Robot Holding Shopping Cart
One of the biggest innovations to shopping came about in 1872, with the founding of the first mail-order company. Prior to that, you had no other choice but to visit a store in person—or at least send someone out with a shopping list. Fast forward 80 or so years, and another significant change in the way people shop came about. It was a return to in-person shopping, but now nearly everything could be found in one convenient spot: the shopping mall.
Forty years later came yet another innovation with the rise of online marketplaces. And while everything could still be found in one convenient spot, consumers were back shopping from the comfort of their own homes. All that is set to change again. With e-commerce becoming more and more competitive by the day, artificial intelligence is quickly emerging as the differentiator for retailers operating in the space. It’s improving customer experiences, operational efficiencies, and even business models.
According to a Forbes Advisor survey, 64% of business owners believe AI will improve customer relationships. The same number feel the technology will increase productivity for their organizations. There are still concerns involving its use, as it’s often seen as a means to replace human workers. Questions also remain about where the technology is headed. It’s continuously learning, so there’s always the potential to bake in algorithmic biases that reinforce inequalities and faulty information.
As far as e-commerce goes, however, the concerns are fairly limited, and AI’s integration is quickly becoming commonplace. It only makes sense to experiment with what the technology can do. The following are often the best places to start:
1. Continue improving customer experiences through personalization.
Personalization is an expectation of an increasing number of consumers, often more than you might think. A McKinsey & Company report can attest to that, indicating that 71% of today’s consumers expect personalized interactions from brands. Interestingly enough, even more (76%) find it frustrating when it doesn’t happen. Why brands don’t tailor content to the individual is still up for debate, but one of the reasons is personalization at scale. It can be immensely difficult to achieve—that is, until AI.
Just ask Michael Quoc, founder and CEO of SimplyCodes, an AI-powered coupon utility offering real-time discounts at more than half a million e-commerce sites. “AI and machine learning have revolutionized personalization over the past decade, enabling better predictions and more accurate recommendations,” Quoc says. Recent advancements, particularly large language models (known as LLMs), have improved the ability to deliver personalization at scale.
“LLMs bring a new layer of reasoning and semantic understanding that, when combined with traditional recommendation systems, can provide even more highly personalized experiences, often augmented through more conversational interfaces,” Quoc adds. Plus, LLM-enhanced search can offer insights into consumer intent, which allows for more targeted marketing. And if you leverage AI-generated content, greater scalability is well within reach.
2. Streamline operations with AI-powered insights.
Helping businesses get to know their target customers is often seen as the main benefit of AI. It certainly is powerful in dissecting past purchases, browsing histories, and a host of other details to deliver personalized shopping experiences at scale. However, AI can be just as beneficial on the backend, providing everything from cost reductions and better resource allocation to enhanced efficiency and greater productivity.
Take pricing strategies, for example. AI all but eliminates the guesswork, factoring in the likes of demand patterns, seasonal fluctuations, competitor pricing, and more to arrive at the right price for whatever it is you’re selling on your e-commerce store. In fact, you can even apply more dynamic pricing practices, as AI can help anticipate optimal discounts throughout the year to improve conversion rates.
Just as important is AI’s ability to leverage much of that same data to enhance inventory management processes. Few questions remain about whether the demand will be there for a given product, limiting many of the issues associated with overstocking or understocking your e-commerce store. When coupled with RFID tags and sensors, you can know what’s selling in real time. Your operations also know where everything’s going, which can be of great benefit to logistics in forecasting and relaying arrival times.
Then, there’s always the matter of data privacy and security—something else in AI’s wheelhouse. With the right algorithms, the technology can detect and alert you of potentially fraudulent activities. Online transactions become that much more secure, helping establish greater customer trust and loyalty.
3. Arrive at new business models with AI innovation.
AI’s ability to predict outcomes is changing the way businesses create value. There’s just no getting around that. However, changes in value creation will inevitably displace many traditional business models and usher in a whole new crop of strategies. Already, you can see this with AI-driven chatbots and virtual assistants, which have changed the engagement models used in e-commerce businesses.
Visual recognition technology is another feature commonly employed in the e-commerce space. Instead of typing into the search function, consumers can use an image or picture to find products. This is especially useful for those who don’t know what they’re looking for, improving the speed and convenience of a search. Similar to this functionality is virtual “try-on” technology, which uses AI to allow consumers to try on clothing, glasses, makeup, and the like from the comfort of home. That same technology has been used to see how furniture, art, or other decor might look in a room.
AI is changing the way all businesses operate—retailers included. Whether it’s offering mail-order, relocating to a shopping mall, or launching an e-commerce site, merchants have long been integrating the next great innovation into their operations. AI is no different. It’s just a matter of determining where the technology fits and how it can best benefit the consumer and the business.
