According to Insider Intelligence, as of 2022, global e-commerce sales are expected to reach $5 trillion, and by 2024, $6 trillion. The question is, who will be the main beneficiary of this growth? Not likely the small stores, which rely on classic and increasingly less effective sales methods.
The e-commerce market, not only in Poland, is clearly dominated by large shopping platforms, which were the first to implement machine learning solutions on a massive scale. Precise data analytics, in particular consumer behavior, offers a huge advantage in the competition for customers, especially in uncertain economic times. So let us take a look at the real-world application of AI in e-commerce.
What is AI and how is it changing online sales models?
AI, or artificial intelligence, is – to make it very simple – a virtual system built on the basis of the already possessed data. We mean here the systems that learn user behavior and thus try to respond to our expectations, ‘guess’ our desires, and needs, as well as solve our problems, etc.
One can easily see the enormous potential of AI technology in the e-commerce industry, which is actually based on adapting the sales model to current shopping trends and constantly changing consumer habits. At the same time, it is apparent that this potential is still being used only to a small extent.
The authors of the Artificial Intelligence in E-Commerce Market report predict that the value of artificial intelligence technology in online retail will grow to nearly USD 36.5 billion by 2030. Currently, it is only USD 1.7 billion, which shows that in fact, we are only at the beginning of the journey.
The leaders in implementing AI solutions in the e-commerce industry today are Amazon, Apple, Google, IBM, Intel, Microsoft, Nvidia, Oracle, SAP SE, and Siemens.
Currently, artificial intelligence in e-commerce is used fairly rudimentary, primarily for making personalized shopping recommendations (based on search history) and planning advertising campaigns. However, the potential of the technology is much greater.
In our article, we take a closer look at selected and most attractive opportunities for using AI in e-commerce.
AR, or Augmented Reality, is a technology for combining the real world with digitally produced images. Unlike VR, AR makes use of the surrounding environment, thus not creating a fully artificial image.
With AR technology, an image (e.g., from a phone’s camera) will be processed and placed in the form of a 3D model in a scanned space. Therefore, you will see this space enriched with a model of a given product, which will allow you to more easily assess whether e.g., it fits well in your living room.
Good to know
AR allows real-time image processing, so we can see the product from all sides, zoom in and out, etc.
The spread of AR technology surely will revolutionize the way we buy furniture, decorations, and other home furnishings, as well as clothes. The fashion industry is particularly interested in the solution. Brands such as Fossil and Herchel are already experimenting with AR, and the ‘virtual changing room’ trend seems to be very exciting and a perfect fit for consumers.
Widespread implementation of AR in the fashion industry may have a significant impact on increasing sales for brands using the technology, as well as reducing the problem of excess returns. This has been demonstrated by Shopify’s research, which shows that AR and 3D can increase conversions by as much as 97 percent and reduce returns by up to 40 percent.
An example of a brand that is already using AR in its sales model is IKEA. The IKEA App allows virtual 3D models of selected products to be placed in the customer’s private space.
A Google AR Survey conducted in 2019 shows that already at that time 66% of consumers were interested in using AR technology and saw it as a real help in making purchasing decisions.
Here are the key benefits directly resulting from implementing AR technology in online sales channels:
- A way to recreate the experience of visiting a stationary store, which is currently one of the biggest challenges for the e-commerce segment.
- Increasing user engagement, and thus conversion and sales.
- Reducing returns of purchased goods (lowering the cost of customer service).
Visual Search is an AI-based technology that displays related search results based on a detailed analysis of the uploaded image. In other words, we are dealing here with the realization of the idea of searching for products using images.
Visual Search opens up entirely new possibilities for both sellers and buyers. Probably each of you happened to be interested in some product that you could not precisely name. VS solves this problem by allowing you to quickly search for a product (or similar products) based on an image, such as one found on social media, Pinterest, etc.
Visual Search technology is by no means new – we have been using it for several years, and the most popular tool for this is Pinterest (Google) Lens, the number of users of which doubles every year.
One of the best-known and spectacular examples of using VS was the Tommy Hilfiger brand show in 2017, during which guests could photograph the outfits on the catwalk and instantly learn their price in the virtual search engine.
Implementing Visual Search technology in a store built on Shopify or WooCommerce platform only requires integration with Google Lens to make product listings presented in the search engine. This significantly increases the reach of the offer. Amazon, AliExpress, Answear, and ASOS, among others, are using this opportunity today.
The benefits of implementing Visual Search technology in your e-commerce channel include, among other things:
- Visual Search allows you to find a product without knowing its name, category, type, etc. This increases the chance of attracting more customers.
- Users can quickly search for similar products without using filters (improving the store’s UX).
- Shortening the purchase path.
- Greater product exposure and thus increased the reach of the offer, which can be displayed e.g., on Google (integration with the Lens tool).
Voice Search/Voice-Enabled Shopping/Voice Commerce
Voice technologies are rapidly gaining popularity, so they had to become of interest to leading e-commerce players as well. Three basic solutions can be distinguished here:
- Voice Search – a well-known speech recognition technology that allows you to search phrases quickly without using the mobile device’s keyboard. The best-known example of this solution is Google Voice Search.
