Artificial intelligence, or AI for short, has come a long way since Amazon launched its product recommendations feature over two decades ago. Today, AI is an inseparable part of online shopping.
While there's no denying AI's role in eCommerce, many online retailers are yet to leverage this invaluable tool in optimizing their operations and enhancing their customers’ user experience.
If you run an online retail store, the time to jump on the AI bandwagon is now. Here's how artificial intelligence will transform eCommerce by 2025.
Why Is AI Important in the eCommerce Industry?
Artificial intelligence is slowly embedding itself into every aspect of human existence. From airport security to self-checkout points at grocery stores—there’s no escaping it. A recent survey by Gartner indicates that the worldwide uptake of AI software increased by 21.3% in 2022 compared to the previous year. You can expect this upward trajectory to continue in the coming years.
Even then, artificial intelligence isn’t a new concept. You would be surprised to learn that AI as a discipline has been around for almost seven decades.
Adopting artificial intelligence is critical to your success if you operate an online business. It is the only way you can compete with other retailers on the same level, especially if your goal is maximizing your revenue.
Since the pandemic, the unprecedented upsurge in online businesses means competition is at an all-time high. The economic landscape is more cut-throat than ever.
Companies can no longer afford to sleep on the potential AI holds for their enterprises. The tech landscape, as we know it, has changed. Everyone is online, immersed in smartphones, sophisticated gadgets, social media, and the internet. Tapping into the online retail market represents a new frontier as far as sales opportunities and revenue generation go.
With a large number of traditional brick-and-mortar retail outlets venturing into the e-commerce space, artificial intelligence is becoming more important now than it has ever been. Business owners leverage it to boost customer interaction and customer engagement on various digital touchpoints. They use it to boost efficiency, improve productivity, and increase sales.
See also: Should Online Businesses Accept Cryptocurrency Payments?
Is There Existing AI Software for eCommerce Businesses?
Many eCommerce businesses are already using AI software in their day-to-day operations. Here are some examples of existing AI applications in the online retail space.
A ChatBot is a conversational tool that relies on AI and natural language processing (NLP) to perform routine customer-oriented tasks. They are programmed to understand customer queries, automate responses to them, and offer product recommendations based on their interests, all in a way that simulates human interaction.
Businesses on Facebook can integrate ChatBot with Facebook Messenger to drive marketing-related content to followers who opt in.
If you’re still manually creating and sending your marketing emails, there’s a much easier way to do it—through AI marketing software for eCommerce. Email marketing AI can create personalized email content for each of your subscribers. It can optimize the subject lines, embed promo codes, and add anything else you might want to include before sending them out at a designated time, all at once.
E-commerce businesses with AI-powered helpdesk software are miles ahead of the competition when handling customer queries and other communications. This software combs through insight from tens of thousands of support tickets to provide relevant replies to customer queries.
If it cannot find an appropriate response, it automatically assigns the ticket to a human agent best suited to address the issue, boosting the team's overall effectiveness.
Many online businesses already use visual recognition software to help their shoppers use images they see in the real world or online for visual searches.
For instance, a prospective customer may see a video of a celebrity in a TV sitcom dressed in an outfit they like. The customer can then take a screenshot of the outfit and upload it to a search engine with image recognition technology to show similar images from clothing retailers. Google Lens is a popular example of this AI technology.
AI warehousing software uses machine learning to automate every aspect of supply chain and warehouse management. It can use data you’ve collected to optimize stock quantities. It can tell you when you’re running low on certain products, reorder stock, send them out, and schedule deliveries at optimal times.
Logistics AI software for eCommerce allows businesses to lower logistics costs and work more efficiently.
Many eCommerce businesses use voice-activated AI technology to recommend content, products, or services to their site visitors. Others have created their own voice assistant smart speakers, which users can integrate with other smart home electronics.
Amazon Echo, Google Nest, and Alibaba’s Tmall Genie are popular examples of AI-powered voice recognition technology.
Main Benefits of Artificial Intelligence to Your eCommerce Business
According to a 2017 survey by Hubspot, 63% of online businesses already use artificial intelligence tools without knowing it. You may have indirectly deployed AI-driven technologies for your eCommerce business without realizing it. That said, here are some core benefits of AI to your online business.
Automates Customer Support
As far as impeccable customer service goes, virtual assistants such as ChatBot make outstanding support representatives, and with good reason.
What’s not to love about them?
A virtual assistant is available 24/7, which is great for businesses with customers across different time zones, is always polite even to the rudest of users, doesn’t need coffee breaks, and is remarkably cost-effective. Perhaps their biggest benefit to e-commerce businesses is that they free up human representatives to address more complex issues.
Recent advancements in AI have refined the capabilities of ChatBots and other virtual assistants. They leverage NLP to determine the shopping needs of customers and use machine learning to grow their knowledge base over time.
