The Post-Pandemic Boom
The e-commerce industry’s success is rooted in consumers’ rising demand for a new shopping experience, one which prioritizes convenience and efficiency. It comes as no surprise, then, that e-commerce experienced tremendous growth during the pandemic. Instead of walking around a store for an hour, shoppers find what they need with just a few keystrokes, and companies gather information and deliver goods straight to their doorsteps. After a certain point, even searching for a product is unnecessary. Websites give personalized recommendations, upselling and cross-selling new products tailored to customers’ profiles, ultimately creating an effortless customer experience. Each of the underlying processes that have driven this impressive growth is founded in emerging technologies, namely big data and a subset of AI known as machine learning.
What’s Driving AI Adoption?
The adoption of cutting-edge AI technology has facilitated the substantial growth of the e-commerce industry over the past 18 months. Considering the staggering Nasdaq projection that by 2040, 95% of purchases will be facilitated by e-commerce, companies must improve the capabilities of their platforms to thrive in this increasingly competitive space. Sophisticated AI systems can efficiently gather customer information to make the shopping experience feel personalized, all at a low cost to the consumer. This stems from the ability of machine learning algorithms to process the vast arrays of data collected from customers and generate actionable insights that drive customer retention and satisfaction. For example, a company may track the buying behavior of a customer as he/she begins purchasing furniture and home goods, gleaning that this individual has recently purchased a home and consequently recommending them a new set of products. Overall, the prudent implementation of AI in e-commerce allows for drastically improved customer satisfaction and top-line sales.
Key Benefits of AI in E-Comm
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Proactivity in decision making
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Reduced operational expenses
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Improved employee productivity
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Improved customer satisfaction
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Improved risk management
Key AI Use Cases
1. Big Data
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Online shopping gives businesses a wealth of information about customers’ needs, wants, and preferences. The amalgamation, organization, and analysis of such information has become known as big data. AI has the capability to process these vast amounts of data and find connections between disparate points, overarching trends, and other relationships not visible to humans alone. This results in actionable insights around which sales and promotional methods are most effective, which product trends are arising among certain demographics, and ultimately how to optimally serve customers to boost recurring revenues.
2. Demand Forecasting
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Another prominent application of AI in e-commerce is demand forecasting: leveraging predictive analytics to anticipate future demand for products and services. By combining troves of historical business data with industry trends, machine learning algorithms dynamically predict market demand with an impressive degree of accuracy. With this technology, companies can more effectively manage inventory, procurement, and logistics. In effect, these tools act as an intelligent advisor to management; when combined with strategic leadership, this breed of predictive analytics boosts operational efficiency and profitability.
3. Augmented Reality
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Although e-commerce provides consumers many advantages over the traditional shopping experience, certain key components are left out. For example, when buying a dress, someone may like it on display but want to see how it fits before making the final purchase. In this case, physical distance between the consumer and product is prohibitive. Augmented reality (AR) technology allows customers to use their smartphone camera to virtually “try on” any number of clothes, creating greater confidence in the product and improving the online shopping experience. This experience is not limited to clothing shopping, even extending to the home improvement sector; macgyver types can instantly view the dimensions and appearance of their next deck or woodshed without ever stepping foot in a Home Depot.
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