Benefits of Using Artificial Intelligence in Ecommerce

Find out how AI can be your secret weapon for a more personalized and efficient online shopping experience.

Artificial intelligence (AI) has become a symbol of this year. With the introduction of ChatGPT,, Midjourney, and other content generators, AI has evolved from something abstract into a means of streamlining various tasks. Some even fear that AI-powered tools may work well enough to replace people.

ai in ecommerce

However, AI has existed for some time before the advent of AI content creators. It recommends relevant products to customers, predicts trends, and notifies specialists about issues with their equipment. AI is also at the center of Google’s BERT and Rankbrain algorithms.

There are many more examples of implementing AI, even when you might not expect it to be there. Today, we’ll focus on the role of AI in eCommerce. We’ll explore how online merchants can utilize AI in their operations to gain the maximum benefits from the technology while preserving the much-needed empathy and humanity in online shopping.

Why Use AI in E-commerce: 5 Benefits for Online Merchants

1. Enhanced Customer Experience

Customer experience refers to what people think about your company based on various interactions, such as:

  • Calling customer service
  • Messaging via social media
  • Talking to a chatbot, and more

This experience determines whether people will continue doing business with you. It encompasses everything from fast page loading to convenient navigation. That’s why you might consider boosting your website with Magento 2 speed optimization or applying techniques for Shopify or another platform of your choice. In short, it’s about taking action to make the shopping experience a breeze.

According to statistics, a good customer experience leads to higher revenue in 80% of cases, and AI can significantly increase these chances.

Practical tip:t’s explore some AI implementations in the context of customer experience:

a. Personalized Shopping Experience

An effective online shopping experience begins with the perception that the merchant understands you. AI helps achieve this by unobtrusively tracking user activity, acting like a helpful shopping assistant. It monitors all the product selections you’ve made in the past, identifies seasonal and behavioral patterns, and tailors its approach to every client.

How? It develops a virtual profile over time, predicting and understanding personal preferences.

Utilizing AI-driven recommendation systems can work wonders. It’s akin to walking into a store that already knows what to show you, and the products are just right in terms of style, size, price, etc. This becomes possible through quality data fed to AI, employing tools like IBM’s Watson or open-source platforms to analyze user data and generate pertinent product recommendations.

b. Chatbots & Virtual Assistants

AI powers round-the-clock support, responding quickly, a crucial factor for 90% of respondents with a customer support request. Investing in AI can cut costs associated with hiring additional customer support representatives or burdening your team with routine tasks.

Related: How Can AI Chatbots Improve Customer Experience?

Chatbots are available 24/7, answering questions or assisting buyers. Here’s what I found on the Fruitful Yield website:

Fruitfuil yield
Fruitful Yield website

The company, which sells vitamins and supplements, offers a simple yet helpful assistant on its website. It aids in tracking orders, accessing product information, and answering queries about membership and account. The company could further benefit from direct communication, like if the chatbot asked questions to help find the best-fit product.

Practical tip: Integrate the chatbot within your site’s infrastructure. A well-designed solution should access inventory or order information to provide relevant answers about product availability and order status. Regularly update the system with frequently asked questions and utilize machine learning to enhance the chatbot’s intelligence over time. Its quality of service will depend on your effective management.

c. Visual Search Capabilities

Consider a scenario where you see something intriguing and want to buy it but don’t know how to describe it. Or a website returns too many results when searching for a product in the catalog. The “snap and shop” trend solves this problem: you can take a photo of the item and upload it to the online store.

AI can enable this functionality, recognize images, and find similar or exact products. To enhance the user experience and leverage AI recognition, start with tools like Vertex AI Vision by Google or Amazon Rekognition. Organize your product image database to enable the system to compare a buyer’s uploaded photo to your collection quickly and accurately.

2. Improved Decision Making for Businesses

Making educated decisions is crucial in the rapidly changing eCommerce world. That’s why advanced decision-making technologies powered by AI may be essential.

a. Predictive Analytics

One of the benefits of AI is its ability to store and analyze vast amounts of historical data. This helps AI find patterns in sales and predict consumer behavior for similar future periods. Suppose you want to determine how many winter jackets you might sell next December.

Overstocking and understocking can harm your business, but AI can help you plan a sufficient amount of products based on the last few years’ sales. This strategy ensures you meet your client’s expectations without disappointing them or maintaining excess inventory, ultimately saving money.

b. Automated Customer Insights

If your products have hundreds or thousands of reviews, analyzing them efficiently can be daunting. AI can quickly scan your ratings and conduct deep analysis to uncover patterns and sentiments in these evaluations. You might discover that a five-star rating on your shoes means more than just “everything is good.” Consumers may praise them for comfort but criticize them for color fading.

Pactical tip: Regularly review and act on your feedback. Adapt and improve product offerings and services, solve quality issues, or consider removing a product that routinely performs poorly. If a product feature is consistently complimented, emphasize it more strongly. Remember, every review is a dialogue with your client; AI only facilitates easier listening.

c. Price Optimization

Ecommerce faces numerous challenges, ranging from global pandemics to shipping crises. Prices often reflect these disruptions. Dynamic pricing strategies consider many factors, including:

  • What your competitors are charging
  • Seasonal demands to consider
  • External events

This agile approach helps you stay competitive without undervaluing your products and services. Imagine an unexpected increase in demand for home gym equipment. With static pricing, your prices would remain constant. Dynamic pricing allows you to respond to market demand without profiteering, protecting your bottom line and providing fair value to your clients.