In turn, it allows them to offer personalized support to site visitors and increase customer satisfaction. AI-powered ChatBots can even curate custom promotions for shoppers based on their preferences, shopping habits, customer behavior, and purchase history.
Drives Up Conversion Rates
Many online store owners are oblivious to the negative impact abandoned shopping carts have on their conversion rates. Let’s say your marketing strategy successfully gets shoppers into your website. While there, they find items they want to purchase and add them to their shopping carts.
However, for whatever reason, they get distracted. Maybe they find the checkout process too long. Maybe they opt to complete their purchase another day. The point is that they exit your website, leaving their items in their shopping cart.
There's a good chance most shoppers will forget about those items and move on entirely. When or if they remember, they may start a whole new online search for the items and purchase them from the competition.
If a prospective customer went through the trouble of browsing your online store, identified products that piqued their interest, and went ahead to add those items to their shopping cart, that’s not a customer you want to lose. Not when they’re so close to the finish line.
Time is of the essence here.
What you want is to remain relevant to them. You want to subtly remind them of their abandoned cart and nudge them on to complete their purchase.
That’s where AI application development comes in.
AI gathers critical information about site visitors and uses those details to reach out to them via email or their preferred communication channel to remind them of the items they still have in their shopping carts. It can even use their previous purchase history to craft a personalized limited-time-only deal to incentivize them to check out their items.
The best part about it is—the entire process is automated and requires no active input on your part. AI handles it for you on the back end, letting you focus on other aspects of running your online store.
See also: How to Migrate Multilingual Stores.
Fights Cyber Fraud
Statista estimates that e-commerce businesses incur losses to the tune of $41 billion annually through online fraud. That figure is expected to reach $48 billion by the end of 2023. Thankfully, this trend will change as more businesses embrace AI.
In the past, employees had to manually review each transaction for suspicious activity. It was like pulling teeth—a painful, laborious process. If that’s the technique you’re using, there's a better, more effective way to do it that is less labor-intensive, faster, and more accurate.
Through machine learning, AI algorithms use sophisticated rules to analyze big data, detect anomalies at multiple data points, and flag them. They can even spot cleverly-veiled fraudulent transactions that would otherwise bypass human agents.
For instance, criminals trying to commit cyber fraud may sometimes enter incorrect shipping addresses. Now, it would be practically impossible for a human to tell whether or not an address is legitimate, especially if it is properly structured.
Not for AI, though.
It would be able to instantly flag this transaction and any other anomaly and can do it for several transactions at once.
Identifies Optimal Pricing
How should you price your products to maintain a competitive edge while maximizing your profits? That’s usually a hard nut to crack. The secret lies in dynamic pricing.
AI-powered software can analyze large data sets while applying various variables such as demand, supply, seasonal highs and lows, competitor stock levels, etc., to help you optimize your commodity prices for maximum impact.
Suppose you have a particular item in stock that enjoys reasonable demand year-round. With an AI system, you can be alerted when there’s a looming shortage of the item or when your competitor’s stock is running low. That way, you can increase your price and take advantage of the influx in demand.
Personalizes the Shopping Experience
Personalization is king when it comes to a shopper's online experience. It breeds brand loyalty, which ultimately keeps customers coming back to your store repeatedly.
AI takes personalization further by leveraging existing data and site analytics to strengthen customers' connections to your brand. It provides them with a unique shopping experience curated for them individually.
According to a recent report by McKinsey, today’s customer has an inherent expectation of a personalized experience across all of a brand’s retail channels. Personalization can take many forms, including targeted ads based on previous purchases.
AI provides insight into a customer’s existing project based on past buys and suggests products to help them continue or complete them. The report also indicated that only 15% of business owners offered personalization across all their retail channels.
Are you part of this elite 15%?
By integrating AI, computers can capture massive amounts of customer data and process it to provide meaningful real-time insights. Based on these insights, eCommerce businesses can suggest relevant items to shoppers and incentivize them to purchase by offering competitive discounts.
Using AI to personalize your customer's shopping experience may increase your profit margin by more than 40%. Understanding your customers’ needs without them having to explicitly communicate what they are is the missing link to dramatically boosting your e-commerce sales.
Offers Personalized Recommendations
One core aspect of shopping personalization is making the right recommendations to customers. eCommerce businesses have a distinct advantage over traditional brick-and-mortar stores when retrieving actionable customer insights.
Think about it.
When a shopper walks into a store, they’ll typically browse the aisles, compare items based on criteria only known to them, pick the ones they’re satisfied with, and proceed to the cashier to pay for them. Once they leave, the retailer has no way of knowing who they are, why they picked their store, why they settled on the items they purchased, or if they will ever return.
Online shopping is an entirely different beast.
