AI in Ecommerce: How It's Transforming the Industry

Learn about 10 ways that your ecommerce business can boost efficiency and increase conversions with artificial intelligence (AI).

Artificial intelligence (AI) technology can officially be found everywhere—including in the world of ecommerce. Ecommerce became one of the leading adopters of AI in 2022, and the implementation of these advancements in this industry is likely to continue in the coming years.

AI in ecommerce offers many advantages, as it has many practical uses. The technology boosts business efficiency, improves customer service, and allows retailers to make more money. You can also use AI to write marketing collaterals, assist customers even when you’re not around, and detect fraudulent transactions.

With AI solutions for ecommerce on the rise, it’s easier than ever to find tools powered by this technology. For example, Podium has developed various AI-powered solutions designed to help growing businesses become more efficient. If you’re interested in implementing AI in your ecommerce business, this post will help you better understand the technology and how to leverage it.

How Will AI Impact Ecommerce?

The global ecommerce market is expected to total $6.9 trillion in 2023, and experts are anticipating this figure to grow for the next few years. By 2026, this market is estimated to reach $8 trillion. This astounding statistic isn’t really surprising considering the increasing number of online shoppers. From 2.3 billion in 2023, the number of people shopping online has now reached 2.6 billion.

Although the increased number of people who shop online means good news for ecommerce retailers, it also has a drawback. The number of businesses going online also increases, leading to fiercer competition. You need to have a competitive advantage, and this is where AI-powered tools come in.

Recent data indicates that 87% of global businesses believe that artificial intelligence will provide them a competitive advantage. But what makes this technology powerful?

Machine learning algorithms make AI devices smarter. AI algorithms and solutions can collect and analyze vast amounts of big data in less time, which means easier access to insights about customer preferences and supply chain weaknesses, among other business aspects.

Types of Technologies Used In AI Ecommerce

AI is made up of multiple technologies, all of which play a critical role in improving the customer experience and optimizing business operations. The four most common shopping AI technologies include:

• Natural language processing (NLP): Arguably the most important tool, NLP uses chatbots and virtual assistants to improve customer service by responding to customer queries in real-time.
• Machine learning: Machine learning in ecommerce is primarily used to analyze data and make predictions. In an ecommerce setting, ML can optimize stock levels, enhance sales forecasts, personalize shopping, analyze customer behavior, and more.
• Computer vision (CV): CV enables computers to interpret information from images or videos. With CV, retailers can enhance their product searches and recommendations. This makes the shopping process more personal, interactive, and visually intuitive.
• Data mining: Data mining unlocks valuable insights from large datasets and presents them to retailers in an easy-to-understand way. With these insights, retailers can better understand customer behavior and preferences and make smarter, more informed decisions around products, pricing, marketing, and more.

With AI ecommerce technologies, retailers can not only improve the customer experience but also enhance operations such as inventory management and logistics. This ultimately results in increased sales and higher customer satisfaction.

10 AI Use Cases in Ecommerce

Want to know how to use AI in ecommerce business? Check out these common ecommerce AI use cases.

1. Personalized Product Recommendations

You can use AI to offer personalized product recommendations to your customers. Personalized product recommendations often appear on a webpage after a customer does a product search. These recommendations may also be used in follow-up emails when customers abandon their shopping carts.

To determine products to recommend, you must gather information on customer interactions, browsing and purchase history, location, and other factors. This is where AI shines. It can collect information on customers’ online shopping journeys and analyze buyer behavior to pinpoint products they’re likely to buy.

By personalizing product recommendations, you can provide consumers with a more relevant online shopping experience that may turn them into repeat customers and loyal ambassadors of your brand.

2. Customer Service Chatbots

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Through AI and other technology like natural language processing (NLP), chatbots are handy tools designed to simulate conversations with people on the internet. For instance, Podium offers a chatbot through its Webchat feature. You can see Webchat in action on your site and set it up to answer common customer queries or perform simple tasks, making it a valuable tool in customer support.

