How Artificial Intelligence is Reshaping the eCommerce Industry

AI in ecommerce

You might have had heard Mark Zuckerberg, Elon Musk, and Jeff Bezos talking about Artificial Intelligence. The term first appeared in a program— DENDRAL written by Carl Djerassi in 1965. AI is the latest buzz around industries. After powering Netflix recommendations, Google’s search algorithms, Alexa, and Siri, AI is all set to enter the eCommerce domain.

Yes, a couple of decades ago, the world wasn’t sure about the success of the eCommerce business. We were not sure about pulling out our credit or debit cards and shop online. But now, with global eCommerce sales expecting to touch $4.88 trillion by 2021, it is clear to see that the sector is growing at a decent pace.

Thanks to the open-source chat APIs that enabled e-commerce companies to cement strong relationships enabling them to interact with customers whenever required.

And with the introduction of AI in this domain, it is likely to go beyond that. Before we jump into how AI will make an impact on eCommerce let’s understand what Artificial Intelligence is.  

What is meant by artificial intelligence or AI?

Artificial Intelligence (AI) refers to the creation of smart software and hardware that are capable of replicating human behavior including the innovative field of edge AI.

It belongs to computer science and has always been a matter of interest to people’s imagination. Even, it’s been a central catalyst for sci-fi flicks for decades. Although the idea appeared in 1965, it became a common term for movie directors and producers.

The A.I. Artificial Intelligence movie and many others highlight the use of robots acting like humans. They have been portrayed doing specific tasks for their human masters and living with them side-by-side.

If you may remember the American comedy sci-fi sitcom— “Small Wonder.” The sitcom portrayed an android humanoid named V.I.C.I. (Vicki) living with its robotic engineer’s family. Yes, that’s the display of AI.

On the fictional front, AI is limited to movie screens; but on the actual front, it’s an integral part of our daily lives. It already empowers machines to take on different human tasks for example — driverless cars, even in driver-bound cars and vehicles, AI reacts to the environment and offer virtual assistance, plays games and more.

It has already made its presence in various industries and is projected to expand its reach in the consumer market in a couple of years. Even, restaurants have started using robots for order processing and serving. And, hospitals have begun implementing AI for data collection and surgeries. While in banking sectors AI is used to avoid fraudulent activities, fortify security through methods including CISSP training for staff, and enhance user experience.

Now, let’s focus on how AI is reshaping the eCommerce industry?

Let’s admit it, in today the success of brand lies in a full-proof eCommerce strategy. Effective eCommerce doesn’t mean about having a wide audience-base or sending hundreds of emails to subscribers or bombarding the target audience’s Facebook timeline with almost anything. It is all about sticking to fundamentals, and that’s being relevant.

Customers want quick access to their favorite products or services that too with ease. However, brands hardly pay attention to that or have enough time to prioritize individual preferences.

This is where AI kicks in. It can do a lot more for your online store right from taking on SEO services for your store to managing inventory and boosting sales. Let’s understand it one by one.

1. Improved and flexible visual search

According to Janrain research, about 74% of online customers get irritated with sites when they find content that is irrelevant. If a brand’s search function isn’t up to the mark, it’s definitely going to disappoint the customer. Later on, this accounts to increased bounce rate and early site abandonment.

Thanks to AI technology that gives eCommerce stores a competitive edge. Businesses of any size or budget can use it. Pinterest introduced its latest update for Chrome extension. It allows users to pick a specific item in any online pictures, and ask it to provide matching items with the help of an image recognition tool or workforce software.

It’s not about Pinterest only that introduced AI-powered search engine for a better experience. Shoppers are frequently saying ‘NO’ to impulse restriction as the latest software platforms that boost eCommerce stores create revolutionary visual search abilities.

Besides bringing the exact matching products, AI enables shoppers to find complementary items as per the shape, size, color, fabric, and brand. These tools or software come with outstanding visual capabilities. It first obtains visual cues as and when an image is uploaded. Then it successfully assists the shoppers in finding the exact product(s) that they need.

The shoppers no longer need to buy something beforehand to see an item that they would like to get. Let’s take an example— you love your friend’s new pair of Nike’s sports shoes or a new dress. If you have got a visual, AI enables you to find similar products on eCommerce websites.

It simply means that eCommerce stores can bring you relevant items through its flexible search ability powered by AI.

2. Interactive voice search

How many websites do you know optimized for voice-based searches? Having an attractive web page design is just half job done. It needs to include some functionalities that today’s tech-savvy users need frequently. Voice search is as such functionality, that’s taking the world by storm. It uses artificial intelligence to search for products or services with the help of speech.

