Using Artificial Intelligence in E-Commerce: Transforming Online Shopping

How is Artificial Intelligence Changing the E-Commerce Industry?

Love it or hate it, artificial intelligence (AI) has become the talk of the town.

Although still relatively new, AI has transformed a lot of industries in a short period. Initially, its impact was only felt in industries such as finance and healthcare, but its benefits have now started to spread into e-commerce.

As technology evolves, the capabilities of AI will continue to expand. This article aims to examine some of the current uses of AI within e-commerce. The reality is that AI could – and probably will – change the e-commerce landscape forever, and companies that fail to embrace the changes could suffer irreparable damage.

AI in e-commerce is reshaping how online businesses price, market, and sell their products. In particular, it’s redefining the entire operations of how such companies – from ordering and storing stock to responding to customer queries.

AI is Crucial for E-Commerce

A business must have an e-commerce platform to compete with other retail companies. If your e-commerce business isn’t able to sell online, you won’t be maximizing your revenue. On top of that, e-commerce businesses have seen an upward surge after the pandemic.

Technology’s revolutionary and transformative use has led us into an era where we are immersed in social media, gadgets, and the Internet as never been before. For all of those reasons, many successful businesses have decided to embrace the online market and are seeking opportunities to increase their sales.

With many brick-and-mortar businesses wanting to enter the e-commerce arena, AI is becoming a substantial part of the business world. It’s also boosting engagement and interaction with digital touchpoints. We’re witnessing firsthand that implementing AI for e-commerce websites can boost your sales and improve your efficiency and productivity in operations.

So what is AI, its benefits in e-commerce, and how can your business leverage AI to sell in a smarter, smoother, and more strategic way?

Let’s take a look.

What Is AI?

AI refers to the ability of machines to perform tasks that were once only performed by humans.

Learning, reasoning, perceiving, problem-solving: things that formerly needed our brain cells to be realized can now be done by computers. (Typically much faster than we’re be able to do them – and with much less chance of error!)

We recently wrote a post on AI and the future of web design. Here we’ll outline the benefits of using AI in e-commerce.

How to Apply AI in E-Commerce

AI can interpret and analyze data, make decisions, and then take action on those decisions – a skill set that makes it ideal for applications in e-commerce. So how can you harness AI’s speed, simplicity, and seamlessness to change how your e-commerce business operates?

Let’s look at how AI will impact e-commerce soon.

Customer Service and Virtual Assistants

When your customer has a query about a product they’ve bought or one they’re considering purchasing, they want answers. (And fast!)

Live chat has become the leading digital contact method for online customers, as a staggering 46% of customers prefer live chat compared to just 29% for email and 16% for social media. And 42% of customers prefer live chat over phone conversations because they don’t have to wait on hold for an agent. And if it’s 24/7? Even better.

But of course, paying someone to provide around-the-clock online customer service isn’t always feasible – especially if you’re a small business. When would such a person eat? When would they sleep? When would they go to the restroom?

Well, AI does none of those things – which is why virtual assistants (such as Amazon Alexa or Apple Siri) and chatbots have become so popular. Chatbots use natural language processing (NLP) to replicate the service experience your customer would have through a live chat tool – only it’s all automated.

A chatbot can interpret a customer’s request, understand their problem, and respond – whether they’re directing them to a support article, asking for further information, or offering a solution then and there.

AI in e-commerce? It’s time to start the conversation! AI-driven chatbots use NLP to interpret a customer’s request, then provide them with product recommendations and further suggestions.

Increased Loyalty and Retention

Returning customers are more profitable than new ones. They tend to spend more and act as your most effective marketers by telling their friends, family, and followers about your products.

As well as serving personalized product recommendations that get increasingly accurate the more a customer shops with you, AI can predict consumer trends and learn more about each shopper. As a result, you can automatically deliver unique experiences for each customer based on their preferred channels and interaction with your business.

Chatbots also come into play in customer retention. AI-powered sales associates can automate answers to routine questions and give existing customers instant information about their orders. This ability eliminates any friction about making another purchase and creates delightful experiences that keep them returning for more.

Automated Customer Journeys

No two customers are the same, and with each individual demanding a personalized experience, it’s a struggle for e-commerce brands to deliver. AI uses all the data available on your customers or target audience to predict their next move, whether that’s adding an item to their cart, contacting support, or sharing a review.

The more AI learns about a customer, the more accurate it becomes in predicting what they want and when they want it. It can then automate each action or touchpoint so that it aligns with the shopper’s needs – for example, it might trigger an informative email about product use cases to a customer who has looked at the same item several times but hasn’t added it to their cart, or it might send a well-timed replenishment SMS to a customer who regularly buys a particular product.