Once a prospective customer visits an e-commerce site, browses the items in stock, makes a purchase, or adds products to their wishlist, an AI algorithm can retrieve actionable insights about that shopper.
AI can analyze the items customers have saved in their wishlists, items they've compared on the website, and items they’ve previously purchased to accurately predict what they’re looking for. The AI algorithm will then recommend similar or related products, increasing the likelihood of a purchase.
Promotes Upselling and Cross-Selling
Closely related to recommendations are upselling and cross-selling. These two aspects of online shopping answer the question: What is a customer likely to add to their cart beside the item they were looking for?
AI-driven product recommendation technology is an invaluable tool to add to your eCommerce arsenal. You can use it to suggest relevant products that complement items in a shopper’s cart before they checkout.
Let’s say a customer added hiking shoes to their shopping cart. AI can analyze frequently bought together data and suggest to them to include wool compression socks and a backpack in their purchase. It can even bundle these items at a discounted price to incentivize the shopper to buy all three.
If they've added hair shampoo to their shopping cart, AI can also recommend they include a conditioner and moisturizer. If they’ve added a phone to their cart, AI can suggest a phone case and screen protector.
You get the drift.
These three scenarios all describe cross-selling.
On the other hand, based on the item in a customer’s shopping cart, AI can intuitively recommend a similar higher-end product, nudging the shopper to spend a little extra. For instance, if they’re shopping for a smartphone, AI can suggest a different one with superior specs at a higher price.
AI can analyze data from your customers’ shopping habits to formulate product bundles and comparable alternatives and serve them up as suggestions.
Reduced Manual Labor
AI doesn’t just impact the technological aspects of an e-commerce store. It can take over the mundane day-to-day operations of an online business, minimizing worker headcount.
Human retail associates are increasingly being replaced by AI-powered bots capable of achieving tremendous levels of automation. While it is unfortunate, it is inevitable.
We won't get into the social aspects of this subject here.
We will say this—that’s just the direction the world is moving in. More businesses are looking for sustainable ways to reduce spend and increase their bottom line. AI is the missing puzzle piece that will allow companies to do this.
NLP focuses on the ways computers can understand human language. That way, the interactions between humans and computers become more natural and organic, much like how humans communicate.
Advancements in NLP have transformed the performance of search engines, allowing them to understand a shopper’s query, both through typed and spoken input, and present results that accurately address what they were looking for. AI assesses the user's query, adds the missing words, phrases, or synonyms, and automatically corrects spelling or grammatical errors to proactively present search results the shopper was trying to find.
One of the new cutting-edge technologies that have been introduced to the world of AI is vector search. It works by combining keyword and vector searches in a single query to improve the accuracy of search results.
Visual search is another aspect of AI-powered smart searches that have taken the eCommerce world by storm. Instead of a prospective customer typing in a search query, they simply share an image of the item they may have seen online or on the street in the search engine. An AI tool then processes the image and suggests similar products to the user and the respective online stores that carry them.
The idea behind AI-driven visual searches is to minimize the searcher’s frustration, particularly if they don’t know what query to enter to get the results they seek. By removing the hoops a shopper has to jump through just to find an item they’re looking for, your business immediately gains a competitive advantage.
Streamlines Inventory Management
AI’s predictive analysis is getting more sophisticated by the day. Current technology still requires retailers to closely monitor their existing stock levels and their movement across the supply chain.
AI deep learning takes inventory management to the next level by removing the guesswork from the entire process. It uses data science techniques to analyze vast amounts of data to accurately predict how much inventory to hold, how much to order, and the best time to do it. This level of optimization can significantly minimize potential revenue loss when a business runs out of stock or holds more stock than it can move.
That’s not all, though.
AI can streamline inventory management through the use of bots which can store and retrieve stocked items, drastically reducing the manpower required in warehouse operations.
See also: Most Popular eCommerce Platforms for Your Online Store.
The Future of eCommerce With AI: Top Trends to Watch For
AI is here, and it’s here to stay. It is shifting the way people do business. More eCommerce platforms are now integrating AI and machine learning into their core infrastructure.
They want to improve the way customers engage with brands. They want to enhance their shoppers’ user experience. They want to increase conversion rates.
How will AI transform e-commerce by 2025?
Here are some hot trends to keep an eye out for. Jumping on these bandwagons will ensure you focus on the relevant aspects of running your online store and meet your customers’ expectations to maintain a competitive edge.
Increased B2C and B2B Customer Personalization
One thing is certain whether you operate in the B2C or B2B space: Customers and clients expect a superior level of personalization when engaging with your business.
After all, who doesn’t want to feel special?
While that expectation is there today, you can expect it to be amplified by 2025. eCommerce retailers and brands will have access to even more user data than ever, which they can leverage to deliver a superior shopping experience.