By integrating virtual assistants like AI chatbots into your online store, you can guarantee immediate response to customers. You can also make your website a conversation starter, get more customers, and boost your website’s conversion rates.

3. Visual Search

Consumers tend to abandon an ecommerce site because they can’t find the products they want. Artificial intelligence can solve this issue, and many businesses have already leveraged the technology to offer solutions with innovative visual search capacities. With this capability, your potential customers are more likely to discover products that match their needs and complete the checkout process.

4. Dynamic Pricing

To determine the right price for your product, you need to research your competitor’s prices, client demand, and manufacturing costs. You can use artificial intelligence to monitor your competitor’s pricing and gather relevant data on market demand and other supply chain factors. With AI, you can pick the right price for your products and adjust prices quickly as needed.

5. Fraud detection

One of the risks online retailers face is fraud. Online retailers deal with hundreds of attacks on their online stores every month. And the increasing popularity of online shopping just gives unscrupulous consumers and cybercriminals more opportunities to scam online businesses.

You can use artificial intelligence to avoid becoming a victim of such scams. AI can assist in fraud detection by analyzing data, monitoring transactions, and detecting anomalies, like multiple transactions within a short time frame. You can also utilize machine learning models to identify fraudulent behavior.

6. Demand Forecasting

If you want to predict demand but don’t have enough historical sales data to use, AI can help. Many brands have used artificial intelligence in ecommerce to make demand forecasts. Instead of using historical data alone, AI uses real-time consumer data, including demographics, social media, and online reviews, to make sales and demand predictions more accurate and reliable.

7. Voice Commerce

Using voice search, like Alexa, is more convenient and faster, which is why many consumers prefer this over the traditional way of interacting with devices. Many consumers are already using voice search, which means you should consider capitalizing on this trend. One way is to ensure your product listings and website are optimized for voice search.

You can achieve voice search optimization by using natural language processing and long-tail keywords. Make sure to provide concise and clear answers to common questions as well.

8. Automated Product Descriptions

Writing product descriptions that are SEO-friendly and persuasive can be challenging even for an experienced copywriter. And if you have hundreds of products to sell, you will likely spend long hours writing unique descriptions. AI in ecommerce can be used to assist in writing, allowing you to save time.

Generative AIs, like ChatGPT, can make the writing process faster. It can generate simple but engaging, optimized, and unique product descriptions within seconds. However, it is important to remember that AI tools may produce text with factual inaccuracies and other errors. As such, you’ll still need a copywriter to check for these errors and produce high-quality copy.

9. Product Bundling and Promotions

For those who don’t know, product bundling is a technique with which you group and sell multiple products as a single unit for one price. It’s a promotional strategy, encouraging consumers to buy more. To encourage your customers to purchase a bundle, the items should be unique and carefully selected.

These days, you can find AI-powered solutions with product bundling functionality. These solutions can generate unique product bundles and even come up with titles and descriptions for each bundle.

Podium also offers a tool that makes product promotions faster and easier–the Text Marketing solution. With Podium Text marketing solution, you don’t have to manually send text messages to your customers, since the tool can send text messages in bulk. It also comes with ready-to-use texting templates you can use to save even more time and effort.

10. Customer Sentiment Analysis

Customer sentiment analysis is crucial, particularly nowadays when market competition is tough. It will help you know and measure how your customers feel about your brand, product, or service. But keeping a finger on the pulse of customer satisfaction levels can be challenging since you likely have hundreds or thousands of reviews to sort and analyze.

If you want to be able to sort through and analyze tons of reviews and feedback fast, AI can help. AI can process large volumes of customer feedback in no time, giving ecommerce companies actionable information and valuable insights.

Benefits of AI in Ecommerce

Improved Customer Personalization

Personalizing customer experience is the trend these days, but this can become challenging for ecommerce stores that have to deal with hundreds of customers regularly. However, it’s not impossible, especially with the use of AI for ecommerce. AI can collect and analyze data to determine shoppers’ preferences so you can create a personalized shopping experience.

