The term “artificial intelligence” may conjure up images from films such as Steven Spielberg’s 2001 film A.I. Artificial Intelligence, sci-fi thriller Ex Machina, or 1982 cult classic Blade Runner. In the ecommerce sector, however, it is less about human-like robotics and more about the learning technologies and algorithms that serve as the foundation.
By using collected business and customer data to make better business decisions and more accurately predict the future, AI can assist today’s online retailers in providing an optimized customer experience on and off their ecommerce websites. Let’s look at some of the ways AI and associated technologies are moving the ecommerce industry forward, from improving customer interactions to streamlining business processes.
Ecommerce and technological advancements
Technology is constantly pushing the boundaries of what ecommerce can do, from digital transformation and software-as-a-service to virtual reality and artificial intelligence.
Every day, something new competes for the attention of online retailers due to technological advancements. You’ll never be short of new and interesting things to try — the real challenge is identifying the best opportunities for your ecommerce business.
AI is transforming the ecommerce industry
Artificial intelligence is more than just a novel technology used for its “cool factor.” AI implementation has the potential to impact a wide range of business functions throughout your organization.
Understanding the components of artificial intelligence can help you understand how it might affect your business. AI is a broad term that includes data mining, natural language processing, and machine learning.
- Data mining is the collection of both current and historical data to make predictions.
- Natural language processing is concerned with human-computer interaction and the interpretation of natural human language by computers.
- Machine learning is the use of a collection of algorithms to solve a problem by applying experience or providing examples. Deep learning is defined as “the process of layering algorithms in order to gain a better understanding of the data.”
AI technology has matured in recent years and has become a powerful tool for increasing sales and optimizing operations. Even many small ecommerce businesses are using technology with AI capability.
The Advantages of Using Artificial Intelligence in Ecommerce Businesses
Amazon has long understood the value of artificial intelligence and related technologies. Machine learning is used by the behemoth ecommerce company to improve product selection and user experience, as well as to optimize logistics.
A recent report from McKinsey & Company and the Retail Industry Leaders Association identified seven imperatives for rethinking retail in 2021, each of which could be supported in some way by AI-informed technology.
- Improved marketing and advertising targeting.
According to the retailers polled, personalization is a top priority, but only 15% have fully implemented personalization across channels. Stand out from the crowd by personalizing your message and engaging in one-on-one conversations with your customers.
AI and machine learning advancements have enabled deep personalization techniques to customize content by user. You can zero in on what your customers really want and deliver the message that will most resonate by analyzing big data from purchase histories and other customer interactions.
- Enhanced customer retention
Delivering personalized marketing and advertising messages to their customers can increase retention. According to McKinsey’s omnichannel personalization research, omnichannel personalization strategies have the potential to increase revenue and retention by 10-15%.
“A critical component of personalization is building better data and insights on customers, an asset that also generates additional value across the value chain,” according to the report. According to our findings, the ROI for personalization will soon outpace that of traditional mass marketing.”
Automation’s goal is to complete a task with as little human intervention as possible. This can include anything from scheduling emails in a CRM or marketing tool to using Zapier to automate tasks or utilizing advanced technology to assist with hiring.
However, among the most discussed future ecommerce trends today are robotics and machine learning. AI can play a significant role in assisting you in automating the repetitive tasks that keep your online store running. Product recommendations, loyalty discounts, low-level support, and other tasks can be automated using AI.
- Efficient sales process
By gathering data about your customers, AI can help you create a more efficient sales process, automate follow-up abandoned cart inquiries, and more. You can assist customers in moving through the funnel by having them interact with chatbots for simple questions.
AI Applications in Ecommerce
There are numerous AI use cases in ecommerce, and you’re probably familiar with many of them — you just might not realize that the technology they’re based on is related to AI. Here are six of the most typical:
- Individualized product recommendations.
- Price optimization
- Improved customer service.
- Segmentation of customers
- Astute logistics.