Visual Search

Visual search enables customers to take a picture of a product they like and then upload it. AI can then evaluate a specific product, brand, style, color, etc., and then provide suggestions on alternative products it feels that customers might be interested in. While this might sound exciting and is certainly innovative, it’s worth noting that it could also reduce the impulse buying factor. That being said, it could alter the entire shopping experience, making it much more streamlined and focused than it is today.

Personalization

Although far from perfect, certain online stores seem to have a sixth sense about what you have been searching for, and this is an insight into what will be coming in the future. AI allows stores to learn about your interests, passions, and the triggers that make you more likely to buy certain products.

Whenever you review a product, return a product, or even tweet about it, companies can use that information as a data point, specifically about you. The stores can then merge this knowledge with AI to present you with an individual storefront filled with all the products that will appeal to your tastes. As time passes and knowledge increases, the buyer will face ever more temptation when visiting a website regularly.

Personalized Product Recommendations

In 2023, providing a personalized shopping experience is more important than ever, given that 71% of consumers feel frustrated when their shopping experience is impersonal.

Introducing AI, then, feels like a paradox. Are businesses making the shopping experience more personal – by outsourcing the work behind it to a robot? Well, hear us out.

Personalizing a buying experience requires a lot of legwork – and you can use AI to do just that. Its algorithms can crunch huge amounts of data, including user behavior on your site, plus your customer’s purchase history and product preferences. Such data allows you to understand what your customers are interested in. You can then use this data to offer product recommendations that’ll be precisely what your target consumer wants.

Better still, AI can lean on NLP – the field of AI that allows computers to understand and generate human language. With NLP, AI can interpret your customers’ feedback, reviews, and comments on your site to better understand their preferences and interests. Not bad, eh.

Virtual Personal Shopper

Many consumers are short on time, and the ability to use a personal shopping assistant appeals to many. The only objection is the cost of seeking their advice.

When that personal shopper is effectively a computer using AI, the cost implications quickly fade away. Of all the technologies and ideas mentioned in this article, this one is perhaps the closest to becoming regarded as normal.

AI is only in its infancy, yet it can potentially destroy what we understand as retail shopping today. As technology improves and customers become more accustomed to AI’s personal and predictive aspects, their shopping habits could change forever.

For example, if they know that the clothes they buy from a certain store look fantastic, they could rely on AI to source a product similar to a picture they provide. Rather than spend the entire day looking for that perfect dress or suit, AI could solve the problem within seconds.

Pricing Optimization

When running an e-commerce business, pricing your products can be one of the toughest tasks you’ll face – especially if you’re new to the game and don’t have an established market or product.

Fortunately, AI can help. AI algorithms analyze several factors, including your competitors’ prices, inventory levels, and current demand, to price your products dynamically. Dynamic pricing means adjusting them, in real-time, according to present market factors. If demand is low and stock is high, prices might go down; if it’s the opposite, they’re going up – along with your profits.

On top of dynamic pricing, AI can also help optimize your pricing. This process involves analyzing historical sales data: chewing over patterns and trends, and spitting out the optimal price for your product. With these AI-enabled figures, you’ll be able to figure out the price point that generates the most sales, without losing any customers through overpricing your products.

Ever wondered why that cheap flight you saw a week ago is never quite as affordable as it was the last time you looked? That’s dynamic pricing at work!

AI Copywriting

The introduction of AI copywriting is revolutionizing the way brands create their sales copy. AI writing tools can generate marketing copy within seconds. Instead of hiring copywriters or ad agencies to write headlines, blog intros, or product descriptions, brands can now use AI software. These tools can offer digital ad copy, social media content, and other e-commerce copy using advanced AI language models.

Remarketing

These days, winning customers isn’t simply about marketing. It’s about remarketing – selling to customers again, again, and again. It’s about using strategies to engage people who may have interacted with (but not necessarily bought from) your brand and lure them back into your business’s ecosystem.

And yes, you guessed it: AI can help. We’ve already discussed some of AI’s remarketing strengths: personalized product recommendations, dynamic pricing, and chatbots, among others. But there are a couple more we’d like to bring to the table.

The first? Predictive modeling. Here, AI crunches customer data to predict which of your customers are most likely to make a purchase – and, most importantly, when. The second? Retargeting. AI marketing tools can help you identify customers who’ve abandoned their cart in a previous session with your site,  allowing you to re-engage them with an ad, an email, or a deal or discount tailored uniquely to them.

Fraud Detection

AI can detect and prevent fraudulent activity by analyzing customer behavior. As a result, it can recognize patterns indicating suspicious activity, such as unusual purchase patterns or login locations.

Thanks to AI identifying and preventing fraud, e-commerce businesses can protect their revenue and reputation without sacrificing time and resources.

Inventory Management

Another area of e-commerce where AI’s predictive analytics are reshaping the terrain is inventory management. Storage facilities don’t have the space or the money to always keep everything in stock, so it’s important to prioritize the products you need when you need them. Inventory must be kept up to date, stored properly, and ordered ahead of time, based on predictions of customer demand.

