Did you know that more than 60% of online shoppers expect personalised recommendations when shopping online? This is a major shift in consumer behaviour, presenting e-tailers with both a complex technical challenge and an opportunity to stay ahead of most competitors.
While just a few years ago, the ability to offer personalised recommendations was more suited to large enterprises, the advent of Generative Artificial Intelligence, which is easily accessible to all, has fortunately created opportunities for mid-sized and small e-shops. And the opportunities in this landscape are only growing.
As there is also a lot of confusion on this topic, we will highlight the most common ways in which AI is transforming e-commerce and how to use AI to make your e-store a success.
What is Artificial Intelligence or AI (Artificial Intelligence)
Since there is also a lot of confusion in this topic, we will highlight the most common ways in which AI is changing e-commerce and how to use AI for the success of your e-shop.
And before rushing to implement artificial intelligence in your company, it is important to orient yourself in the world of concepts in the field of AI, because there is a lot of noise and hype around this topic.
When applying AI in e-commerce, it is important to understand that AI is an umbrella term and encompasses a set of technologies, the main ones being natural language processing, machine learning, computer vision and data mining:
Natural Language Processor (NLP): NLP is a technology that enables computers to understand and generate text in a manner characteristic of human language by imitating human language use and interpretation skills. This is not limited to recognizing words, but also includes understanding their meaning and context, allowing machines to interpret, react and even communicate by imitating human emotions.
Machine learning (ML) is a field of artificial intelligence that involves the use of statistical techniques and algorithms to enable computers to learn directly from data without the need to directly program them to perform certain tasks. Machine learning models can identify patterns and relationships hidden in data to make informed predictions and decisions.
Computer vision can detect, analyze and interpret visual data, allowing machines to “see” and “understand” images and videos in a human-like manner.
Data mining means analyzing and interpreting large amounts of data, with the aim of finding hidden patterns, connections, trends that are not obvious at first glance.
Application possibilities of AI in e-commerce
Integrating artificial intelligence (AI) into your business is a strategic change that opens up new opportunities and benefits. Applying AI helps to better customize services and products, personalize customer experience and optimize business processes while creating positive shopping experiences
Improved Customer Experience
AI-powered personalization is at the forefront of improving the online shopping experience. By analyzing individual customer data, AI can provide personalized product recommendations and tailor marketing communications to meet specific user preferences. Such customization not only improves user engagement, but also significantly increases the likelihood of repeat purchases and customer loyalty.
Natural language processing tools such as ChatGPT allow platforms to provide automated personal communication to customers by responding to their queries and comments in a natural and human-understandable way. This increases the efficiency of customer service, making communication faster and more accurate.
Also provide customers with personalized product recommendations and search by analyzing their previous purchase history and preferences. This approach improves the customer experience and helps increase sales.
Data-driven decisions
One of the most powerful aspects of AI is the ability to quickly and accurately process and analyze massive amounts of data to make better informed decisions. Be it identifying market trends, understanding customer behavior or evaluating the effectiveness of marketing campaigns. In addition, AI enables the analysis of customer feedback and reviews to better understand customer needs and preferences, thereby contributing to the design of better product and service offerings.
Data mining helps tailor product selection, marketing campaigns and even website design based on customer purchase history, browsing behavior and feedback.
In addition, data mining helps to forecast future trends and market demand, which is important for product inventory and supply chain management, allowing to optimize warehouse levels and avoid excess stock.
Data mining can also aid in fraud detection and prevention by identifying unusual transaction patterns that may indicate fraud
Operational Efficiency
AI makes many operational aspects of e-commerce easier. From inventory management to order processing, AI systems can automate and optimize routine tasks, reducing manual work and minimizing errors. This efficiency means savings and allows companies to direct resources more efficiently towards strategic growth areas.
Machine learning can be applied to dynamic pricing. Algorithms analyze various factors such as demand, inventory status, competitor prices and market trends in real time to determine the optimal pricing for each product. This allows you to maximize profits and react to the current market situation.
Computer vision helps analyze product photos to identify and categorize products, improving the management of large data sets. It can also help detect fraud or copyright infringement by identifying counterfeit or copyrighted images.
Improved Conversion Rates
AI tools increase marketing and sales efficiency by ensuring that the right products are visible to the right customers at the right time. Proactive analytics and targeted marketing campaigns lead to higher conversion rates, maximizing ROI on marketing spend.
A personalized search based on machine learning allows customers to find what they need more easily in the e-store. For example, with Computer Vision, customers can upload photos of products they want to buy or are looking for similar products, and computer vision systems can analyze these images and recommend similar or identical products. This is especially useful if the customer has difficulty describing the product or wants to find something similar to the item they have seen.
Competitive advantage
Today, staying competitive requires not just following trends, but creating them. AI empowers e-commerce companies to innovate by offering cutting-edge solutions and services that differentiate them in the marketplace. The use of AI allows companies to offer unique shopping experiences, predict customer needs and respond quickly to market changes.
