| 9 min read

Ecommerce Artificial Intelligence: Everything You Need to Know

The words ecommerce artificial intelligence (AI) may invoke images of expensive AI systems from Silicon Valley companies being used at large companies like Amazon or Apple. 

But the use of AI tools in ecommerce is becoming more and more common, and your  small business may already be using it in some capacity today. If not, it’s likely coming soon. 

Artificial intelligence (AI) is already being used by 37% of consumers for at least some of their online purchases, according to the 5WPR 2022 Consumer Culture Report, suggesting it’s a growing area of e-commerce that brands should embrace. 

AI solutions analyze data, provide insights for better business decisions and automate tasks that would normally require human thought or insights In ecommerce, it can help retailers and marketers understand customer behavior, better target and deliver more customized and personalized experiences, make better decisions when investing advertising dollars, and more accurately manage inventory. 

 Here’s a glimpse into what the future holds for AI in the ecommerce market.

Technological Advances in Ecommerce

AI and ML (machine learning - a subset of AI) allow online retailers to use data to deliver more targeted customer experiences, as well as to handle more routine tasks with fewer workers. Machine learning algorithms monitor data (such as customer interactions) and use that data to then improve the sales process, the supply chain, the fulfillment process, or all of the above.

“The greatest opportunity for e-commerce businesses in the next few years include the introduction of new artificial intelligence (AI) offerings and better integration into e-commerce platforms,” predicts Dara Busch, CEO of PR agency 5WPR. In research published in its 2022 Consumer Culture Report, it found that less than half of the survey respondents currently use AI-enabled tools when shopping online, including interactive chats, voice search and reverse image searches. 

“As these technologies advance and continue to roll out, there will be incredible and continued opportunities for growth amongst consumers,” she says. 

How AI is Changing the Ecommerce Industry

Over the past several years, AI technology has become a powerful tool to boost sales and optimize operations. Even many small ecommerce businesses are using technology with AI capabilities, focusing mostly on customer experience and optimized logistics.

It can often handle repetitive tasks, becoming something of a virtual assistant to the business and the customer. It can be used to improve the online shopping experience by making it easier for consumers to find what they need and by offering increasingly smart product recommendations.

But the use of big data does raise serious concerns about data privacy. Gartner predicts, for example, that by 2024, artificial intelligence identification of emotions will influence more than half of  advertisements a customer sees online.

As a result, businesses should expect restrictions that may impact the type of data they will be able to collect from potential customers. It’s expected that individuals will have more choice and control over the type of data they want to share and how it’s used.

Benefits of Artificial Intelligence in Ecommerce

AI can provide a more customized experience for shoppers in a number of key ways:

  • Enhance cross selling and upselling through smart product recommendations. 

  • Power chatbots and virtual assistants to handle certain types of customer queries and extend customer service hours.

  • Reduce returns and customer complaints. 

  • Offer discounts or dynamic pricing to reluctant customers, improve customer retention, or to re-engage previous customers. 

  • Integrate customer data from a variety of sources to provide omnichannel customer experiences.

  • Improve inventory management to reduce overstock or stockout scenarios, and to improve shipping times. 

Use Cases for AI in Ecommerce

There are numerous opportunities to use AI to better target and serve customers. 

Automated CRO (conversion rate optimization) testing offers one of the biggest opportunities for harnessing AI, says Filip Pejic, who formerly managed the ecommerce account for a national retailer and is now the founder of Pearly, an online store that sells bubble tea kits.

“As we see AI and ML (machine learning) continue to evolve,” he observices, “we will see a lot more applications come out that make it very easy to test and optimize an eCommerce website with little to no expertise needed. I think this presents a great opportunity for brands to fight back against hyper-optimized sites like Amazon, but comes at the expense of hurting your branding.” How? “Changing button colors/styles to optimize for conversion isn't always pretty,” he explains.

Government regulations, ad blockers and other restrictions on data collection mean marketers may have to find creative ways to learn more about what their customers want so they can deliver it. 

“(They) push brands to utilize contextual AI, interacting with quizzes as part of the funnel in order to truly get to know customers, creating a two-way relationship and personalize offers in a manner that meets demand,” says Alon Gilady, cofounder and CEO of renovai, an AI-based interior design platform for lifestyle brands.

How to Use AI for Your Ecommerce Business

Here are some ways ecommerce companies may incorporate AI into their ecommerce stores:

Chatbots: Chatbots can help your business respond to common customer support queries, provide answers to frequently asked questions, and even make product recommendations. They are available 24/7 and can reduce labor costs while improving the customer experience. In the 5WPR 2022 Consumer Culture report, 50% of those surveyed said they use interactive chat.

Shopping assistant: AI can help customers find what they are looking for based on search engine queries and/or purchase history, and can recommend other related products.

Voice search: The use of smart speakers such as Alexa and voice search is on the rise. An increasing number of consumers are using it for shopping, with over half of online shoppers using voice search to research products. Natural language processing continues to improve real-time results so shoppers can find and purchase what they are looking for. Voice assistants can also be used to recognize multiple languages.

Email: AI can be used in email to send and create better emails at optimal times. AI software is even being used by some marketers to help write emails, improve subject lines, or customize messages. 

Visual Search: Develop a visual shopping experience to increase sales. “Visual aspects are crucial since most customers trust and prefer visual information over text,” says Gilady. “Images are essential for building confidence and inspiring shoppers, it’s the closest to a human salesperson they will encounter online.”

Programmatic Advertising: AI can leverage data for smarter decision-making when it comes to media buys. It can optimize ad placement and reduce ad spend waste. 

AI will continue to transform the online retail industry. Ecommerce businesses that responsibly harness the power will have a significant advantage over those that don’t.  

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