What is Ecommerce AI & How is it Changing Everything?

What is ecommerce AI and how is it poised to be the game-changing technology of the decade? Join us as we break down everything you need to know in this blog.
With popular media featuring robot takeovers and doomsday scenarios brought on by technology, it’s no wonder why people were once scared of artificial intelligence. It seemed too futuristic, too unnatural, for mainstream use — until it became a part of our everyday lives. Now, AI helps you unlock your phone, pick a Netflix show to watch, and navigate to where you need to go while avoiding gridlocks and road closures, just to name a few examples. Even Google searches and social media feeds are shaped by AI. 

In short, artificial intelligence was integrated into the mainstream so quickly because it mimics human intelligence, improves efficiency and enables personalization. AI uses input data to generate outputs and “learns” with time, providing better outputs the more it’s used. That’s why platforms like streaming services and food delivery apps always seem to “know” what you’ll want, especially after you’ve logged in a few times. 

AI is undoubtedly powerful, and in recent years it’s been a necessity for e-tailers looking to grow their businesses. From using ecommerce AI to boost sales to building better customer service programs, there are nearly endless benefits to this technology. Some would say it’s changing everything.

Read on to learn more.

What Is Ecommerce AI?

Ecommerce AI refers to the use of artificial intelligence in online retail. Plain and simple. Sellers can use this technology to improve various aspects of their businesses, including personalized recommendations, fraud detection, customer service, and supply chain management. There are benefits for both e-tailers and consumers, from the standpoints of efficiency and customer experience, so it is simply a matter of which tools to implement.

Some examples of ecommerce AI in action include machine learning algorithms that can analyze customer data and make product recommendations, chatbots that can assist customers with their purchases, and predictive analytics tools that can help businesses forecast demand and optimize inventory. 

Let’s take a closer look at some of the ways savvy e-tailers are leveraging AI and why it’s a game changer for ecommerce.

It Offers Product Recommendations

If you’ve ever seen the “Recommended for You” section on Amazon, you’ve seen AI at work. This tactic uses recommendation engines, which employ artificial intelligence to analyze data about the products that a customer has viewed or purchased, to make recommendations for other products that the customer may be interested in.

Recommendation engines can also make use of other data sources, such as customer reviews and ratings, to improve the accuracy of their recommendations. By making personalized recommendations, businesses can help customers discover new products that are relevant to their interests and improve the overall shopping experience. 

Consider these product recommendation statistics to prove the point:

  • 80% of consumers say they enjoy seeing product recommendations.
  • 49% of shoppers made unplanned purchases after seeing recommended products.
  • 26% of revenue, on average, is attributed to product recommendations (35% for Amazon).
  • The recommendation engine market is expected to reach $15 billion by 2026.

This tactic can lead to increased customer satisfaction and loyalty and can help online retailers increase sales and revenue.

It Runs More Effective Marketing

Unfortunately, the popular saying “build it and they will come” does not apply in ecommerce. Running a successful online store requires customer acquisition, which means having to market your products to the masses and building a solid reputation. The good news? AI can help. 

There are several ways that online retailers can use AI to run more effective marketing campaigns. Here are a few ideas: 

  • Customer segmentation: AI can identify patterns in customer data and segment customers into groups based on shared characteristics. Then, you can tailor your marketing efforts to specific customer segments and improve the effectiveness of your campaigns.
  • Predictive analytics: AI-based predictive analytics tools can help forecast future trends and customer behavior, which can help businesses make more informed decisions about their marketing strategies.
  • Content generation: AI can generate personalized content, such as product descriptions and email subject lines, which can help sellers if copywriting isn’t their strong suit. 

Overall, AI is a smart marketing tool that can help you understand and engage with your customers, not to mention save time and accomplish more with fewer resources.

It Can Detect Fraud

Ecommerce businesses can use AI to detect fraudulent activity by analyzing customer data and identifying patterns that may indicate fraudulent behavior. As you might have guessed, machine learning algorithms can be trained on large datasets of both fraudulent and legitimate transactions to be able to point out possible fraud. This may include data about the customer, like their location, IP address, and browsing history, as well as data about the transaction itself, such as the amount of the purchase and the payment method used.

By using AI to detect fraudulent activity, businesses can protect themselves and their customers from financial loss, as well as improve the overall security of their ecommerce platform. In addition, the implementation of robust cybersecurity measures such as Virtual Private Networks (VPNs) can further enhance security. VPNs encrypt internet traffic, ensuring secure communication channels, particularly crucial when handling financial transactions. By combining AI-driven fraud detection with VPNs, businesses can establish a multi-layered defense strategy, safeguarding both themselves and their customers against potential security breaches. Moreover, the use of AI for fraud detection can help businesses to reduce the workload of their security teams and to improve the efficiency of their fraud detection processes.

It Powers Ecommerce Chatbots

Chatbots, the computer programs that are designed to simulate conversation with human users, are powered by artificial intelligence. These chatbots can help customers with various aspects of their online shopping experience, from answering questions to providing assistance with orders and returns. 

AI chatbots improve customer service by providing quick and accurate responses to customer inquiries. With 95% of shoppers saying that good customer service is imperative for brand loyalty, this will pay dividends for e-tailers. Chatbots can also gather customer feedback and data, which sellers can use to improve the overall shopping experience and to identify areas for improvement.

One major benefit of using ecommerce AI chatbots is that they can operate 24/7, providing support to customers at any time of day or night. This can be particularly useful for businesses that have a global customer base, as chatbots can operate in multiple languages. Additionally, they can field low-level requests, which reduces the workload of customer service teams.

Helps Optimize Inventory Levels

Predictive analytics tools are a type of ecommerce AI that use data and machine learning algorithms to forecast future outcomes and trends — particularly demand for products and optimized inventory levels.

By analyzing past sales data, customer demographics, and external factors like weather and economic conditions, predictive analytics tools can help businesses make informed decisions about how much of a particular product to stock. They avoid overstocking, which often results in excess inventory and increased storage costs, as well as understocking, which means lost sales and customer dissatisfaction, so using AI is a no-brainer.

Predictive analytics tools can also be used to identify trends and patterns in customer behavior, which can help businesses to make more informed decisions about marketing and sales strategies. For example, a business may use predictive analytics to identify the most effective times to run promotions or determine when to target specific customer segments with personalized recommendations.

Ecommerce AI Is Changing the Game

While AI is ultimately limited by the input data it receives, there are several uses that make it an incredibly powerful tool for consumers and e-tailers alike. It’s changing the game to improve the back-end of ecommerce businesses, as well as leveling up the shopper experience. Best of all, there’s no coding required.

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