robot holding shopping cart
One of the greatest innovations to shopping came in 1872 with the creation of the first mail order company. Until then, you had no choice but to go to the store in person, or at least send someone out with a shopping list. Some 80 years later, another major change has occurred in the way people shop. It was a return to in-person shopping, but now he can find almost everything in one convenient place: the mall.
Forty years later, the rise of online marketplaces has ushered in yet another innovation. And while everything can still be found in his one convenient location, consumers are back to shopping from the comfort of their homes. Everything is about to change again. As competition in e-commerce intensifies by the day, artificial intelligence is quickly emerging as a differentiator for retailers operating in this space. They are improving customer experience, operational efficiency, and even business models.
According to a survey by Forbes Advisor, 64% of business leaders believe that AI will improve customer relationships. The same number of people feel that technology increases productivity in their organizations. There are still concerns regarding its use, as it is often seen as an alternative to human workers. Questions also remain about where this technology will go. Because we are continually learning, there is always the possibility that algorithmic biases will be built in that reinforce inequalities and misinformation.
However, concerns are fairly limited as far as e-commerce is concerned, and AI integration is rapidly becoming commonplace. It only makes sense to experiment with what technology can do. Often the best place to start is:
1. Continually improve the customer experience through personalization.
Personalization is a consumer expectation that is increasing, often more than imagined. McKinsey & Company's report proves that, showing that 71% of today's consumers expect personalized interactions from brands. Interestingly, even more people (76%) find it frustrating when that doesn't happen. Why brands don't personalize their content is still up for debate, but one reason is personalization at scale. That may be very difficult to achieve, that is, until AI comes along.
Just ask Michael Quoc, founder and CEO of SimplyCodes, an AI-powered coupon utility that provides real-time discounts across more than 500,000 e-commerce sites. “AI and machine learning have revolutionized personalization over the past decade, enabling better predictions and more accurate recommendations,” says Kwok. Recent advances, particularly large-scale language models (known as LLMs), have improved our ability to deliver personalization at scale.
“LLM brings a new layer of reasoning and semantic understanding. When combined with traditional recommendation systems, it can provide even more highly personalized experiences, often enhanced through more conversational interfaces. ” Quoc adds. Additionally, LLM-powered search provides insights into consumer intent, allowing for more targeted marketing. Leveraging AI-generated content can also significantly improve scalability.
2. Streamline operations with AI-powered insights.
Helping companies understand their target customers is often seen as the main benefit of AI. Indeed, it is powerful in analyzing past purchases, browsing history, and other details to provide personalized shopping experiences at scale. However, AI can be just as beneficial on the back end, offering everything from cost savings and improved resource allocation to increased efficiency and productivity.
For example, consider pricing strategy. AI takes most of the guesswork out of it, taking into account demand patterns, seasonal fluctuations, competitor pricing, and more to come up with the right price for whatever product you're selling on your e-commerce store. In fact, you can even apply more dynamic pricing as AI can predict the best discounts throughout the year to improve conversion rates.
Equally important is AI's ability to leverage much of the same data to enhance inventory management processes. There remains little question as to whether a particular product is in demand or not, limiting many of the issues associated with overstocking or understocking an e-commerce store. When combined with RFID tags and sensors, you can see what is selling in real time. Additionally, operations know where everything is going, which is a huge benefit for logistics when it comes to predicting and relaying arrival times.
Then there's always the issue of data privacy and security, something else that's in AI's wheelhouse. With the right algorithms, technology can detect and alert you to potential fraud. Online transactions become more secure, further increasing customer trust and loyalty.
3. Reach new business models with AI innovation.
AI’s ability to predict outcomes is changing the way companies create value. There's no getting around it. However, changes in value creation will inevitably replace many traditional business models and introduce entirely new strategies. We are already seeing this with AI-driven chatbots and virtual assistants, which are changing the engagement models used in e-commerce businesses.
Visual recognition technology is also a commonly adopted feature in the e-commerce field. Consumers can use images and photos to find products instead of typing them into a search function. This is especially useful for people who don't know what they're looking for, making searches faster and more convenient. This feature and similar virtual “try on” technology also leverages his AI to allow consumers to try on clothes, glasses, makeup, and more from the comfort of their own home. The same technology has been used to see how furniture, art, and other décor will look in a room.
AI is changing the way all businesses operate, including retailers. Whether it's offering mail order, moving shopping to malls, or launching e-commerce sites, merchants have long incorporated the following great innovations into their operations: AI is no exception. The only thing that matters is determining where the technology fits and how it can best benefit consumers and businesses.