Practical use of AI in e-shop
So how can you use AI in your eCommerce business? Let’s look at five of the most popular use cases:
1. Product information management and translation
2. Personalized product recommendations
Creating personalized product recommendations involves using data from previous customer interactions, browsing history and purchase records to offer products that perfectly match their preferences. AI can analyze the language and images of online shoppers to match them with desired products and offer additional items.
3. Search – using speech or description
The use of artificial intelligence (AI) search on e-commerce platforms, which supports search based on speech and free-form descriptions, allows customers to find products in a natural and intuitive way. Instead of relying on specific keywords or filters, customers can use free-form descriptions or even speak to express what they’re looking for, making the search process much more flexible and user-friendly. AI analyzes these inputs, understands context and presents the most relevant products, making product discovery faster and more accurate.
4. Customer service – chatbots and virtual assistants
Powered by AI and NLP, chatbots and virtual assistants can act as customer service representatives, managing customer inquiries, processing orders and providing personalized offers. They provide effective customer communication, collect valuable customer data, improve the checkout process and provide 24/7 customer service.
5. Fraud detection and prevention
AI helps in fraud detection and prevention by analyzing data, detecting anomalies and monitoring transactions in real-time. Machine learning models can create user profiles based on behavioral data, and allowing companies to spot unusual transactions and detect fraudulent behavior.
6. Inventory management
AI helps in inventory management by analyzing historical sales data and forecasting future demand. It can automate inventory replenishment processes, predict transit times, and communicate shipment updates to stakeholders.
7. Dynamic Pricing
AI-powered dynamic pricing allows businesses to adjust prices in real-time based on user behavior, global demand, and competitor pricing. AI helps optimize discount opportunities, vary prices across channels and facilitate assortment intelligence for better pricing strategies.
Some examples of success stories
Burberry
Burberry combined e-store and brick-and-mortar store purchase data using an RFID tag on products, which allowed sales assistants to provide personalized recommendations and increase the overall value of the purchase. The sales assistants were thus aware of the customer’s preferences without having previously met him.
For example, if the customer had previously bought a red coat, the consultant offered a matching bag for it.
In addition to implementing RFID, Burberry also adopted big data analytics to identify counterfeit products. Using Entrupy AI technology, it was possible to identify fakes from images with 98% accuracy by analyzing the texture and weave of the product.
By applying artificial intelligence, Burberry was able to reduce the loss caused by counterfeits and increase customer repeat purchases by 50%.
Kids2
Kids2, a toy and baby supplies company, used AI translation services to improve the translation process of its e-commerce content. As a result of the implementation of AI, translation time was reduced by up to 92%, from 90 minutes to less than 5 minutes per entry. AI also improved the quality and accuracy of translation both in the e-shop and in marketing channels. Thanks to AI, Kids2 was able to achieve consistency in all translations, reduce costs and improve processes.
AI tools in the online store
Below are some tools that make it easier to use artificial intelligence in an e-shop. Which of them could be suitable for your e-store depends on the specific situation.
DigitalFirst.ai is a web-based platform that provides solutions for creating and tracking marketing campaigns. It helps businesses optimize their digital marketing by providing analytics and recommendations to make campaigns more effective.
AdCreative.ai is a tool that helps users create visually appealing ad images. This platform uses artificial intelligence to optimize designs, thereby increasing conversion rates and effectiveness of ads.
Flair.ai specializes in creating product photos using artificial intelligence. This platform allows businesses to quickly and efficiently create high-quality product images that are essential in e-commerce and digital marketing.
DALL-E 2, created by OpenAI, is a powerful tool for creating illustrative images. It allows users to generate unique custom images for various purposes such as blog posts or other visual content.
Copy.ai is a platform that helps users create a variety of texts, from product descriptions to blog posts and newsletters. It uses artificial intelligence to generate creative and engaging content, including in Estonian, but is perfectly suited for cooperation with translation services such as Deepl.com.
Deepl.com is a translation service that offers high-quality machine translation, including into Estonian. It is a useful tool for translating texts and is well suited for collaboration with other e-shops to ensure a smooth and accurate translation of products, descriptions, etc.
Tawk.to is an easy-to-integrate AI assistant for e-shops. It collects data and learns from it to provide effective customer support, making the customer service process smoother and more efficient.
Into the future with artificial intelligence
There is no doubt that in the near future, artificial intelligence will become an indispensable element in order to maintain our competitiveness in a rapidly evolving environment. It is precisely the speed of change that puts companies in a situation where the application of artificial intelligence can become absolutely essential. And artificial intelligence will definitely continue to develop and new, practical solutions will emerge to support business processes and enrich the customer experience. Applying artificial intelligence allows you to create more personalized customer experiences, optimize your product range and improve overall service efficiency. And artificial intelligence can be seen as a toy, but if applied correctly, it can essentially become a strategic tool.
