, in turn, translates to reduced expenses on marketing and advertising efforts.
5. Fraud Prevention
Analyzing data is one of the strengths of AI, and it is extremely helpful in identifying questionable actions on eCommerce platforms.
Each transaction shows a risk score on AI-based systems to flag out-of-the-ordinary purchasing patterns. Plus, AI technology makes identity recognition more accurate using biometric and document verification.
What Brands Are Using AI in eCommerce?
Online marketplaces like Amazon and eBay leverage AI algorithms in several ways, such as suggesting products to customers on a more personalized level, improving their online shopping experience, and boosting sales.
Fashion retailer IK Bennet has implemented AI to help customers make confident purchasing decisions by providing accurate sizes that fit them perfectly.
Sephora, a line of beauty products, uses AI to offer customers bespoke skincare guides based on their preferences and skin type.
The media-streaming company, Netflix, is known for its AI-driven “shows recommended for you” based on their users’ previous views and preferences.
These brands have effectively integrated AI into their eCommerce strategies. They demonstrate how to use AI in eCommerce to mine the immense potential and benefits of this technology.
What Are the Impacts of AI on eCommerce?
AI has had profound effects, both good and not-so-good, on the world of eCommerce.
The benefits of AI can be felt by both parties in an online transaction.
For online shoppers:
- A more enjoyable shopping experience,
- Better choices in products and prices,
- Faster resolution of issues,
- Less returns on purchases.
MORE: Retailer returns report
- More accurate and relevant customer information,
- Higher numbers of satisfied and loyal customers,
- Savings of time and money,
- Diminished inventory wastage,
Greater workforce productivity.
While the positive impacts of AI on eCommerce are many and remarkable, it’s essential to acknowledge its negative implications:
Some human roles may become obsolete as businesses rely on automation and AI algorithms in more processes.
Potential Breaches in Privacy and Data
There is no other way for AI to provide customized services to shoppers but to access their personal information. However, this raises concerns about how that data is stored and, more importantly, protected.
Bias and Discrimination
If not carefully designed and monitored, AI systems may unintentionally amplify existing biases and unfairly target or exclude some groups of buyers.
For example, a Statista survey found that more than 40% of online shoppers of the Baby Boomers generation are not comfortable with using AI for personalization.
Businesses need to be aware of these potential negative impacts and take steps to avoid such risks in their AI applications.
MORE: Generative AI in retail
The Future of AI in eCommerce
As we look ahead, the possibilities of AI and machine learning in eCommerce seem endless. According to research, AI in eCommerce will be valued at over $36 million by 2025 as more retailers continue to utilize it in harvesting customer data to provide increasingly personalized offers.
Also, those who haven’t yet will apply AI to inventory management and demand forecasting to spend less and earn more. This will bring about $20 billion in AI spending by 2026.
And compared to the 85 million job losses due to AI by 2025, AI-related roles will employ 97 million individuals across all industries.
As AI evolves, we may also see advancements in voice-activated shopping and augmented reality try-on experiences.
MORE: AI in retail
How to Implement AI in eCommerce Strategy
Want to stay ahead of the game in the eCommerce world? Add AI to your strategy. That is already non-negotiable.
Here’s a simple step-by-step guide:
1. Start by analyzing your customer data to understand their preferences and patterns of browsing and buying behaviors.
2. Invest in AI-powered digital tools and platforms that can automate tasks, optimize pricing, and improve inventory management.
3. Continuously monitor and update your AI strategy to ensure it aligns with your business goals and current trends in AI technology.
The benefits of AI in eCommerce are undeniable.
From chatbots providing instant support to automated checkouts that slash shopping time, customers now enjoy a more delightful online shopping experience.
For online sellers, creating a personalized transaction for each buyer encourages purchase, while controlled supply chains reduce costs.
Overall, AI has transformed eCommerce by enhancing efficiency, personalization, and customer engagement, resulting in outstanding business outcomes.And this is not limited to retail giants like Amazon. With the accessibility of AI technology, even small business owners like you can dream big.