In this blog, you will learn about artificial intelligence (AI) and its role in transforming the eCommerce industry.
Today if you look around, you will realize that you are surrounded by artificial intelligence. From the voice assistant at your home to the eCommerce app that you use to shop for daily essentials, AI is integrated everywhere in different forms, uplifting your shopping experience.
But do you know, there are more jobs that AI does in the eCommerce? Yes, artificial intelligence is not just limited to enhancing shopping experiences but helps eCommerce business owners in numerous ways.
This blog speaks about the role of artificial intelligence in eCommerce in detail. So, if you are reading this till the end, you can rest assured that you are going to gain extremely valuable insights regarding artificial intelligence in eCommerce. So, without further delay, let’s start.
AI and Its Subsets Used in eCommerce
Before diving into the roles AI plays in eCommerce, let’s understand what AI is and which of its subsets are used in the eCommerce industry.
Artificial Intelligence, popularly known as AI, is a branch of computer science used to develop systems that can perform tasks, such as learning from data, recognizing patterns, making decisions, and understanding natural language, that typically require human intelligence.
AI systems analyze large amounts of data gathered from various sources, perform tasks based on programmed algorithms and learned models, and deliver results quickly and with high accuracy.
However, AI is not alone in transforming the eCommerce. There are some other key players, known as subsets of AI, that support artificial intelligence in revolutionizing the eCommerce sector. Let’s talk about subsets of AI:
- Machine Learning
Machine learning is a subset of AI that enables systems to learn from large datasets and make predictions based on data. The key feature of machine learning is that it improves its performance over time, reducing the need for explicit programming.
Remember the last time you visited Amazon to buy a shirt, and you got similar product recommendations? That is machine learning for you!
The machine learning analyzed your search, past purchases, size, and other details, and provided you with similar products you are looking for.
- Predictive Analytics
Another subset of AI used in eCommerce is predictive analytics. As the name suggests, predictive analytics involves getting insights by evaluating data to predict future outcomes or trends. This significantly helps businesses to prepare and handle future events with informed decision-making.
When you were planning for a vacation and checked hotel prices, you got them low. However, after some days, when you checked again, there was a surge in hotel prices.
This is because of predictive analytics. The subset of AI analyzed data like demand, peak season, number of rooms, etc., and revised prices dynamically.
- Natural Language Processing
Natural Language Processing (NLP) enables computers to understand, interpret, and generate human language, streamlining tasks like text analysis, sentiment analysis, and language translation through algorithms and linguistic models.
When interacting with the eCommerce chatbot to know about order status or cancellation requests, you must have noticed that the chatbot understands your queries and resolves them providing you with the exact solution. But, how does it happen? It is because of another subset of AI known as natural language processing (NLP).
- Computer Vision
Computer vision is a field of artificial intelligence that allows systems to interpret and understand visual information from images or videos and facilitates tasks such as image recognition, object detection, and scene understanding through algorithms and deep learning models.
You must have seen or used the visual search option available in most eCommerce websites and applications. If you click or upload a picture, let’s say, furniture or a book, the algorithms analyze the image, and provide you with similar products as results, all because of computer vision in eCommerce.
- Generative AI
Generative AI is a subset of artificial intelligence that creates new results, such as images, music, or text, by analyzing and learning patterns from existing data and generating novel outputs, leveraging algorithms like generative adversarial networks (GANs) or variational autoencoders (VAEs).
It is the new emerging subset of artificial intelligence used by leading eCommerce apps and platforms. There is a generative AI-powered assistant that helps buyers make their shopping decisions.
If you want to shop for outfits for an office party from a fashion app or use a travel website to make plans for travel in the upcoming weekend, you can ask the assistant, “ What should I wear at the office party”, and “ Suggest me 10 places to visit this weekend”.
The assistant will analyze your queries and provide you with the best outfits for office parties, and the best places to visit on weekends, respectively.
Hence, these are the subsets that support AI’s role in the eCommerce. Now, it will be easier for you to understand the role of AI in eCommerce.
Role of Artificial Intelligence in eCommerce
There are various roles of AI in the eCommerce landscape. In this section, you will learn about them in detail.
Role#1. AI for Enhancing Customer Experience
For an eCommerce business, the customer is king. Hence, it is crucial to provide an enhanced customer experience to attract and retain them.
The leading eCommerce businesses leverage artificial intelligence to enhance the customer experience in the following ways:
- Personalized Recommendations
AI is used in eCommerce to offer personalized recommendations of products and services to customers they are looking for. If a customer comes to your platform and cannot find relevant products or services, he/she will abort.
A report shows that 56% of online customers usually return to a website that offers personalized recommendations. The same report shows that 44% of customers who experience personalized shopping experiences say they’ll become repeat buyers.
