This month, Amazon made headlines when it posted two job openings that hinted at its AI strategy around e-commerce. The postings suggested that Amazon wanted to make searching on its website more interactive and conversational by employing generative AI, indicating a radical change from its legacy keyword and filter-based search.
The e-commerce sector has been using AI since the early 2000s and industry giants like Amazon, eBay, and Alibaba have used AI in their operations for years. It is, therefore, no surprise to see e-commerce companies investing more in AI.
How and why is AI used in e-commerce?
A widely-held notion in retail, especially after Covid-19, is that experiences sell rather than products. So, companies must provide a unique shopping experience for their consumers if they want to differentiate. That is where AI comes in.
According to GlobalData, creating personalized user experiences through buying recommendations and virtual assistants is among the primary AI use cases in e-commerce. For example, chatbots use AI capabilities to answer user questions and send targeted push notifications. This can help e-commerce companies increase conversion rates and shopper loyalty by providing more efficient and unique shopping journeys. Online retailers also use machine learning to deliver personalized advertisements to shoppers.
Using AI, e-commerce companies can learn a lot about shoppers’ preferences and behaviours. This knowledge allows them to develop targeted strategies and personalized offerings to differentiate and increase revenues.
What is next?
The global AI market is projected to grow at a compound annual growth rate (CAGR) of 21.4% between 2022 and 2030. So, people can expect to see more of AI not only in e-commerce but in all aspects of life. The AI capabilities we see will also get more advanced.
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With these developments, new and improved use cases will inevitably emerge. For example, generative AI capabilities are already advanced enough to write a decent high school essay, so virtual assistance tools that process and generate audio and text input will become more sophisticated, helpful, and accurate. Another example is creating AI-integrated AR and VR-based shopping experiences, in which users get previews of how products look on them, as if they were trying them on in a physical store. Retailers like L’Oréal and Chanel already provide these services, and their accuracy and usefulness will increase with the application of AI. These advancements will further increase human-AI interaction and offer online shoppers a smoother and more personalized experience, which will increase purchase likelihood.
Despite these exciting predictions to look forward to, there are also some concerns surrounding AI use in e-commerce, particularly regarding data privacy, as AI-based technologies collect and process users’ data. Organizations must ensure stringent data privacy to remain competitive, so e-commerce companies must keep users’ data safe. Considering the benefits, e-commerce companies that employ AI and keep track of related developments will be one step ahead of their competitors.