Enhanced Efficiency and Productivity

With an AI-powered tool, you can easily gather customer data, automate follow-up and other processes, and respond to simple customer queries. It can take tedious tasks off your team’s shoulders, giving them more time to focus on vital processes. It can also help boost your team’s productivity and reduce labor costs.

Better Decision Making

With AI and machine learning for ecommerce, gone were the days of relying only on instinct or business know-how to make decisions for workflows like marketing, merchandising, and sales. This technology can perform predictive analytics on customer data, analyzing vast amounts of information in a matter of seconds. This way, you can create more effective marketing and sales strategies based on reliable data.

Increased Sales and Revenue

Lastly, using AI in ecommerce can help you increase conversion rates and make more money. By analyzing customer data and automating repetitive tasks, AI can help the sales team close more deals and work efficiently. In addition, machine learning tools can be used for customer behavior prediction, sales forecasting, and other processes that help attract more customers and close more deals.

4 Inspiring AI in Ecommerce Examples

Let’s take a look at the ways AI ecommerce business tools are being used:

1. Amazon

Amazon is just one of the ecommerce platforms that has incorporated AI in its Dynamic Pricing strategy. Whenever Amazon’s competitors offer discounts or promotions, the company immediately adjusts its product prices. However, Amazon does this gradually to guarantee maximum profitability and remain the cheapest ecommerce.

Aside from using AI for ecommerce, Amazon created a revolutionary store where consumers can walk into the store and take whatever they want from the shelves. There is no cashier to track and process payments, which cuts down on labor costs and makes the shopping experience more memorable.

2. Alibaba

Alibaba didn’t get behind the game, as it launched an advanced AI model capable of understanding images and having complex conversations. The company had already used AI to recommend relevant products to their customers, which helped increase their sales. It also used an AI cloud to reduce its computational load and boost product sales during its annual Double 11 Shipping Festival.

3. Stitch Fix

Stitch Fix is an online personal styling service in the United Kingdom and the United States. While many businesses have just started to implement an AI strategy, Stitch Fix has been leveraging this technology from the get-go. It uses AI and machine learning models to personalize its client’s experiences. The models also underpin its operations, from inventory management to logistics.

It also takes advantage of Generative AI to automate time-consuming tasks, allowing its experts to concentrate on activities where judgment and creativity are important.

4. Nike

Nike is also seen leveraging shopping AI solutions for ecommerce, specifically to improve customer experience. Since 2018, the company has acquired expertise, tools, and technology in data science and analytics to offer more personalized experiences for customers. The company also combines AI solutions to help its customers find the right fit fast.

The AI Assistant Your Ecommerce Business Was Missing

Podium AI Employee isn’t your ordinary AI solution for ecommerce. It offers a combination of functionalities designed to help you communicate with leads better and faster, increasing the chance of converting them into customers and growing your startup business.

This AI Employee can collect messages and emails from various touch points, put them in a centralized location, and send pre-approved auto-responses within a few seconds. The technology can create responses to reviews, summarize your phone calls, and tailor messages to your customers. All these features help users save time and focus on value-adding tasks like lead generation and nurturing.

Pro tip: Use Podium’s AI-powered tool to quickly send personalized Google Review responses that improve the customer experience and your online reputation.

AI in Ecommerce FAQs

Q: Why is AI the future of ecommerce?

A: While AI systems today look less glamorous than what you can see in movies, they’ve already become valuable tools in the ecommerce industry. Using artificial intelligence in ecommerce delivers over 25% improvement in cost reduction, customer satisfaction, and cost of revenue. Many businesses are adopting this technology, and more will likely follow suit.

Q: How is AI used in ecommerce and online payment systems?

A: AI and ecommerce go hand-in-hand—the technology can be used in various ways. The technology is used to personalize customer experiences, improve virtual search and overall user experience, and create accurate demand forecasts. AI technology can also detect fraud, making it useful when processing online payments.

Q: What is an example of AI in shopping?

A: A good example of ecommerce AI is a chatbot that immediately responds to customers in online stores. By answering simple customer queries, these chatbots can improve customer service levels and boost customer satisfaction.

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