With the increased dedication to online shopping because of the pandemic, one thing has become apparent for retailers of all kinds — the value of artificial intelligence (AI). While AI was an important consideration to the digital experience before COVID-19, now that customers rely more heavily on eCommerce, it’s suddenly become crucial for any retailer who wants to remain competitive.
Today, the most common AI use cases in eCommerce would be how it’s used to predict shopping patterns based on the products that shoppers buy and when they buy them. This can help retailers maximize their store’s offerings and boost their conversion rates.
Besides product recommendations, eCommerce intelligence is being utilized by online retailers to provide chatbot services, analyze customer comments, and offer personalized services to online shoppers.
By integrating AI into their digital experience, businesses will be able to give customers what they want, when they want it. And while this is only one example, we’ll talk about a few more in the next chapter of this article.
The Importance of AI
While AI may be a newer concept when it comes to eCommerce, we’re far past the early adoption stage. In a survey, 85% of companies thought that AI could give them a competitive advantage. That said, only 20% have used some form of AI in their offerings, meaning there’s still a big gap in adoption. Therefore, jumping on AI now could allow your company to power ahead of the competition.
The global eCommerce sales industry is expected to grow to $4.8 billion by 2021, and much of that growth will be affected by AI. Research from Gartner predicts that around 80% of all customer interactions will be managed by AI technologies (without any human agent) by the year 2020.
While the three main reasons to upgrade AI are to improve the customer digital experience, reduce costs, and increase revenue, there are many potential applications within these categories.
In a recent survey by Adobe, 39% of respondents wanted to use AI to segment their customers, while 38% thought it would be good for product categorization. Another 37% saw value in fraud detection and offered personalization, while 35% admired its use for customer review analytics. These applications are just the tip of the iceberg, as AI has many potential uses for eCommerce.
All of this means that now is the time for businesses to start taking AI seriously. Otherwise, they may fall behind industry standards and lose customers to businesses that are providing these updated services.
How AI Is Transforming the Ecommerce Industry
There are four main ways that AI is contributing to eCommerce. For businesses that want to stay ahead of the curve, you’ll need to consider how all of these aspects can be implemented into your website. This is something Vaimo can help with if you’re running on the Magento platform.
Intelligent Product Recommendations
AI enables an eCommerce website to recommend products uniquely suited to shoppers and enables people to search for products using conversational language or images, as though they were interacting with a person. This personalization highlights yet another limitation of brick-and-mortars and shows how AI plays a key role in the increasing revenue share of eCommerce in the retail industry.
So far, AI has proven invaluable for product recommendations, as research shows they can increase conversion rates by 915% and average order values by 3%. Even on thriving sites like Amazon, product upselling and cross-selling accounts for 35% of its overall revenues.
With the use of big data, AI in eCommerce is impacting customer choices thanks to its knowledge of previous purchases, searched products, and online browsing habits. In addition to using search and purchase history, AI can also use visual data to provide customers with products similar to those they have already looked at. This might include finding a visually similar item, recommending a complimentary item (like a matching purse), or offering another piece to complete their outfit.
Finally, AI can make recommendations in multiple ways. Behavioral recommendations can show customers products that other customers have viewed or bought. Shopper-focused recommendations can be personalized based on each customer’s browsing history. And content similarity recommendations can provide products with adjacent features or benefits.
Overall, product recommendations provide multiple benefits for eCommerce retailers:
- A higher number of returning customers.
- Improved customer retention and sales.
- A personalized shopping experience for online shoppers.
- Enable a personalized business email campaign.
Personalization of the User Experience
Rated among the most effective modes, personalization is at the core of AI in eCommerce marketing. Based on specific data gathered from each online user, AI and machine learning in eCommerce derive important user insights from the generated customer data.
For instance, the AI-enabled tool Boomtrain can analyze customer data from multiple touchpoints, including mobile apps, email campaigns, and websites, to see how they perform online interactions. These insights enable eCommerce retailers to make suitable product recommendations and provide a consistent digital experience across all devices.