Hence, leading eCommerce companies like Walmart, Amazon, and others leverage AI and machine learning algorithms that analyze what users are looking for and recommend products that align with their needs.
An example of Amazon’s personalized recommendations
- Chatbots and Virtual Assistants
Chatbots and virtual assistants help significantly in enhancing customer experience in eCommerce. AI-powered chatbots leverage natural language processing and machine learning to understand text queries from customers, analyze them, and provide solutions in real-time.
This saves customer’s time and helps eCommerce businesses save resources spent on sales representatives. According to Outgrow, chatbots can increase sales by 67% on average.
Similarly, virtual assistants are trained on data to help customers with making buying decisions. These assistants evaluate what customers are looking for and suggest products or services similar to search intent.
Moreover, they also provide answers to product or service-related queries in real-time, enhancing customer experience.
Nowadays, top AI developers are leveraging generative AI, the emerging subset of artificial intelligence, to enhance the functionalities of these bots. GenAI-enabled chatbots and virtual assistants can understand the context of customer queries better and offer them real-time relevant solutions.
- Improved Search Functionalities
Leading eCommerce worldwide are taking customer experience seriously and putting much effort into enhancing it. Another strategy eCommerce businesses use is making search functionalities better.
Voice-based search and image search are the top ways to enhance the eCommerce apps’ search functionalities.
The image search uses computer vision to find similar products submitted by customers, whereas the voice-based search leverages machine learning and natural language processing (NLP) to analyze and deliver results in real-time.
An example of a voice-based search in a leading eCommerce app. The microphone in the search bar symbolizes the voice-based search feature. Users can tap on the mic and speak what they are looking for.
Similarly, the camera in the search bar symbolizes image-based search in an eCommerce website. Users can tap on the camera icon, and click or upload a picture of a product to search for that particular and similar products.
So, this is how leading eCommerce companies embrace artificial intelligence (AI) to enhance customer experience. Now, read further to learn how AI is used for bettering operational efficiency in eCommerce business.
Role#2. Artificial Intelligence for Bettering Operational Efficiency
ECommerce companies use artificial intelligence (AI) to streamline their operational processes so that a product can reach its end users without any hassle.
In this section, you will read how AI helps eCommerce businesses streamline and improve their operational efficiency.
- Inventory Management
Managing inventories in the eCommerce industry is a very tedious task. The demand for any product rises and dips unexpectedly, making it difficult for eCommerce businesses to optimize their inventories.
However, leveraging artificial intelligence can make inventory management easy. Predictive analytics, the subset of AI, plays a crucial role, as it analyzes past data, such as demand for a particular product during a season, the actual number of units sold, and more.
The inventory management experts evaluate these insights carefully and create further plans of action to manage inventories during normal days and sale days.
- Demand Forecasting
Similarly, AI plays a crucial role in forecasting demand for particular products and services. Predictive analytics analyzes past data on last year’s inventories, sales made, market trends, and more.
After analysis, it provides insights used by eCommerce businesses to predict product demand accurately, helping save resources and capital and avoid wastage.
- Automated Pricing
Automating pricing is another role of AI in the eCommerce industry. The demand for a product or service is directly proportional to its price. When demand rises, the price increases, and vice versa. It is basic economics!
However, when an eCommerce platform has thousands of products and services, it is nearly impossible to study their demand and optimize prices accordingly, manually.
This is where artificial intelligence (AI) comes into play. eCommerce businesses integrate predictive analytics and machine learning that analyze the demand for a product and service in real-time and adjust prices accordingly. AI automates price optimization, saving capital, time, and other resources for an eCommerce business.
Role#3. AI for Marketing and Sales Optimization
The third role of AI in eCommerce is marketing and sales optimization. Using AI, eCommerce businesses enhance their marketing and sales performance better. In this section, you will read how AI is used for marketing and sales optimization in the eCommerce sector.
Also Check: Role of AI in Influencer Marketing:
- Customer Segmentation
Customer segmentation is a process of categorizing customers based on their characteristics, preferences, behavior, and more. It helps businesses in marketing and selling products manufactured for a particular market.
For instance, you cannot sell or market Rolex watches to lower-income sections. Similarly, you can ask elite people to buy Toyota cars. Therefore, marketing and selling the right product to the right people is what a successful business is known for.
Now, let’s talk about how AI streamlines customer segmentation in eCommerce.
Customer data is evaluated using machine learning and natural language processing to understand what a particular customer is looking for, its buying capacity, its past purchases, etc.
Post analysis, the algorithms categorized that customer and kept its information under a particular section. This categorization helps the marketing and sales team to market and sell the right product to the right customer.
