If we think about it for a moment, artificial intelligence in ecommerce is not a completely new phenomenon. But as a consequence of the release of ChatGPT in November 2022, this technology has gained great popularity. With its detailed and articulated responses - although criticized for its factual accuracy - the OpenAI chatbot has had a very clear achievement: putting artificial intelligence on everyone's lips.
Like it or not, artificial intelligence is here to stay. And although most people only have a vague understanding of what artificial intelligence is, as leaders of our businesses and companies, it is our responsibility to quickly understand the impact of this technology and, more importantly, how we can take advantage of it.
Finance, marketing, banking, advertising - virtually every industry is being impacted by the use of artificial intelligence. And of course, there is one industry in particular that is giving a lot of attention to AI, and that is the ecommerce industry.
In this article, we share all the key data you need to know to begin to understand how artificial intelligence in ecommerce can be the new technological leap that has already begun.
What is artificial intelligence?
Artificial Intelligence (AI) refers to the ability of a machine to simulate human intelligence. That is, it is a field of computer science that seeks to develop algorithms and systems that can perform tasks that, until now, only humans could do.
In simple terms, AI is based on the programming of algorithms capable of learning and adapting to new situations, and in this way, according to what has been learned, performing actions to solve problems autonomously. To achieve this, AI uses different techniques such as machine learning, natural language processing, computer vision, among others.
AI currently has many practical applications, such as task automation, data analysis, creating chatbots and virtual assistants, autonomous driving, disease prediction, facial recognition, among many others.
Keep in mind that the main objective of artificial intelligence is to improve the efficiency and accuracy of automated systems, making it easier to perform complex tasks that, until our days, only humans could do.
Types of artificial intelligence
So far, there are several types of AI that can be classified based on their capabilities and characteristics. These are the most common ones:
- Weak or Narrow AI: These are systems designed to perform specific tasks, such as voice recognition, image classification, product recommendations, among others. These systems do not have the ability to perform tasks outside of their area of expertise and do not possess true intelligence.
- Strong or General AI: Unlike weak AI, strong AI is capable of performing multiple tasks and adapting to different situations autonomously. This type of AI aims to imitate human intelligence in its entirety and is an area of ongoing research.
- Machine Learning: This is a subset of AI that focuses on the development of algorithms that allow machines to learn from data. These algorithms can be supervised (with prior guidance) or unsupervised (without prior guidance), and are used in a wide variety of applications, from fraud detection to weather prediction. You've probably heard about this one in the industry.
- Neural Networks: Neural networks are a type of machine learning algorithm inspired by the functioning of the human brain. They are based on the simulation of interconnected networks of neurons, which allow the machine to "learn" from data and improve its accuracy over time.
- Natural Language Processing (NLP): NLP is an AI technique that allows machines to interpret and understand human language. It is used in applications such as chatbots, virtual assistants, and sentiment analysis on social media.
It is in this last category where ChatGPT can be classified. Although the popular chatbot also uses Machine Learning and Neural Networks techniques to improve its ability to process natural language, which has made it a powerful tool for text and natural language processing tasks.
Artificial Intelligence in ecommerce
As mentioned earlier, the use of AI in ecommerce is not really new. In fact, it has been used by various companies around the world, with a special emphasis on to improve the user experience, optimizing efficiency, and reducing costs. Some very relevant examples of its use are:
- Amazon: one of the leaders in the use of AI in ecommerce. It incorporated it to provide personalized recommendations, optimize logistics, and improve warehouse efficiency.
- Alibaba: the renowned ecommerce giant in China, uses AI to offer personalized recommendations, improve warehouse efficiency, and provide intelligent logistics solutions.
- Zara: this Spanish company uses AI to improve efficiency in its supply chain, optimizing the production and distribution of products based on market demand.
- Walmart: this American corporation uses AI to analyze large amounts of sales and user behavior data, which helps it make informed decisions about marketing and product management.
- Adidas: the German brand uses AI to personalize its product offerings, based on its customers' preferences and purchase history.
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Does my ecommerce business need artificial intelligence?
In recent years, the e-commerce industry has evolved at an unprecedented pace. Online shopping in the United States reached an astonishing figure of $1.7 trillion in the two years since the start of the pandemic. This represents a 55 percent increase in online spending.
It's no secret that e-commerce was one of the few sectors to benefit from the pandemic. But long after physical stores have reopened, e-commerce stores are expected to continue generating more revenue than before the pandemic. It's predicted that online shoppers in the US will spend $1 trillion this year alone, a trend that is expected to hold true in other markets.
Considering that the industry seems to be maintaining its growth, it's easy to think that online stores don't need any additional help to generate profits. But while there seem to be many online shoppers ready and waiting to part with their money, the competition to attract these customers is incredibly tough.
According to Internet Retailing, during the first four months of Covid closures, the number of new e-commerce businesses launched increased. It's estimated that 85,000 companies set up their own online stores or joined marketplaces. This means that competition among e-retailers is fierce.
What to do?
To overcome all the noise and make their businesses stand out, online retailers need to work hard to capture the attention of potential customers. To get noticed, they need the right tools to make it happen. While advertising campaigns are one way to get consumers' attention, artificial intelligence offers a plethora of new and additional possibilities.
The use of artificial intelligence in daily life continues to increase. 2023 is undoubtedly the year of its popularization. However, retailers will mainly use artificial intelligence to improve the user shopping experience on their websites.
