Artificial intelligence still rings in our ears as something out of a science fiction movie, while in reality, it has been around us for quite a while. The future is here and it sometimes feels overwhelming, especially for e-commerce startups still trying to get their business off the ground.
So, let’s make sense of the everyday applications of AI in e-commerce and see why adopting AI tools is exactly what your business needs.
What is artificial intelligence?
Artificial intelligence (AI) is a branch of computer science that seeks to build smart machines capable of performing tasks that require human intelligence.
When put into practice, AI, in all of its shapes and forms, collects and analyzes massive volumes of data, finds patterns in them, and bases its decisions on these findings. Much like the human brain, it amasses “experience” and learns from it.
Sure, robots such as The Terminator or “Dolores” from Westworld might have given AI a bad reputation. However, in e-commerce, you won’t have to deal with a robot eager to cast you down and take all that you hold dear. Siri, Alexa, or Google, despite seeming like the all-seeing eyes and all-hearing ears, actually are defined as narrow or weak AI.
This type of AI tool is focused on performing a single task extremely well and they do it under strict constraints and limitations. Several areas of e-commerce are covered by narrow AI.
- Product targeting
- Visual search and voice-powered search
- Product assortment and sales forecasting
- Virtual assistants and customer service
- Supply chain management
AI in product targeting
All those Nike ads chasing you after you Googled “running shoes?” That’s AI in product targeting. Artificial intelligence is used three ways in e-commerce marketing:
- Predictive analytics and targeted advertising
Predictive analytics and targeted advertising are what you encounter online on a daily basis. Google collects user information from multiple sources, including our engagements and preferences on social media networks, our previous purchases, the content we consume on websites we visit, etc. Based on this data, Google predicts our preferences and serves up ads aligned with them.
- Programmatic advertising
With this type of e-commerce, AI takes things a step further. It enables businesses to buy digital advertising space automatically, based on the consumer’s likes, dislikes, and habits. In less than a second, this application of AI can choose tailored advertisements, purchase, and display them.
- Responsive search ads built with artificial intelligence
Already available on Google Marketing Platform, this application allows e-commerce businesses to submit up to fifteen ad layouts and unlimited meta-descriptions to Google’s ad database. Based on each user’s history and behavior, the AI determines which ad to display.
Visual search and voice-powered search
“See it, find it, buy it” or, “Say it, find it, buy it.” Whether it’s a voice command or taking a picture of a product you want to have, there is no arguing that turning a purchase into a simple command can give you a massive headstart among competitors.
According to business leaders, by 2021, the early adopters of visual and voice-powered search will increase their digital commerce revenue by 30 percent.
Using AI image search tools such as Synthetic’s Artificially Intelligent Style, retailers can enable customers to find clothing items and accessories based on the photo they upload. Popular retailer ASOS offers this option on its website, enabling users to take a photo and find similar products on their website.
Product assortment and sales forecasting
Product assortment can make or break your business, be it online or in the “real world.” In e-commerce, using artificial intelligence for product assortment enables retailers to track not just their own inventory, prices, purchases, and supply, but also those of their competitors.
But these AI tools do not bomb retailers with data — they turn it into recommendations and forecasts that allow e-commerce businesses to shape their decisions on both short- and long-term bases.
Ironically, the stellar results of using product assortment AI have been widely publicized by H&M’s adoption of the tools in their brick and mortar stores, in a bid to break out of a two-year drop in sales.
By analyzing purchases and returns using AI, H&M discovered that certain items sold better than they expected. That helped them shake off a bad habit of stocking their stores with similar merchandise, which had resulted in $4 billion worth of unsold items. Sales have improved significantly since, according to The Wall Street Journal.
Some AI tools go even further with predictive analysis by combining data and finding patterns in the retailer’s sales, current market environment, trends, economic and political factors, etc.
Virtual assistants and customer service
Image and voice search are currently the superstar e-commerce AI tools. However, virtual assistants are giving them a run for their money. In fact, some even claim that conversational AI is the next big thing in the digital space.
According to the BRP 2017 Customer Experience, 45 percent of retailers plan to use artificial intelligence for customer service by 2020. By 2017, 14 percent of retailers had implemented digital assistants and chatbots, seeking to gain a competitive advantage as early adopters.
It makes sense. From simple chatbots to Siri, communicating in a natural, conversational tone, and receiving feedback, guarantees a seamless buyer experience and customer service. A website that tracks these interactions and bases product recommendations, or even layout, on them offers a unique personalized experience.
This experience starts with a search, and does not have to end with a sale. Artificial intelligence also can serve as post-sale support via follow-ups and automated handling of complaints, returns, and refunds.
Supply Chain Automation
According to a survey from Symphony RetailAI, almost half of retailers struggle with average to very poor supply chain forecasting technology. A third of e-commerce businesses track planning, replenishment, allocation, and orders on separate systems.
Artificial intelligence offers a response to that challenge. According to Statista, 49 percent of retailers expected supply chain AI to reduce costs. A similar percentage expressed the belief that artificial intelligence would increase productivity and revenue. Finally, 40 percent said AI improved their decision making.
The perk of using AI in e-commerce inventory and warehouse management is its capability to find weak points in the supply chain. Much like sales forecasting, it provides retailers with recommendations and solutions, with a special focus on potential issues such as seasonal or seemingly unexpected delays or increased demand.
By linking it with GPS-based delivery services, it enables e-commerce businesses to follow the product from point A to point B and use that data to maximize speed and efficiency.
Artificial intelligence in e-commerce is a significant investment, especially for startups. However, at this point, it is no longer a luxury of the select few. Yet, the research has shown that by next year, most retailers still won’t have implemented e-commerce AI.
This leaves you with a lot of maneuvering space when it comes to transitioning to the new technology. Now is the perfect time to test AI in e-commerce, and see which tools are a good fit for your business. If you decide to become an early adopter, you will have an immense competitive advantage — so it is definitely a win-win situation.
We are Fetchr; a company specialized in e-fulfillment. We help e-commerce entrepreneurs grow their business in the Middle East. Let’s make it happen! One box at a time. Learn more here.
This blog is intended for informational purposes only, and should not be considered business or legal advice. MENA 360 DWC-LLC (Fetchr) will not be held liable for the use, non-use or misapplication of this information, lost profits, personal or business interruption, or any other loss.