- Forecasting sales and demand
- Individualized product recommendations
Collecting and processing customer data about their online shopping experience is now easier than ever. AI is being used to provide personalized product recommendations based on past customer behavior and lookalike customers.
Machine learning is used to analyze your purchase history on websites that recommend items you might like based on previous purchases. Machine learning is used by retailers to collect data, analyze it, and use it to provide a personalized experience, implement a marketing campaign, optimize pricing, and generate customer insights.
For everyday types of applications in ecommerce companies, machine learning will require less and less involvement from data scientists over time.
- Pricing Optimization
AI-enabled dynamic pricing is a pricing strategy that changes based on supply and demand. With the right data, today’s tools can predict when and what to discount, calculating the minimum discount required for the sale dynamically.
- Improved customer service
You can simulate higher-touch customer service with virtual assistants and chatbot technology. While these bots aren’t completely self-sufficient, they can help with simple transactions, freeing up live support agents to handle more complex issues.
Virtual agents also have the benefit of being available 24 hours a day, seven days a week, so low-level questions and issues can be addressed at any time of day without making your customer wait.
- Segmentation of customers
Access to more business and customer data, as well as processing power, enables ecommerce operators to better understand their customers and identify new trends than ever before.
“AI systems can explore highly complex and varied options for customer engagement very quickly, and continuously optimize their performance as more data becomes available,” writes Accenture in an insight. This means that marketers can set parameters and then let AI optimize and learn to achieve precision.”
- Intelligent logistics
“Machine learning’s predictive powers shine in logistics, helping to forecast transit times, demand levels, and shipment delays,” according to a report from Emerging Tech Brew.
Smart logistics, also known as intelligent logistics, is all about using real-time information from sensors, RFID tags, and other devices to manage inventory and forecast demand. Machine learning systems learn to make better predictions for their supply chain and logistics functions over time.
- Forecasting sales and demand
You should base your inventory planning on both real-time and historical data, especially during and after COVID-19. Artificial intelligence can assist you in doing so. According to a recent McKinsey report, investing in real-time customer analytics will continue to be important for monitoring and responding to shifts in consumer demand that can be used for price optimization or targeted marketing.
How Can Artificial Intelligence Be Implemented in Ecommerce?
It’s always tempting to dive headfirst into new and exciting technologies. However, you should have a plan in place before launching a new program to avoid wasting time and money on failed attempts.
- Develop a strategy.
You must begin somewhere, and your strategy will outline the path you must take to reach your AI goal. Do not simply delegate this to a newly hired AI expert or your CIO or CTO.
Put some thought into what you want to achieve with AI. Take a practical approach and remember to start small. You can always build on past successes. 2. Identify specific use cases that are relevant to the overall corporate strategy.
- Find narrow use cases that are relevant to the overall corporate strategy
The most successful AI use cases are those that combine business goals, data differentiation, and readily available artificial intelligence models. All of this is to say that you should prioritize revenue-generating opportunities where you have a data advantage and where proven AI technology can be applied.
- Make use of third-party expertise
Even if you’re an armchair AI expert, you’ll want to seek professional help on this one. Bring in a tiger team for a project or on a part-time basis to dig in and assist you in developing a strategic AI roadmap. Those third parties can also help you bring your MVP (minimum viable product) to life.
- Create a full-fledged solution.
When you’re satisfied with what your team has created, it’s time to build the full-scale solution. Don’t be surprised if it takes a few iterations before it works as expected. As you and your team gain confidence in working with AI, the projects you implement will begin to yield greater benefits.
Tomorrow’s AI may sound like something out of a movie, but there is plenty of AI technology available today that is improving customer experience, increasing conversion rates, and helping to streamline business operations.
Look into the various benefits of artificial intelligence and machine learning if you want to provide the best possible shopping experience on your ecommerce website. It can assist you in making better use of your customer and business data to create a viable future.