- Targeted Advertising
According to Wikipedia, targeted advertising refers to a type of advertising, that also includes online advertising, directed toward an audience with particular traits, based on the product or person the advertiser is promoting.
Artificial Intelligence (AI) in the eCommerce sector plays a crucial role by helping marketers advertise their products and services to a particular target audience.
Natural language processing (NLP) algorithms in models understand customer information, such as product preferences, buying history, behavior, and more. It provides insights that help marketers in eCommerce to advertise their products or services to that particular customer.
You must have noticed, for instance, that when you search for a particular product online, you start getting relevant advertisements on different platforms, such as YouTube, and Chrome News feed.
This happens because the AI in eCommerce app gathers information, such as what you were looking for, and starts showing ads for that particular and similar products.
- Customer Behavior Analysis
Last but not least, AI is used in eCommerce to evaluate and understand customer behavior. Every customer is different so are their buying preferences. Hence, one cannot sell a product without knowing what they want.
That is why eCommerce businesses leverage artificial intelligence and machine learning to understand customer’s needs to market and sell them relevant products and services.
Also, understanding customer behavior helps businesses create new products and services that more people tend to buy.
Role#4. Security and Fraud Detection
Security and fraud detection are other crucial roles that AI plays in the eCommerce industry. A successful eCommerce business must take robust measures to protect its customers from potential fraud. According to the FBI’s report, US citizens lost approximately $12.5 billion to online fraud in 2023.
Due to rising cases of online fraud, eCommerce businesses have started leveraging emerging technologies like blockchain and artificial intelligence to ensure secure transactions and protect customer data at all costs.
Let’s understand how AI helps eCommerce businesses protect their customer from online fraud:
- AI in Fraud Detection and Prevention
AI plays a crucial role in detecting fraud and alerting the user in real-time. The machine learning algorithms are trained on user data to detect unusual patterns that may lead to fraud.
For example, if you always shop between $100 to $200, and suddenly there are orders for $50,000, the machine learning algorithms in the eCommerce platform will detect it and alert about it.
Another example of this is when you log into your eCommerce app using a new device, you get an instant notification that a new login has been made into your account using a particular device.
This is because machine learning algorithms detect a new device and alert you in real-time to prevent any sort of potential fraud.
- Enhancing Transaction Security
Another role of AI in eCommerce is enhancing transaction security and safeguarding customer’s hard-earned money. AI developers train ML and NLP algorithms to detect unusual patterns in transactions and alert users.
For example, if anyone hacks users’ eCommerce accounts and makes frequent purchases, the algorithms detect the pattern and send notifications regarding the purchases, alerting the users in real-time.
Moreover, the payment gateways in eCommerce apps and websites are safeguarded by artificial intelligence. If someone tries to make unauthorized access, it detects it and alerts the cyber security team.
Therefore, these are the major roles of AI in eCommerce, enhancing customer experience, streamlining operational efficiency, optimizing sales and marketing, and safeguarding transactions.
Let’s discuss the benefits of implementing artificial intelligence (AI) in eCommerce.
Benefits of Implementing AI in eCommerce
Artificial intelligence offers numerous benefits to eCommerce businesses. The top advantages of integrating AI in eCommerce are mentioned below:
- AI Increases Sales
Artificial intelligence can increase your sales significantly. It helps you to market the right product to the right customer at the right time, thus, increasing the probability they buy it.
Also, it allows you to manage your inventories efficiently so that there is a sufficient supply of goods when there is high demand.
- AI Helps in Providing Better Customer Services
Another benefit of implementing artificial intelligence (AI) in eCommerce is that it helps you offer better customer service.
You can use AI to provide personalized recommendations, enhancing customer satisfaction. Moreover, you can leverage generative AI-enabled chatbots to address customer grievances in real-time.
- AI Enables Efficient Use of Time and Resources
Last but not least, AI in eCommerce enables you to use your time and resources efficiently. It helps in optimizing inventories efficiently so that there are no shortages or excess stock during sale days.
Also, it helps you analyze market trends, and demand, categorize customers, create marketing campaigns, and more, rapidly, saving your time. Moreover, artificial intelligence protects your eCommerce business from unauthorized cyber attacks, safeguarding customer details and transactions.
Hence, these are the top advantages of leveraging AI (artificial intelligence) in eCommerce. Read further to learn how to implement AI into eCommerce.
Steps to Integrate AI in eCommerce
Here is the step-by-step process to implement artificial intelligence (AI) in eCommerce.
- Planning
Planning is the first step to implement AI into eCommerce. You must determine for what purposes you are going to use AI in the eCommerce business.
- Gather and Refine Data
After you have a clear purpose for using AI in eCommerce, you need to gather data from different sources and refine it to remove irrelevant and irregularities to make it high quality.