Natural language processing can also help your system understand what your shopper actually meant if their original search had no hits. This lets your shoppers use more natural language or dialogue-style terms instead of precise keywords. It can also correct misspellings, add synonyms, or automatically add missing terms. Sometimes, users don’t know what to search, so an AI system can extract a category or concept that the search might represent before sending the query to the search engine.
According to a Boston Consulting Group report, retailers that have implemented personalization strategies see sales gains of 6-10%, a rate two to three times faster than other retailers. It could also boost profitability rates by 59% in the wholesale and retail industries by 2035, according to Accenture.
Here are some of the benefits businesses will see upon implementing a personalized user experience:
- Increased product recommendations.
- A more consistent user experience across devices.
- Sales gains and higher profitability rates.
- Improved customer engagement.
Chatbots and Other Virtual Assistants
A 2019 Statista study found that around 40% of US-based consumers state that they have used chatbots to engage with the retail industry. Chatbots can play multiple roles during the shopping experience, whether businesses target B2B or B2C eCommerce. They can stand in as customer service representatives for quick questions or facilitate the shopping process to provide information and tips. As more and more businesses move onto online platforms, chatbots allow retailers to achieve high scalability and collect info and strengthen user experience.
Ecommerce retailers are increasingly turning towards chatbots or digital assistants to provide 24×7 support to their online shoppers. Built using AI technologies, chatbots are getting more intuitive and are enabling a better digital customer experience.
Apart from providing good customer support, chatbots are enhancing the impact of AI in eCommerce through several capabilities:
- Natural language processing (or NLP) that can interpret voice-based interactions with consumers.
- Addressing consumer needs through deeper insights.
- Self-learning that capabilities help them improve over time.
- Provide personalized or targeted offers to customers.
Efficient inventory management is all about maintaining the right level of inventory that can fulfill market demand without adding to idle stock.
Apart from inventory management, AI enables warehouse management with the emergence of automated robots that are being projected as the future of artificial intelligence in eCommerce design. Unlike human employees, AI robots can store or retrieve stocks 24×7 along with immediate dispatching of items for online order.
While the conventional form of inventory management was restricted to current stock levels, AI-enabled inventory management is enabling how to maintain stocks based on data related to several factors:
- Sales trends over the previous years.
- Projected or anticipated changes in product demands.
- Potential supply-related issues that could impact inventory levels.
How to Integrate AI Into Your Ecommerce Strategy
For businesses that are ready to use AI for one or all of the above sectors, it’s important to create a plan of action. We recommend the following steps:
- Create a vision and strategy about how to use AI to drive your business forward. This strategy should be built using your data as a guide. Think about how your data differentiates you from the competition.
- Prioritize your AI initiatives within your organization. AI should be at the top of your technology and information budgets to ensure it gets the focus and support it needs to succeed.
- Curate the right expertise and skillsets. You can’t trust just anyone with your company’s AI. You’ll need data scientists to build your programs to ensure you capture great data. The most valuable data for AI remains hidden in unstructured or flat files (80% of all data is unstructured, while less than 1% is being analyzed today). If you don’t have the right quality or quantity of data, the value of AI is limited. Most companies are committed to collecting and storing data but lack resources and understanding to identify the good from the bad.
With your strategy, budget, and expertise sorted out, it’s time to take action and outline your projects. We recommend doing this by focusing on relevant and narrow use cases that are well supported by what your data tells you. Pragmatism, combined with selecting Saas AI solutions, will get you to wins and value the fastest.
For companies that need more help integrating AI in their Magento development, Vaimo can help. We’re experts in Magento design and can create stunning eCommerce websites your customers will love. With a wide variety of SKUs targeted toward business sales, suppliers like Fastenal can greatly benefit from our eCommerce design services to help their products pop. Their B2B sales will make it much easier for their customers to resell the items in a B2C capacity. Learn more about our services, or talk to our team today to get started.