- Voice-Enabled Shopping/Voice Commerce – these are technologies that allow you to make purchases using only voice and a mobile device or assistant (e.g., Amazon Alexa, Google Nest).
The technologies should be of interest to all e-commerce players who are looking for their competitive advantage by eliminating shopping barriers, i.e., by offering consumers even more convenience when buying online.
Studies show that as many as 65% of Internet users use voice-dialing features at least once a day – whether using Google or a smart speaker (the sales of such devices have literally shot up in recent years).
Voice technologies are also part of a general trend of steady growth in Internet traffic from mobile devices – 55% of us now surf the Web using a smartphone, tablet or watch. Typing on such devices is inconvenient and promotes mistakes, which, of course, limits the ability to quickly search for products of interest.
The most important benefits of implementing voice technology in e-commerce include:
- Reducing the risk of users misspelling the name of the product they are looking for.
- Facilitating users to search for products by long phrases (e.g., ‘Warm knee-length fall coat’), which also gives more leeway for positioning online stores for phrases with a so-called long tail.
- Convenience for the user, faster product search.
- Perfectly fitting into the trend of moving our online activity from computers to mobile devices.
- Offering an advantage to retailers operating locally (in the U.S., as many as 58% of people use voice search to find a ‘next-door’ business)
Chatbots are applications that, thanks to artificial intelligence, are able to carry on an almost natural conversation with a live user. Nowadays, advanced chatbots are used more and more often, and they no longer just answer basic, predefined questions, but are able to deliver precise directions to users and almost enter into a dialogue with them. Such bots are called virtual assistants.
A virtual assistant is an excellent tool for supporting and even driving sales in e-commerce. Such robots, thanks to machine learning, deep learning, or natural language processing technologies, learn user behavior, by looking for its patterns.
For example: When ordering food online with the help of a virtual assistant, you can expect suggestions from it regarding the choice of various side dishes. Such suggestions are the result of analyzing the behavior of previous customers.
Chatbots can be implemented at many levels of sales. It can be either a simple bot answering the most frequently asked questions, a robot helping to select a specific product, guiding the customer through the entire purchasing process, as well as providing after-sales service (accepting complaints, returns, etc.).
Chatbots are an example of AI technology that is already being used on a massive scale in e-commerce and will evolve to replace customer service staff. Such a solution has a number of benefits for sellers, including:
- A real increase in sales.
- Offloading and eventually even replacing standard channels of communication with customers.
- Automating the customer service process (before, during, and after sales).
- No language barrier.
You may be persuaded to invest in chatbot technology by evocative data. For example, according to Gartner, in the near future, as much as 85% of our engagement will take place without interaction with another human being (emphasis on self-service and chatbots)
A Facebook survey showed that more than 50% of users are more likely to shop at the companies they were able to connect with via chat. In addition, more than 59% of millennials and 60% of Generation X representatives already interact with bots.
Classical remarketing aims to re-target consumers who, for some reason, did not make a purchase although they were already one step away from completing the transaction (e.g., they abandoned the shopping cart in the last step). Using appropriately selected marketing messages – for example, an ad informing about a discount on a particular product – one can significantly increase in-store conversions.
Today, remarketing is closely associated with artificial intelligence. AI allows you to better understand shoppers’ needs and expectations, learn their behavior and create patterns based on which personalized, more precise messages will be created. The idea is also to distinguish those who are genuinely interested in a purchase from those who simply browse the store’s offer out of boredom or in search of various inspirations, although they do not intend to make a purchase at all.
The use of AI remarketing offers a number of benefits to e-commerce players, including in particular:
- Increasing conversions through better matching of suggested products.
- Improving the store brand image, which no longer attacks users with misconfigured marketing messages.
- Reducing the cost of a remarketing campaign (higher ROI).
Upselling and cross-selling
Upselling (offering the customer products or services with a higher price, higher volume, available at a higher standard, etc.) and cross-selling (offering complementary products – for example, shoe polish for the shoes that the user is currently viewing) are standard techniques used by virtually all online stores and shopping platforms today.
The effectiveness of upselling and cross-selling is strictly dependent on the precise messages that the customer obtains. For this, artificial intelligence is essential, which allows you to analyze customer behavior, create patterns and on this basis very accurately group and at the right moment display products/services worth recommending.
Tools using AI (machine learning) make it possible to present the user with personalized recommendations of products and services, for example, in the form of categories on the homepage, bestsellers on the thank-you page, product sets on the product card, recommendations based on search results or upselling at the shopping cart stage.
The key benefits of applying AI-based upselling and cross-selling include:
- Even greater precision in recommending additional/more expensive products and services to the customer.
- Increased confidence in the store’s brand.
- Making the offer more attractive.
- Ultimately, increasing cart value and improving sales performance.
AI is one of the hottest and most important trends in the e-commerce sector, which will dominate the development of the entire industry and will undoubtedly change consumer habits (e.g., more frequent use of virtual assistants or ‘virtual changing rooms’).
What is important is the fact that the tools described above can be used not only to increase sales, but also to improve and automate customer service, streamline logistics processes, or create and protect the seller’s brand image (higher customer satisfaction = greater positive feedback).