3. Successful Marketing Strategies

Marketing is another field that can benefit from the integration of AI. In this section, we’ll focus on targeted advertising and content generation.

a. Targeted Advertising

Similar to providing relevant offers on an eCommerce website, AI can enhance its capabilities to create personalized ads. It can segment users and curate ads based on their preferences. For example, consider a scenario where a buyer, let’s call her Sarah, has been browsing summer dresses. AI will ensure that she sees advertisements for similar garments, perhaps even complemented with accessories that pair well with them.

Pactical tip: Employ AI-driven analytics platforms such as Google’s AutoML or Facebook’s Lookalike Audiences. These can help regulate who sees your ads, preventing people searching for beachwear from encountering winter coat offers, thus boosting your return on investment (ROI).

b. Content Creation & Curation

AI has advanced into the realm of content creation, moving beyond mere numbers. Tools like OpenAI’s GPT models or platforms like leverage generative AI to assist you in brainstorming ideas, crafting a content strategy, or drafting texts in seconds.

Related: 50+ Useful AI Writing Tools

Note: Don’t delegate all creative work to machines. Retain a human touch, regardless of how appealing it may be to replace human effort with robots.

While AI can produce good articles, it’s the personal experience that resonates with people – and with Google, one of the critical SEO factors. AI may generate content, but it doesn’t share our humor, memories, or emotional responses.

Practical tip: Utilize AI to generate ideas, structures, and drafts. But to finalize a copy, infuse it with your personal stories, humor, or brand-specific voice.

4. Streamlined Operations

Apart from employing killer marketing tactics and designing stunning user interfaces, the success or failure of an eCommerce business may hinge on its internal operations. This is where AI can also come into play.

Here’s how:

a. Inventory Management

As previously mentioned, AI’s predictive analytics can assist in averting understocking and overstocking situations. Have you ever walked into your warehouse and asked yourself, “Why did I order so many?” after observing a pile of unsold goods? Or worse yet, had to handle an unhappy client because a sought-after item sold out too soon?

With AI-driven inventory management, such scenarios could become things of the past. AI can also optimize picking routes, thereby speeding up order processing and fulfillment. The benefits include:

  • Reduced waiting times and potential customer dissatisfaction;
  • Lower storage costs;
  • Smoother inventory turnover.

b. Fraud Detection

One constant remains: eCommerce businesses are prime targets for cyber-attacks. The retail industry currently suffers more breaches than any other, as intruders leverage increasingly advanced and destructive hacking methods to target vast assets. The repercussions extend beyond monetary losses, damaging reputations and dissuading shoppers from patronizing your store.

AI algorithms scrutinize each transaction closely, identifying any unusual or subtle patterns or behaviors that might evade human detection or conventional systems.

Pactical tip: Your AI system should continually evolve to keep pace with fraudsters as they devise new strategies for data and money theft.
5. Increased Sales & Revenue

Now let’s see how AI can directly boost sales.

a. Upselling and Cross-Selling

Have you ever been ready to complete a purchase and suddenly noticed a message that says, “Customers who bought this also bought…” or “Upgrade to the premium version for better features!”? That’s AI at work, analyzing patterns and preferences invisibly in the background. You can see this in action on the Jollyes website.

Jollyyes website
Jollyes website

AI aims to enhance the shopping experience by suggesting everything a client may need. For example, if you buy a pair of boots, it might prompt you to consider a pair of socks. This capability drives sales, increases shopping cart value, and holistically addresses shoppers’ needs.

b. Retargeting Potential Customers

Various reasons might lead to not completing the order:

  • A sudden distraction;
  • High shipping costs displayed in the shopping cart;
  • A buyer looking for a discount code and abandoning the cart.

While this may seem like a missed opportunity, it’s more like a pause in the conversation. AI can help you retarget users at the optimal time – within 24-48 hours – and provide personalized incentives such as:

  • A bundled deal;
  • Free shipping over a certain amount;
  • A small time-sensitive discount, as seen in the screenshot from Quiksilver below.
quicksilver website
Quiksilver website

AI in Ecommerce: What Hinders AI Proliferation

When discussing AI, it’s essential to mention some of the hurdles to the widespread adoption of AI in eCommerce:

  • High Initial Costs: Investing in the appropriate technology, training staff, and ensuring smooth integration can be expensive, particularly for smaller organizations. Although the initial costs can be steep, there are long-term advantages. Start small with features such as chatbots or AI-driven customer service, and scale up as your comfort level and budget allow.
  • Data Privacy Concerns: AI operates on data, and this raises numerous questions. How much data is needed? How will you store and protect it? With regulations like GDPR, CCPA, and others becoming more stringent, consumers may be reluctant to share their information. Combat this challenge by making transparency your strategy. Clearly explain what you collect and why, ask for permission, and invest in robust encryption methods.
  • The Skill Gap: There may be a lack of knowledge, or you might need to hire an in-house team for managing, optimizing, and interpreting AI solutions.
  • Over-Reliance and Loss of Human Touch: Some fear that AI will replace humans, and certain businesses bring these fears to life by automating every conceivable task. However, AI won’t supplant humans in tasks requiring empathy, judgment, and complex decision-making. Savvy online merchants should keep this in mind.

To Sum Up

AI has become an indispensable tool for eCommerce. We’ve examined some of the most prominent advantages of AI in eCommerce, including enhancing marketing strategies, optimizing operations, and increasing sales.

However, it also presents drawbacks such as high initial costs, data privacy concerns, skill gaps, and more.