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10+ Best Use Cases of AI in E-commerce

Luigi's Blog | May 5, 2022
10+ Best Use Cases of AI in E-commerce

E-commerce has been advancing in leaps and bounds in the past few years, and the pandemic has only accelerated this process. With more people shopping online than ever before, e-commerce owners now both have an opportunity to attract far more customers and also many challenges to face.

From growing customer demands and increasing numbers of support questions to attempts at fraud, anyone who owns an online shop has a lot on their plate.

To handle all of those tasks without cutting corners, many e-commerce businesses have decided to use artificial intelligence devices to help them learn more about their clients and provide them with outstanding customer service.

Could you also use AI in your shop? Definitely – here are a few ways in which artificial intelligence could improve customer experience in your store as well.

How is AI transforming the e-commerce industry?

By the beginning of 2021, e-commerce sales hit almost $5 bn, and by 2024, experts say that will have jumped to over $6 bn per year.

We shouldn’t be too surprised by that – customers have been demanding a flexible but simple and convenient way to shop for years now. And online shops definitely are convenient: 

    • They are available 24/7
    • Shoppers can research a product and price range from the comfort of their homes
    • People can buy products in just a few clicks by using online payments and have them delivered by courier or parcel locker.

It’s therefore not surprising that there are already over two bn online shoppers and that the number is quickly growing. But those customers have also gotten pretty savvy. Now that they have thousands of online shops from which to purchase products, they won’t settle for anything less than a perfect shopping experience.

This is where artificial intelligence-powered tools can be helpful for all sizes and types of e-commerce companies. There’s now far more to AI than just being a fancy toy for large companies. It can impact practically every part of your ecommerce business, from inventory management to customer service.

According to Accenture, artificial intelligence can enhance business productivity by up to 40%. and 87% of global business organizations believe that AI will give them a competitive advantage. What makes it so powerful, though? The ability to gather and analyze a vast amount of data to find patterns and then take action accordingly.

87% of businesses believe AI will give them a competitive advantage.
Most people are pretty sure AI can boost their business.

Thanks to machine learning algorithms, AI devices also get “smarter” the more they interact with customers and the more data they have available to process. By using big data from your customers’ purchase histories and other interactions, you can pinpoint what they really want and deliver messages that resonate with them.

For example, AI can predict customer shopping patterns based on the products they have previously purchased and send them a personalized mail with a relevant discount. But those tools can do so much more – here are a few examples of how to use data gathered by AI to boost your e-commerce store customer experience.

1. Recommendations tailored to your customers

With personalized product recommendations, shop owners can personalize interactions with customers and provide more relevant experiences that will drive higher conversion rates, average order values, and customer loyalty. And AI-powered recommendations can help tremendously here.

How does Netflix do it?

For example, Netflix’s recommendations engine (NRE), powered by AI, is worth $1 bn per year. How does it handle providing detailed and tailored recommendations to millions of subscribers?

NRE uses algorithms to filter content based on each user’s profile. It can filter over 3,000 titles at a time using 1,300 recommendation clusters to pinpoint the exact titles that a user might be interested in.

Basically, by analyzing data from each customer visit and click, the recommendation engine can “understand” that person’s preferences and create hyper-personalized recommendations for each of them. And it doesn’t matter how many customers you have – the engine can instantly match a given customer to the right products or offers.

Man watching Netflix
Netflix uses AI to tailor content to every user.

2. Dynamic pricing optimization

The right price for your product depends on several factors such as your competitors’ prices, manufacturing costs, and client demand. Researching this all takes time, especially if you have many products.

What would you say if AI could do it for you and automatically change pricing based on the data it has? Because it can, and it’s called Dynamic Pricing.

With it, you can price your products at the optimal price at any given moment, taking into account your own costs and your competitors’ prices through the use of big data. Additionally, such systems can predict when to raise the price of a product and when to launch a sale if it has access to the right data.

AI can also change the prices for hundreds or thousands of products in your store, saving a lot of time on manual adjustments. How could you use it in practice?

For example, increasing your prices when your competitors’ stocks are low. When consumers want a product right away but it’s unavailable on one website, they will more than likely be willing to pay a higher price if they know they can get it from your store sooner. 

How does Amazon do it?

Amazon is one store that fully utilizes a Dynamic Pricing Strategy. Whenever its competitors offer promotions or discounts, they regularly adjust their product prices by up to 20%.

