5 Ways AI Is Changing E-Commerce



Amazon.com essentially pioneered the field of AI for e-commerce, creating a personalized experience for users that took their sales to another level. The level of personalization, attention, and order fulfillment that Amazon provides is now coming to be expected by consumers across the board.

Fortunately, these innovations are right at your fingertips with e-commerce AI tools. Not sure where to begin? Consider five of the biggest ways in which artificial intelligence is transforming e-commerce.

1. Intelligent Product Recommendations

One simple way that Amazon uses artificial intelligence to bolster its revenues is by offering intelligent product recommendations to customers. The way in which this works is that Amazon’s AI engine analyzes data on customers’ browsing habits, product views, and previous purchases to present other products the customer is likely to enjoy or to suggest a more expensive upgrade.

The statistics show how effective this simple strategy is. Cross-sells (offering related products) and upsells (offering more expensive versions of a product) account for 35% of Amazon’s revenue and can boost conversion rates by a whopping 915%—as seen in a study of over 100 online retailers by MyBuys.

2. Chatbots and Artificial Agents

While much of AI for e-commerce is data-driven, other applications of artificial intelligence use natural language processing (NLP) to create a more supported experience for customers. Simulating the customer service representative experience, chatbots and artificial agents can be used to interact with customers while they shop—reducing the need for human involvement and providing 24/7 support.

So far, chatbots are being used effectively by eBay and several other online retailers to suggest products a customer might like, answer basic questions, and even offer personalized discounts. NLP technology also allows the bots to understand and interpret speech (Amazon’s Alexa is a good example) and to ask questions in everyday language.

The acceptance of chatbots among consumers is surprising. According to a 2019 Ubisend study, 20% of consumers are happy to buy goods and services from chatbots and 40% will use them to secure a good deal. However, the job can’t be left entirely to robots. A human is always needed for backup to prevent your customers from becoming frustrated.

3. Predictive Behavior Modeling

Now we’re moving into Big Brother territory, but this application of AI is really not as scary as it sounds. Predictive behavior modeling is actually one of the most commonly used e-commerce AI tools, and consumers barely realize it’s there.

Basically, the AI e-commerce engine collects user data from a range of sources, including:

  • Social media
  • Sales
  • Loyalty cards
  • Market research

It then analyzes this data in-depth to create psychographic profiles of your customers. It’s the digital version of sitting down for a chat with the customers that come into your store so that you really get to know what they’re like.

Fashion giant Zara has applied this tool effectively to personalize clothing suggestions for their customers. Based on the data they collect on each user, the Zara website suggests clothing in the size, colors, and style that the customer likes to increase conversions and reduce returns.

4. Intelligent Payments

So, AI e-commerce techniques have led your customer successfully to the checkout. Now, artificial intelligence can work to make sure that the transaction is successful. Global trade and fraud alerts can make credit card authorization a complex business. There are some ways that AI-powered merchant services can help:

  • Lift approval rates for frequent transactions
  • Respond to real-time fraud reports about particular regions or internet users
  • Request up-to-date credit card information when a user’s card is about to expire
  • Analyze a customer’s preferred payment options and recommend that you offer that option at the checkout

If your store offers a recurring subscription, keeping users’ payment information updated is key to making sure the regular subscription will continue. As the backbone of many businesses’ revenue, this application of AI is one that’s worth considering across the board.

5. Inventory and Logistics Management

No matter what they order, everyone wants their orders to arrive quickly. AI for inventory management is helping to make this a reality. As usual, Amazon is leading the way in this area with warehouse drones that work 24/7 to collect and dispatch their customers’ orders and collect data on future inventory needs.

While drones for delivery aren’t a reality quite yet, advances in AI e-commerce for logistics do result in faster fulfillment times and less idle and slow-moving inventory.

Applying E-Commerce AI Tools 

The need to keep up with AI is undeniable. The have-nots will soon become obsolete in the face of AI giants like Amazon. However, the uncertainty about how to get started discourages many smaller companies from trying.

If you would like to try AI on your website, get in touch with an experienced consultant who can create a customized plan with your team. With a little AI training and an integrated marketing strategy, you could soon be on your way to massive gains.