How much more personalized can online stores become?
To answer this question, let’s examine a popular use case: Nike’s Nike By You.
The sports apparel giant has taken personalization to a new level by allowing customers to create unique custom sneakers based on their individual preferences. Customers have free rein to create whatever design they want.
This is a great example of eCommerce personalization in action. It defines a brand leveraging the increasing demand for customers' high levels of customization to reflect their styles and personality. By 2025, we expect to see these types of personalized AI solutions being adopted by more e-commerce brands on a larger scale. Augmented reality or virtual reality shopping might be the norm then.
Increased Reliance on Real-Time Data Analytics
Real-time data becomes available the moment it is generated and is especially invaluable for eCommerce retailers. Business owners can use this data to optimize their operations, manage products, and improve customer service.
It can also provide enhanced visibility into the performance aspects of their more complex operations, including inventory management and supply chain management. AI aggregates data based on products site visitors browse on their website and other channels.
Through machine learning, AI then analyzes these data points and provides actionable insights on the areas eCommerce brands should focus on. It can be through promotions, limited-time-only sales, competitive discounts, etc.
By 2025, e-commerce brands can leverage real-time AI-generated predictive analytics to predict trends on a more granular level. Think—real-time data analytics that anticipates consumer demand and, as a result, decides what inventory to carry. For instance, AI may use real-time insights to uncover that mules are expected to be all the rage this summer.
Increased AI Implementation of Virtual Assistants
The world is advancing rapidly. People expect products and services to be delivered instantaneously. Patience is at an all-time low.
Customers expect businesses to attend to them immediately. They don't want to wait several minutes to speak to a customer support representative. They expect someone to be on-call to address their query, regardless of the time of day or night.
While AI ChatBots have been in existence for a while now, we expect to see an exponential uptake of these virtual assistants by 2025, with even more innovative AI application scenarios. eCommerce retailers are becoming increasingly dependent on AI-powered ChatBots to automate interactions with customers.
Estimates indicate that the current ChatBot adoption rate for customer support worldwide stands at 67%. If the existing trend is anything to go by, you can expect over 90% of all customer interactions to be handled without any intervention from human agents by the time 2025 rolls around.
Increased Uptake of Voice Search and Voice-Enabled Shopping
AI-driven voice assistants like Alexa, Google Home, and Siri are household names in the tech space. Millions of people worldwide use them daily. Smart speakers have amassed an insane following in the last few years.
According to a recent Edison Research and NPR report, approximately 35% of Americans aged 18 and over own a smart speaker. The same report indicates that 62% of American adults use voice search and voice assistants in some form on their mobile devices, computers, TVs, and cars.
These figures point to the fact that voice search capability in devices has gone from being a gimmicky feature to one that’s extremely useful. By 2025, it is estimated that voice queries will account for more than 65% of internet searches.
Customers find voice-enabled shopping more natural, casual, and engaging. Many people prefer to speak their queries aloud instead of typing them since it is faster, allowing them to identify the products they need efficiently. Voice assistants also reduce friction in the checkout process, further enhancing user experience.
The worldwide transaction value of voice-enabled eCommerce purchases is projected to reach $19.4 billion by the end of 2023 and is expected to double by 2025.
Increased Use of Generative AI
Generative AI is hot right now. People can’t stop talking about it. It has been hailed as one of the most budding AI and machine learning innovations in the last decade.
Generative AI is a set of algorithms and machine learning systems capable of reading data and using it to synthesize content like text, images, video, audio, etc.
By 2025, we can expect a wide-scale application of generative AI in the eCommerce industry.
For instance, clothing brands can use it to create high-resolution image outputs of AI-generated fashion models with custom poses and outfits. Brands won’t need to rely on human high-fashion models or social media influencers to market their clothing brands for them. With generative AI, they can create their own influencers and generate their own hype around their brand.
Zalando, a Berlin-based clothing brand, is an example of generative AI in action. The fashion models featured on the official website are all AI-generated high-resolution images. It's virtually impossible to tell that they are not actual humans.
Ultimately, the eCommerce industry is expected to undergo a major digital transformation in the coming years as the uptake of artificial intelligence and machine learning increases. Brands that have embraced AI in their operations are already reaping the benefits of enhanced customer experiences.
ChatBots and other virtual assistants, product recommendations, voice-enabled searches, and voice-driven shopping are some of AI's most notable use cases in eCommerce. Since technology is always evolving, expect these AI tools to improve dramatically by 2025. We also expect to see even more powerful ones entering the tech landscape at that time, with vast applications in e-commerce and other retail and financial services.
Regardless of the AI technology you incorporate into your business, the most critical thing to focus on is delivering an outstanding customer experience. Provided your operations are customer-centric, the rest will fall into place.
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