AI in eCommerce: What is it and how does it work?

Darko Marjanovic | 06. 03. 2023.

Here you are, reading this article – most likely because some AI-powered algorithm made it available for you based on your search and other information it might have on you.

I know this sounds a bit scary. And the truth is that, for most people, Artificial Intelligence (AI) and its closely connected sub-term machine learning (ML) still evoke some robot-like perception, fueled by movies, comics, and whatnot. 

In reality, what differentiates AI and ML from other systems in business is the ability to process vast amounts of data into actionable insights for business purposes. And on top of that – learn. 

So, to show you that these systems aren’t that frightening and that they can learn in a similar way a person would, we’re going to explain what AI systems are and how they work.

Moreover, we’ll do this from the perspective of eCommerce and list all the benefits of using AI in eCommerce. 

Finally, we’ll discuss essential AI-based eCommerce solutions you should consider for your eCommerce business. 

Understanding AI in eCommerce

Understanding AI in eCommerce is crucial for grasping the immense impact it can have on the online retail landscape. 

In the eCommerce realm, the role of AI is transformative in several ways:

• It affects the way businesses interact with customers, optimize operations, and drive growth. 
• Additionally, AI helps facilitate effective inventory management, demand forecasting, and logistics. 
• Finally, AI-driven chatbots and virtual assistants offer round-the-clock customer support, improving responsiveness and customer satisfaction.

As you can see, AI is quite helpful in reshaping eCommerce and empowering businesses to stay ahead in the competitive marketplace.

Yet, the helpfulness of AI in eCommerce doesn’t stop here.

The benefits of using AI in eCommerce

AI in eCommerce doesn’t only empower you to stay competitive. Its impact extends to a few other aspects, including: 

• Predictions: By crunching vast amounts of data, AI can provide more precise predictions about your business – be it sales, costs, stock, or customer churn. Thanks to the incredibly accurate AI-based predictions, you can greatly improve your planning and decision-making process.
• Personalization: Like it should be, far above changing the name on top and remembering birthdays, AI-powered recommendation systems can offer data-based recommendations of products to customers that are a far better fit than rule-based ones
• Super targeted campaigns: AI enables fully personalized campaigns, which feature products customers are more inclined to buy or be interested in, again, based on data available. In addition to that, it can learn the most appropriate channel to get a response for each customer. Less clutter for consumers, more relevance.

It’s old news that maintaining and boosting revenue are everybody’s goals, especially when competition is tough. 

And since you already have so much data at your disposal, why not use it smartly? 

With the help of AI- and ML-based eCommerce solutions, you can expect: 

• Higher conversions – based on our experience in working with different clients, conversion can increase as much as 30%, sometimes even more. 
• Better campaign response due to personalized offers.
• Next-level UX for the customer thanks to UI adaptation and NLP-powered chatbots.
• A better understanding of business segments, trends, and planning basis.

Now that you know that AI isn’t that scary after all, let’s see what AI-based solutions can be a game-changer for your eCommerce business. 

4 Essential AI-based eCommerce solutions you should consider 

In the dynamic world of eCommerce, delivering exceptional customer experience and staying on top of your game is vital. Moreover, embracing cutting-edge technologies and solutions is what can make or break your eCommerce existence.

Read on, as we go through the essential AI-based eCommerce solutions you should try and see how they can unlock new dimensions of growth and success for your eCommerce business.

Recommender systems

Most eCommerce sites use some kind of recommender system, but as we know from our own experience, the difference in the quality of given suggestions is huge. Having a good recommender can incredibly boost sales by using data about the customer and learning from lookalike clients. 

For recommender to work best, it’s important to have options for recommendation:

• From simple best sellers for new customers we know nothing about, 
• All the way to sophisticated cross-selling recommendations, based on the history or similar customer choices. 

In general, the more data there is about the customer, the more personalized recommendations you can generate.

AI allows a deeper understanding of customers’ needs, so it can display far more relevant products to the customer and increase their basket size. 

For instance, if a person is searching for a pink modern watch, and returns again, based on previous experience of color preference, the system can suggest modern pink shoes in the shoe section. Or when a person suddenly starts buying baby wipes, it might be a good time to offer them a pram, baby food, or similar baby items.

Smart segmentation

We are used to devising some sort of customer segments we follow to determine marketing tactics. And this is ok, but also limited, mostly because it is based on experience, not data. 

With AI-powered segmentation, you can sift through many more variables and detect important segments based on different criteria than the ones you might customarily use. 

These segments can be used to predict business trends, but also to detect the correct actions to prevent churn by addressing dormant customers and upselling to the right people based on the behavior of similar/lookalike customers. 

Having such a tool enables you to address the right people with the right message. It’s also a great way to monitor how these segments change and/or new ones emerge, so you can act promptly.

Smart search

Humans that we are, we explore various websites in search of items. Yet, in return, we often get robot-like misunderstandings or irrelevant results. Miss one letter or change the word order, and you get nothing. 

Now imagine how frustrating this can be when you’re looking for something specific and you know the website has it, but the search couldn’t „find“ it. Let’s not get started on how this affects the sales rates.  

Luckily, AI can help here significantly! 

AI-powered search engines on websites process languages similarly to humans and can provide relevant results in cases of incomplete queries, misspelled words, or even for a foreign language. 

To make matters better, it recognizes the context even if the word is a synonym. This feature is called natural language processing and increases conversions on-site by up to 15%.

With smart search, you can significantly improve the experience for your customers and make sure they leave your eCommerce happy and with the product they were looking for. 

Smart campaigning

To put things in perspective very vividly – how many promotional emails have you deleted this morning? We would dare to bet – a lot of them! 

Now stop and think, did the ones you bothered to open contain anything of interest to you? Probably not. 

For a while now, companies have been struggling to reach out to consumers. Also, consumers are overwhelmed with irrelevant offers from all over the place. 

In such a context, being able to understand what your customers might really need (based on data) and having tools to offer personalized products to each of them greatly increases the chances to convert messaging into purchase. 

Thanks to an AI-powered campaigning tool, you can enable high-scale personalization. This means that you can reach out to a high number of customers and still offer „to each their own“ – AI can help you determine what products are a good fit for each segment/person and select the best channel to reach them. 

This might really be the beginning of a win-win marketing – the customer gets interesting offers, the seller gets high conversions, and everyone benefits.

Ready to embrace AI in eCommerce?

Everything we’ve discussed in this blog post was just scratching the surface when it comes to the benefits of AI in the eCommerce industry. However, to make the best out of AI and successfully implement it in your eCommerce business, we recommend that you start by defining your business problem. Try to answer these questions: 

• How do you compare to your competitors?
• How is your revenue trending? 
• What is impacting your conversion rate currently? Is there anything specific you would like to increase – like basket size, conversion, frequency of visits, campaigning responses?
• What data do you have? Are you using it? Can you extract all you need?
• And your webshop – are you satisfied with search performance and the recommendation system? Can this be improved?

Once you have defined your main business problem, you can be smart and let professionals take it from there. At Things Solver, we are always happy to help businesses move forward and embrace the power of AI-based solutions. Contact us today at ai@thingssolver.com for a free consultation and we’ll make sure to help you navigate and prepare for the next level of your AI-driven business!