- Develop the AI Model
Develop the AI model for your eCommerce business. You can hire the best AI developers or outsource it to a leading AI development company to build your AI model.
- Train the Model
Post development, train the AI model using the refined high-quality data you gathered from different sources.
- Testing
After training, test the AI model to ensure that it is delivering the desirable and accurate results with high precision.
- Deployment
If your AI model is working fine, deploy it into your eCommerce business. It is recommended to deploy it in limited systems and expand it with time to ensure successful deployment.
Therefore, it is the process of integrating AI into the eCommerce business. However, there are challenges that you may face during the integration process. Let’s discuss the possible challenges in the next section.
Challenges of Integrating Artificial Intelligence in eCommerce
The following are the challenges most eCommerce companies face while integrating artificial intelligence into their business. Let’s understand them in detail.
Challenge#1. Data Privacy and Security
The most common challenge faced by eCommerce businesses is data privacy and security. To ensure the smooth functioning of AI models, you must train them with high-quality data. It is quite difficult to ensure that the customer data you have is accurate or not.
Morever, there are high chances of cyber attacks in the eCommerce industry. Hence, most businesses find it challenging to protect their data from cyber-attackers.
Challenge#2. AI Implementation Costs
AI implementation costs require high investments. Many eCommerce businesses, especially new startups find it challenging to integrate artificial intelligence during their initial phases.
Challenge#3. Integrating AI with Existing Systems
AI models require high-end systems to function efficiently. Most businesses in the eCommerce industry find AI integration challenging, as their systems do not support novel AI solutions.
Challenge#4. Training Staff and Managing Change
Change is necessary for success. However, many people find it difficult to adapt to changes. In the context of AI in eCommerce, you need to train your staff to leverage AI efficiently.
It is another major challenge for eCommerce businesses when integrating artificial intelligence.
So, these are the top challenges faced by eCommerce businesses when implementing artificial intelligence (AI).
Real-Life Examples of AI in eCommerce
The following are the real-life use cases of artificial intelligence in the eCommerce sector.
- Amazon
Amazon is one of the prominent eCommerce businesses that is leveraging AI to increase sales and drive sales. The company is using high-end machine learning algorithms to offer product recommendations on its shopping website and app.
Also, its AI-powered voice assistant, ALEXA, helps customers search for products, place orders, and pay using voice commands. It increases customer satisfaction by delivering convenience and saving time.
- Alibaba
Alibaba is another leading eCommerce platform that is using AI to streamline its business processes and inventories.
The business employs AI algorithms to evaluate data like historical sales data, market trends, holidays, and more, and forecast accurate demand. This helps Alibaba maintain its inventory levels and prevent situations like overstock or stockouts.
- Stitch Fix
Stitch Fix is a rapidly online personal styling service provider that uses AI to enhance its marketing strategies and increase sales.
The startup uses AI to analyze customer data and categorize them based on their buying capacity, preferences, and behaviors. It is also used to create personalized marketing campaigns to target particular customer segments.
This allows Stitch Fix to allocate its capital and resources efficiently and increase its customer base and sales.
Hence, these are the top eCommerce brands that are embracing artificial intelligence to increase sales, boost productivity, and retain customers.
Conclusion
There are many roles that AI (artificial intelligence) plays in the eCommerce sector. It significantly helps businesses enhance customer experience, improve operational efficiency, safeguard customer data and transactions, and optimize marketing strategies to boost sales.
This is the reason why leading eCommerce businesses like Amazon, Ikea, Alibaba, Walmart, Etsy, Shopify, and many others are using AI for different purposes.
If you also want to leverage the potential artificial intelligence to grow your eCommerce business, reach out to Quytech, the leading AI development company.
With 12+ years of experience in the industry, we have helped numerous businesses, from startups to enterprises, reach new heights of success with our robust and personalized AI solutions.
So, what are you waiting for? Contact us today for end-to-end AI development services tailored to your business needs.
Frequently Asked Questions
The following are some of the frequently asked questions related to the role of AI in eCommerce.
The major roles of AI in eCommerce are:
– Enhancing customer experience
– Safeguarding customer data and transactions
– Streamlining business operations
– Optimizing marketing strategies to boost sales
You can use artificial intelligence (AI) for targeted marketing. When you market the right products to the right customer, you increase the chances of successful sales. Also, you must use AI to manage inventories to avoid overstock and out-of-stock kind of situations.
Quytech is a leading AI development company with 12+ years of experience in developing and integrating personalized AI solutions tailored to specific business needs. From in-depth consultations to successful implementation, we will assist you at every stage of AI implementation into your eCommerce business.
Visit our website to know more: www.quytech.com