By 2022, voice commerce sales are expected to reach $40 billion. Though the time is still experimental for such functionalities, brands are looking for ways to capitalize on it. Amazon, Apple, Google, and other voice-controlled assistants allow users to look for best deals and buy online.

Even Google and Walmart agreed on a partnership that lets Google Assistant to remind you to restock or reorder products that you bought earlier. According to your response, it places the order on your behalf through Walmart.

3. Personalized experience

Once upon a time, personalization for any online store was limited to only knowing the customer’s name. Remember, the emailers with our names? It’s still in trend, but a few decades back, it was the extent of personalization.

But now, the scenarios have changed. It may sound a little bizarre, but robots are here to make your shopping experience more improved and personalized than humans.

See it in this way— you meet a salesperson, he or she greets you and asks about your basic requirements.

Artificial Intelligence, on the other hand, engages you with at each touchpoint. It understands your shopping behavior and preferences than a real salesperson.

Previously, essential data were either unknown or weren’t huge. But now, even a small business has big data including customers’ details, their preferences, shopping behavior and more not during their purchase but afterward too.

Thanks to artificial intelligence, businesses have access to big data that allows them to put all this information in creating a personalized experience. From product suggestions to deals and promotions, it customizes everything accurately.

Whether a shopper is using a particular app, website, or email, the AI software is continuously monitoring the devices and channels to bring you smart data. That unified data enables eCommerce websites to provide a seamless experience irrespective of the platform.

For companies like Netflix and Amazon, personalized marketing based on AI has proven to be thriving. These are the brands that adopted AI-based technology while it was in its initial state.

While Amazon, which also has Amazon photo storage, experienced a 29% boost in sales due to product recommendations, Netflix garnered a 75% jump in its personalized recommendations. And, you know what; Netflix saves about $1 billion every year through customer retention due to personalized content.

That’s how AI-based personalization works and adds to a brand’s revenue.

4. Inventory management

There is no eCommerce without inventory or stock. However, if you have understock, you will miss a sales opportunity. An overstock, on the other hand, will get you cash-strapped and tied funds.

Even, statistics show the same scenarios. About $1.1 trillion capital is stuck in inventory that is equal to 7% of the US GDP. The stats don’t end here. About 45% of Small and Mid-sized Businesses (SMBs) either do not keep track of their inventory or managing inventory manually.

And, that’s a dominant factor in affecting an e-store’s overall growth as well as success. AI can tackle inventory challenges via a highly automated process. For example— it will initiate creating purchase orders for items that are high in demand.

It also notifies the vendor about the products that run out of stock in real-time. Unlike time-consuming and manual reports, it creates automated reports as per market demand. This all indicates less time consumption in stock estimation. Leveraging machine learning algorithms with natural language processing, AI-based chat bot allows you to automate your communication with the buyers too. AI can also design models based on predictive analytics.

Do you know what problems lie within traditional methods? The problem is it uses observation-based perspective. And, as demand and competition keep changing, it hardly is accurate. However, to reach their operational best, retailers need to be capable enough. They have to foresee demand with the help of predictive analytics.

Artificial intelligence, as said earlier, designs analytics models to discover key factors influencing demand. It includes varying levels of demands for different items and different times.

Once artificial intelligence comes into foreplay, it makes future forecasts (for the demand of course) more precise and accurate. This helps you in controlling your supply chain. It also gives you a clue about your customer’s behavior. Accordingly, it reduces the shrinkage and saves your valuable time and money.

5. Customer-focused pricing

Be it eCommerce trends or real-time scenarios, pricing a product isn’t a guess game. With the help of sophisticated machine learning algorithms, AI evaluates market dynamics and other relevant factors for pricing. Keeping optimal prices helps a company stay relevant and outperform competitors.

Likewise, artificial intelligence taps on the right point and facilitates well-organized inventory management. It can only be achieved by analyzing a huge volume of data generating actionable business-insights.

But, it’s not that easy. eCommerce is a big challenge. If you see statistics, you will find that people have started trusting online shopping more than ever. And their interest in it is increasing day by day.

As for any retailer, more demand means more competition; it signifies that the price of every particular product will change frequently considering market dynamics. As retail is going online and the market is getting Omnichannel, retailers need to put their focus on market dynamics analysis. They need to do it on a smaller level where they measure operations in minutes and hours than days and weeks.

Doing a thorough analysis of dynamic data points in a time-restrictive and the intensive environment is nearly impossible for human resources. However, artificial intelligence does it with ease.

6. Revs up cybersecurity

In 2018, about 60 million Americans were affected by identity theft. Breaching cybersecurity and stealing customer data isn’t new. It’s been around for decades. And, to identify or detect a breach, earlier companies used to take 100 to 200 days.