AI uses predictive analysis to make estimates about what future demands in the market will look like. With machine learning, AI becomes better and better at accurately predicting what inventory you need to order and how much of it you should always have on hand.

AI systems can anticipate quick changes in demand, conduct preventive maintenance for your technology and even automate certain packing procedures to increase efficiency.

Smarter Logistics

Artificial intelligence in e-commerce doesn’t only benefit your product, pricing, and customer care. It can also boost the logistics of your e-commerce business’s operations: that is, how you order, store, and ship your inventory to your customers.

In terms of your logistics, AI can help your e-commerce business with the following.

• Optimize shipping routes: given factors such as distance, weather, traffic, and delivery deadlines, AI can help you slash delivery times and and transportation costs.
• Forecast more effectively: by analyzing market trends and sales data, AI can predict future demand for stock, helping you to place better orders, reduce the ill effects of stock outs, and improve the efficiency of your supply chain.
• Manage your space: by getting to grips with your e-commerce warehouse data – for example, your inventory levels and order fulfillment rates – AI can streamline your warehouse operations. You can reduce costs, speed up fulfillment, and minimize “dead” storage space – and boost your bottom line!

Benefits of Using AI in E-Commerce

We’ve reviewed some of the applications of AI in e-commerce. But is it right for your business? Let’s whizz through the benefits of AI in e-commerce to find out.

• A personalized approach: AI can analyze your customers’ behavior, preferences, and purchase history to recommend the products most relevant to their needs.
• A high-quality customer experience: with chatbots answering queries and providing 24/7 support, you’ll never have to keep a customer waiting.
• A more secure way to sell online: AI can identify fraudulent transactions and stop them from happening. This safeguards your customers data and protects you from the financial and reputational risk of chargebacks and customer disputes.
• A more effective marketing thrust: AI can optimize your marketing campaigns, allowing you to figure out the best channels, timing, and messaging for engaging your customers.
• A hands-off style: with AI doing all the stuff you don’t want – or don’t have time – to do, you’ll be able to focus on what matters most: growing your business!
• A boost in Google’s rankings: by using AI keyword research tools to optimize the content on your site, you can give your e-commerce SEO a leg-up – and rise to the summit of the search engine results pages.

AI in E-Commerce: Top Tips

Now that you know what AI can do and why you need it, let’s explore our top five tips for introducing it to your e-commerce business.

• Define your AI goals: first, you’ll need to understand which areas of your e-commerce business stand to benefit most from AI. Operations? Marketing? Customer service? This understanding will help you know where to start your AI journey and which arms of your e-commerce business to prioritize.
• Choose the right AI solution: with your goals and pain points identified, do your research and pick the AI tool that works best for you.
• Start small, and work up: going in guns blazing with a blanket AI rollout isn’t a good idea. It would be best to start small – testing, tweaking, and tuning up your AI solution in a controlled environment – before gradually scaling it up. That way, you can get a handle on any issues early on and know about them before your customers do!
• Ensure your AI tool plays well with others: as the “new kid on the block,” your AI tool needs to integrate with the systems – such as your CRM, your marketing tools, and your inventory management software – already underpinning your e-commerce business’s success.
• Always iterate and optimize: as we’ve touched on already, AI is a constant process – not one you can “set and forget.” You need to continually feed it data to get the most out of it and monitor it to ensure it’s performing at its peak.

AI in E-Commerce: Summary

AI is still a topic that divides opinion. Some love it; some hate it. For some, it represents a utopian new future; for others, it’s a thing to be feared and loathed in equal measure.

But for e-commerce business owners, AI should represent one thing above all else – excitement. After all, the possibilities of AI in e.commerce are already thrilling – from chatbots and remarketing to smarter logistics and pricing optimization – and evolving every day.

Powerful AI technology is pretty much mandatory in today’s e-commerce landscape. Fierce competition and high customer expectations mean brands are tasked with repeatedly creating personalized experiences that delight shoppers.

E-commerce brands increasingly turn to AI to improve their analytical insights, create a more personalized customer experience and increase their competitiveness. As the market for AI in e-commerce continues to grow, any brand not investing in its potential will be left in the dust.

The future of e-commerce is here, along with its two letters. And all you have to do? Embrace them!

Do You Need to Improve E-Commerce Usability?

Are you interested in selling your products online but unsure of the benefits of AI in e-commerce? Our professional e-commerce designers will be happy to help you with this. But first, look at our portfolio and read our case studies.

Then, if you believe we are a good fit for your e-commerce web design needs, reach out to us! We offer a full range of consulting and design solutions for businesses and product brands.

And if you are unsure how to improve e-commerce usability with AI, let’s talk! We will listen to you, answer your questions, and help you meet the expectations of demanding online consumers!