AI’s Reach Into E-Commerce Has Only Just Begun
The last five years have witnessed a massive evolution of e-commerce, accelerated by factors like the pandemic, which created a surge of online shoppers, and advances in machine learning and artificial intelligence (AI) that have improved the online shopping experience.
The quickly scaling use of AI is changing the game in online retail, so much so that the World Economic Forum (WEF) addressed the topic at Davos this year. A WEF blog post pointed to automation, loss prevention, and sustainability as areas where retailers will find more use for AI tools. The AI industry market size for retail was $4.84 billion in 2021, and is projected to grow to nearly $52 billion by 2029.
More recently, AI and machine learning have become household buzzwords. While big retailers like Amazon have been at it for years building in-house capabilities, many retailers are turning to machine-learning-driven software and technologies like Shopify that make their digital storefronts hyper-competitive. Consumers are also now armed with AI driven plug-ins and apps to help them compare prices, chat with a brand, and make better buying decisions. ChatGPT is evolving rapidly allowing consumers to browse the web and shop, even buy groceries. But how exactly is AI being used for e-commerce today? By taking the round-the-clock flow of data and using it to “learn more” about buying behavior, then creating algorithms and application upgrades based on a continuous feedback loop, companies are automating and improving mission-critical functions. Among the most significant include:
- Improved product recommendations
- Targeted advertising
- Optimized pricing and inventory control
- Personalized customer service and chat
- Augmented reality to virtually try out products
The changes to e-commerce are only just beginning, as AI is now extending across the sales funnel — especially where it impacts the bottom line. To be sure, the next wave of AI tools is not just getting consumers to the point of sale, but is actively engaging them after the transaction.
Now we’re seeing a bigger push into reviewing products, with smart brands and stores offering consumers incentives to share about their purchases. Retailers know positive reviews translate into more sales, and longer, detailed reviews are especially helpful in sales conversions — which is where AI comes in. Brands can comb through data to detect trending topics and automatically prompt customers to review that topic. Machine learning can help update those requests in real time, even as preferences change. AI-led platform Yotpo cited a 61 percent uplift in the prevalence of suggested topics in customer reviews.
Another example is product protection, which data shows drives sales conversions. A few brands famously offer product protection — like AppleCare for new Apple products — at a premium price. It’s been so successful that Apple reported $8.5 billion in revenue from AppleCare sales in 2021. Today, consumers don’t need to wait for a brand to offer product protection services. AI-led browser-based consumer tools can “ride along” with a purchase, determine if it’s a good fit for product protection, and offer dynamically-priced product protection in a seamless experience for consumers.
And customers are craving it. Eight out of ten consumers say that if a payment method included shopping protection, they would use it for some or all of their purchases, according to recent survey data. Nearly one-third of consumers won’t even shop with a brand that doesn’t offer product protection, which can range from replacing a broken device to fixing stains on furniture.
Online retail looks far different today than it did five years ago — and expect that revolution to continue as people untether themselves from brick-and-mortar-based shopping. Adding AI to all the purchase touchpoints adds to the durability of the online customer-retailer relationship, ultimately increasing sales and boosting bottom lines for retailers.
Chinedu Eleanya is the Founder and CEO at Mulberry, helping consumers shop with confidence and protect the things they buy online.
Chinedu Eleanya is the Founder and CEO at Mulberry, helping consumers shop with confidence and protect the things they buy online. A member of the Forbes 30 Under 30 Finance List, he is a proven ecommerce entrepreneur and sought-after business advisor having founded two companies dedicated to improving the customer experience and increasing customer acquisition.