However, it does so gradually to ensure maximum profitability based 

on sales forecasts. This allows it to remain the cheapest and maintain control over its profit margins.

3. Chatbots for enhancing customer service 

Keeping up with customer requests can place significant pressure on support teams. Whether it’s answering pre-purchase questions, helping with checkout issues, or dealing with returns and exchanges, customer support teams have their hands full every day. What’s more, customer expectations are now much higher than ever. 

An “immediate” response within 10 minutes is rated as important or very important by 90% of customers. So a great way to boost your customer support while also freeing up your support team of too many tasks is by using virtual assistants or chatbots on your website.

With AI-powered chatbots, you can offer customer support even during weekends and holidays. While your human support team is away, a chatbot can answer simple questions or perform simple tasks, route customers to suitable knowledge base materials, or allow them to leave messages for agents and schedule callbacks.

While these bots are not completely self-sufficient, they can answer around 80% of daily questions, allowing live support agents to focus on more complex issues. You can also use chatbots to automatically collect customer feedback by, for example, asking them to fill out short surveys and then automatically collecting the answers.

4. Customer segmentation

In this survey 80% of audiences said they prefer doing business with a brand that personalizes their experience. Here, segmenting your audience is key to delivering tailored marketing communications. 

What’s more, using segmentation tactics can increase your marketing campaigns’ productivity, effectiveness, and ROI. For example, look at Campaign monitor – their report found that there was a 760% increase in revenue from segmented campaigns.

Those revenue numbers come from personalized marketing promotions, devising sales strategies to increase conversions from each segment, and developing products that address the specific needs of particular segments, etc. But if you had to manually create groups for your customers, that would take far too long.

Here’s also where AI can lend a hand. By analyzing the data it has, artificial intelligence tools can swiftly create customer segments for you based on the similarities it finds.

Moreover, they can analyze the data without any prior assumptions or biases, such as that young males should be the main target for video games while women are more interested in fitness products. Thus, AI can give you a far more accurate picture of your audience.

Many of those tools can also create entirely new segments for you by highlighting parts of your audience that could be overlooked by you or your team, even if they worked on the same data.

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    5. Smart logistics

    Like many industries, logistics can greatly benefit from using AI-powered or “smart” devices and automating various repetitive tasks. The purpose of smart or intelligent logistics is to make use of real-time information gathered through sensors, RFID tags, or similar to better manage inventory levels and predict demand.

    A good example here is using smart warehouse shelves that sense weight and pressure, sharing this info with warehouse management systems. Combined with radio-frequency identification (RFID) or barcodes, this allows companies to keep their inventories up-to-date by tracking when items are received, stored, picked, and shipped.

    Businesses can thus increase production efficiency while also preventing overspending, as there will be no risk of ordering more items than necessary because of a mess in the inventory.

    AI can also allow you to keep track of all your products throughout the entire supply chain, from the manufacturer to your store, not just those already in it. By using a tracking system with integrated RFID and GPS technology, you can locate all of your products or supplies and even monitor in what conditions they are stored or transported.

    As such, AI devices can be helpful if you have a lot of suppliers and vendors to keep an eye on. By doing so, you can minimize the likelihood of late deliveries or accepting damaged products.

    6. Sales and demand forecasting

    E-commerce companies regularly use forecasting to manage inventories, plan logistics and warehouse space, as well as determine pricing strategies. Yet accurately predicting demand is only getting harder because historical sales data are no longer enough, even when combined with seasonal data.

    To make demand forecasts more accurate and reliable, many brands have turned to AI for sales predictions. Rather than just using historical data, AI makes sales and demand predictions using real-time data including demographics, weather, the performance of similar items, and online reviews or social media. Machine learning will also improve forecasts over time the more data it has available.

    How does Danone do it?

    Among the companies that have implemented a machine learning system to improve demand forecasts is Danone. In addition to creating more accurate estimates for their short-life products, their machine learning system also improved planning between departments such as sales, supply chain, finance, and marketing.

    This system also improved efficiency and inventory balance, helping Danone achieve its targeted service levels at channel and store level.

    7. Voice search

    71% of Americans say they’d rather use voice search than have to enter a query on a keyboard. Capgemini also predicts that by 2022, 70% of consumers will be using voice to shop instead of visiting brick-and-mortar stores. Therefore, smart, AI-enhanced voice search has enormous potential for e-commerce companies.

    How does Sephora do it?