As eCommerce is a platform that stores customer information, hackers and cybercriminals always look for ways to steal that data. To prevent unauthorized access, AI and machine learning algorithms come together in mitigating the chances of fraudulent activities.

It can empower a website to take real-time decisions along with risk scoring. And, it does it by detecting even the subtle patterns that are hard for humans to identify. As it features a constant learning cycle, the software keeps analyzing transactions to make sure the authorized person is shopping on the site or performing the transaction.

7. Automated customer service

According to Gartner, by 2020, 25% of customer service operations will become automated using chatbots or virtual assistants.

The primary focus of any eCommerce store is to make its customers happy. And the best way to do is to provide unmatched customer support whenever needed. But not all businesses have the required workforce to deal with customers’ queries round the clock.

For example— a customer browsing your store needs some help at 3:00 AM. You may not find anyone there to help him or her in the wee hours.

This is where chatbots come to the rescue. Powered by artificial assistance, chatbots are programs that take on frequently asked questions and provide you with the needed information.

As these aren’t human, they are sure about the questions. However, they may fail if you ask a complex question. Remember, the Netflix movie Tau?

So to handle such a situation, a hybrid agent and artificial intelligence come handy. The agent gives the AI required training and development during the operational process. It makes the Chabot smarter with every interaction.

Domino’s and other brands started answering to customers queries using chatbots. Visit their Facebook page or social media campaigns, and a Chabot will greet you.

The great benefit of using a virtual assistant or chatbot is that it can store more data as compared to a human brain. It can also dispense the details related to specific items, delivery dates or others at a fast pace.

Duplex is yet another example of AI-based virtual assistant launched by Google. It can help businesses enhance customer service.

eBay is yet another brand that joined the Chabot bandwagon. It introduced a simple version of Messenger bot to remind is bidders. At present, the brand owns ShopBot. It is an advanced version that allows customers to find Father’s Day gifts within their budget. It even locates a listing by uploading a picture. You can see similar bots from brands like H&M, Pizza Hut, Sephora and Burberry.

8. Automated Shipping and supply chain

No eCommerce company can grow further if its shipping or supply chain is third rated. Warehousing and logistics if seen closely are the grave issues for online stores. But if integrated with AI, the industry poses combined growth.

Not only the boom in IoT (Internet of Things) or web-enabled devices, but a boost in digital marketing has also stimulated the growth of eCommerce sites. And it has led to the challenges in ecommerce logistics and warehousing too.

Therefore, it becomes essential to automate these sections. Though it still in its initial state, implementing automation can bring 100% accuracy, cut cost by 25% and increase transaction speed by 30% with improved compliance as stated by McKinsey Digital Reports.

Businesses all over the world have started to see an increased demand for action-based intelligence to decipher big data and make quick decisions. That’s exactly where AI would revolutionize the logistics landscape.

AI is now ready to reshape the supply chain and make it seamless as well as effortless. It’s because of AI and machine learning that Amazon eyes on starting drone-based shipping services. FedEx is yet another name that unveiled autonomous delivery robot (a bot) for same day delivery purposes and last-minute eCommerce deliveries.

It can help brands and customers with accuracy, speed, conception, analysis, supplier selection, implementation, and delivery. The goal of such innovations is to reduce operational cost, gain revenue and provide better customer service.

There is no doubt that AI in logistics is going to be a game changer in eCommerce businesses.

9. Automated Cash Management Software

AI automated cash management software improves the financial efficiency, fraud risk, customer experience and increases the data insight.

The automated features of cash management decreased the stress of account receivable and account payable management.

It improved cash visibility by monitoring their cash position in real-time and giving them an accurate and up-to-date view of their cash balances, cash inflows, and outflows.

This helps make informed-decisions in developing or investing in the business developments.


As we see, AI has the power to revolutionize the eCommerce sector. The impact can already be felt as it has streamlined the sales process enormously, and enhanced customer experience by cutting off irrelevant information that customers were given earlier. It has also reshaped the searching with voice and visual searches.

The changes that we have seen are just the top of an enormous iceberg. Many other aspects of eCommerce are still on AI’s radar for innovation.

About the Author

Alice Jackson

Alice Jackson is a business consultant, blogger, social media enthusiast, online market analyst, amateur designer and an avid author at Designhill. She has written on several topics including social media marketing, SEO, content marketing, startup strategies and e-commerce. When she’s not writing, she loves spending her time reading romantic novels, customizing her t-shirts. Connect with her on Twitter: @jackson_alice1

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