Of course, the use of artificial intelligence by online retailers can also help increase their sales, better understand the customer journey, and eliminate friction points.
But...what is all of this about?
Uses of Artificial Intelligence in Ecommerce
While it may seem very obvious why online retailers need to use artificial intelligence, how they use it is important. The capabilities of AI in ecommerce are enormous. The potential for ecommerce businesses to benefit from artificial intelligence is already significant, and this will only increase as technology continues to develop. Something that seems to be moving very fast!
While technology is advancing at great speed, artificial intelligence seems to be - at least for the moment - among the fastest. This is an exciting prospect, given that AI has already improved many aspects of modern life, even if we are not fully aware of it.
It is very likely that the next search you make on the internet will already include a chatbot offering you answers. Will customers of your online store also have this experience? It is almost certain. Understanding which aspects of their shopping experience are being influenced by artificial intelligence is fascinating. These are just some of the ways that ecommerce stores can harness the potential of AI:
1. Responding to customer service inquiries
Soon, more and more ecommerce websites will take advantage of some type of AI-powered customer experience tool, specifically: AI chatbots.
Using AI to respond to common customer inquiries not only saves businesses a lot of time, but also makes it easier to provide faster and more accurate customer service as these tools become even more intelligent and sophisticated.
By analyzing customer interactions with chatbots, AI-powered tools learn and improve in understanding and responding to their inquiries. Chatbots can help improve the overall buyer experience, reduce support costs, and free up human intervention, giving more time to manage other aspects of the business.
2. Generating AI product images
With advancements in machine learning, AI will reach the point where it can create product images. This will limit the need to hire a graphic designer or professional photographer (forcing such professionals to incorporate AI into their services). AI image tools like NVIDIA's GauGAN, Midjourney and DeepArt.io already allow users to create images and—art, if you will—with AI technology.
AI-generated product images can benefit small and new businesses, which generally don't have a budget for professional photography. With AI-generated images, product images can be generated in minutes, saving time and money for retailers.
Additionally, with the ability to generate images and infographics in various styles and backgrounds, ecommerce sellers can create unique and eye-catching product images that stand out from the competition.
AI image generation can also create images in multiple sizes and formats, ensuring that products are presented in the best possible way across different platforms and devices.
3. Product Listing Optimization
Tools such as Listing Builder AI Assist can now write product listings for sellers in a matter of seconds based on user-generated keyword lists. From here, artificial intelligence will soon learn to better optimize product descriptions through keyword optimization, tone and perspective selection, and audience segmentation, as it can learn directly from users.
Keyword optimization is an area where AI tools can have a significant impact. By analyzing search data and identifying high-performing keywords, AI algorithms can help retailers optimize their product listings for search engines, increasing visibility and driving more traffic to their online stores.
By analyzing customer data and identifying language patterns in customer feedback or social media posts, AI algorithms can help sellers tailor their messaging to specific audiences, ensuring that their descriptions resonate with customers and increasing conversions, all with the click of a button.
At Orienteed, we have developed VALIDO App, a tool to evaluate and test online stores, in which we are incorporating AI to improve solutions for errors that often appear in the user experience during their shopping journey.
4. Customer sentiment analysis
AI is very good at synthesizing information through text summarization algorithms. These algorithms use natural language processing (NLP) techniques to analyze large amounts of text and summarize the most important information for quick consumption.
Using AI for customer sentiment analysis can synthesize what customers like, don't like, and what changes need to be made to a product.
The use of artificial intelligence for customer sentiment analysis includes natural language processing to analyze customer comments, reviews, and social media posts. This will help determine how buyers (a highly desirable aspect for many) feel about a particular product or brand.
AI can be used to perform sentiment analysis at scale, making it easy for companies to quickly and accurately analyze large volumes of customer feedback in real time.
One of the key benefits of using AI for sentiment analysis is the ability to analyze unstructured data. AI algorithms can analyze large volumes of unstructured data, including social media posts, product reviews, and customer comments, and identify patterns in language and sentiment that can inform marketing strategies.
5. Detection and prevention of fraud
E-commerce businesses are constantly at risk of fraudulent activities, such as fake reviews and credit card scams. In 2023, AI-powered fraud detection and prevention tools are expected to be even more sophisticated, allowing companies to detect and prevent crimes in real-time.
By analyzing customer behavior and transaction data, these tools can identify patterns of fraudulent activity and flag suspicious transactions for further review. This can help protect e-commerce businesses from financial losses, reputation damage, and fines from government institutions.
Now is your turn!
If you made it this far, it's a good time to ask yourself: How do you plan to use artificial intelligence for your ecommerce business? It's not a simple answer, but don't worry, help is on the way.
Artificial intelligence will play an important role in ecommerce in 2023 and beyond, with the potential to change the way sellers run their businesses. From chatbots and customer service to product image generation and fraud detection, AI-powered tools are not here to replace but rather to help ecommerce sellers manage and grow their businesses.
This is just the beginning of an era of AI popularization or adoption across many industries. It's clear that it will continue to change the rules of the game for ecommerce, offering new opportunities for businesses to streamline their operations, enhance the customer experience, and increase the performance of their products.
And the best part is that businesses of all sizes can leverage this technology to gain a competitive edge in the ecommerce industry. Will yours be one of them?
Digital Marketing Manager at Orienteed.