    A good example is the voice search offered by Sephora. In 2017, it launched one of the first Google Assistant actions, allowing users to book beauty services, play quiz games, and listen to beauty podcasts.

    Users of Google Assistant can now shop at Sephora, and those with Google Home can even use Sephora’s Skincare Advisor tool to find nearby stores, get skincare tips, and determine their skin type. Through Google Home, users can also ask Google Assistant to play a Sephora makeup tutorial.

    Man using voice search
    More than 70% of Americans prefer voice search to having to enter a query on a keyboard.

    8. Visual search

    Visual search is another innovative feature that many e-commerce platforms are gradually introducing to attract more customers. This involves using artificial intelligence to enable shoppers to search online based on any type of image instead of text or keywords.

    For people who don’t know exactly what they’re looking for or type the wrong search terms into the search bar, this is extremely useful in helping them find the right products faster and easier.

    How does Pinterest do it?

    Pinterest’s Lens feature is an excellent example of this. With it, users can search for items in a photo they’ve taken with their phone’s camera or upload existing pictures from their camera roll.

    In 2020, the visual search engine registered 459 million monthly active users who would rather search for new brands or products via visual search than regular search.

    9. Tackle fake reviews

    In the online shopping world, customer reviews are key to building trust. Since users cannot physically see what products look like before they buy them, they build up opinions based on reviews and ratings left by current and past buyers or users.

    93% of shoppers read online reviews before purchasing, and 91% of 18-34s trust online reviews as much as personal recommendations. Sadly, many of those reviews aren’t exactly reliable.

    Approximately 31% of online reviews are fraudulent according to a report by Fakespot, a developer of AI technology that can recognize fake reviews. For this research, Fakespot analyzed reviews from more than 2m active online stores on Shopify and main e-commerce platforms such as Amazon, Walmart, BestBuy, eBay, and Sephora.

    But self-learning artificial intelligence is becoming very good at identifying all sorts of fake reviews. These systems can analyze text patterns, writing styles, and formatting in order to mark those that seem suspicious right away.

    They can also compare reviews in the blink of an eye and flag those that seem fake. This could be just what e-commerce needs to finally start winning the never-ending battle against fake reviews.

    10. Detect cases of fraud

    According to the UK’s Office for National Statistics (ONS), there were nearly 63k consumer frauds reported in the first half of 2020, of which around 41k were related to online shopping and auction fraud. What’s even more worrying is that during the first half of 2019 and the first half of 2020, online shopping and auction fraud increased by 37%.

    As customers slowly shift from in-store to online purchasing, e-commerce businesses are particularly susceptible to these attacks due to the increasing volume of transactions, orders, and deliveries.

    However, AI-based fraud detection and prevention tools can help merchants gain the upper hand. After analyzing all available data and understanding the context, AI tools don’t have much trouble spotting and blocking suspicious transactions.

    For example, a user might place many orders in a short space of time, enter an unrecognized address in the relevant field, or skip over basic information required for delivery. AI can detect all such cases and alert business owners to potential fraud attempts.

    These engines can also analyze multiple ID or credit card parameters using AI to combat the use of fakes. By catching users of multiple accounts or proxy servers to make multiple purchases, this technology can also prevent promo code and loyalty program abuse.

    11. Auto-generated product descriptions

    Even for experienced copywriters, writing product descriptions that are both persuasive and SEO-friendly is not an easy task. The more products you have to sell, the longer it might take to write unique descriptions for each.

    How about reaching out to AI-powered tools for those? Of course they are not on the level of professional copywriters, but when it comes to simple product descriptions AI can quickly create engaging, unique, and optimized content based on the specifications.

    Additionally, most AI tools now can use copywriting principles like AIDA (attention, interest, desire, action) to write like a human and also cleverly add keywords to fit the text naturally. While AI-generated product descriptions are not yet widely accepted by the industry, it’s probably just a matter of time considering how fast such tools armed with natural language processing are improving.

    Conclusion

    With so much potential already visible, AI will only be getting more important for e-commerce owners. This technology can provide a wealth of benefits that other technologies cannot offer – from saving you and your team time on various tasks to boosting your customer experience far beyond expectations.

    Add to this helping you fight rising levels of fraud, improving your internal logistics, changing product prices on the go, and providing you with far more valuable data than ever before. 

    Do you still have any doubts that this will change the e-commerce world and how customers find products online? If you don’t already use some of the aforementioned solutions to power your business, now may be a good time to start.