AI has become a household term globally. With companies launching new AI capabilities every day and improving existing models so rapidly, it’s safe to say that the world is living in the peak AI era. In the past few decades, there have been several tech advancements but the pace of AI evolution is nothing like seen before.
The Founder & CEO of Anthropic said, “The single most important thing to understand about AI is how fast it is moving. I have personally never seen anything resembling this pace of progress”. Even, Satya Nadella, Chairman and CEO of Microsoft said, “The pace of AI innovation in 2023 was astounding – but even more impressive was how people applied this technology to make a real difference in their careers, communities, and countries.”
AI is transforming the Commerce Industry. AI is in the early stages of the Hype Cycle, as introduced by Gartner, and is a graphical representation of the maturity, adoption, and social application of specific technologies. Several companies are experimenting with AI capabilities to personalize buyers’ experience, AI-powered chat-bots, recommendations, Fraud detection, etc. This article will cover all aspects of Commerce Platforms and how AI is changing the industry.
The influence of AI in Commerce Platforms has been huge. Many companies are reporting increased revenue with AI. As per a report from McKinsey, many companies are looking at AI as a way to reduce costs and improve efficiencies. Commerce Platform is a unique place where AI impacts all 3 parties involved – Buyers, Sellers, and the Marketplace itself. AI is expected to have a $5.9 trillion impact on the global e-commerce sector. AI is transforming the way businesses operate.
1. Buyers
There are several ways, AI is impacting how users shop online. The impact of AI on users’ behavior has been massive and is expected to continue. There have been a plethora of AI products and tools that are changing buyers’ behavior for good. Some of the areas where AI is impacting commerce are:
- Search: This is the first point in the funnel of e-commerce conversion flow. Buyers generally start with searching for a product and based on the results, they go about the next steps in the buy flow journey. A lot of AI tools are changing how buyers are searching for products online.
- Google Lens is a visual search tool that helps buyers discover products to buy. A recent report suggested that Google Lens has inspired 60% of shoppers to buy something.
- AI powered search is also gaining ground. It helps companies to implement contextual search that goes beyond the traditional search. This is something that users are leaning towards. So, instead of knowing what exactly one wants to buy, they provide a context of why they want to buy. and this type of search will power the next generation of commerce platforms.
- Product comparisons: AI is helping buyers to compare products. AI is making it easy for buyers to know exactly what they want to buy and how does it compare with another similar product and pricing. AI is helping buyers to save time and buy exactly what they want taking out the guess work and reducing waste. 86% of shoppers want AI to help with Product research.
- Reviews: Reviews are critical step in the overall user-buy journey. 82% of buyers read reviews before buying a product online. Research shows that 93% of buyers say that online reviews affect their buying choices. Amazon has started showing keywords on their Reviews section using AI. Ecommerce companies are using clustering algorithms to tag reviews that fall under the given category. Companies have even started to summarize the reviews using Large Language Models for buyers to make it easier for them. Amazon is using AI to generalize and summarize product reviews, saving shoppers time.
- AI in Checkout: Artificial Intelligence can be used in the checkout flow to make things more personalized for the buyers. Companies are using AI to upsell and cross sell items during the checkout flow. This sort of recommendations is surfaced using AI algorithms. AI can also be used to create subscriptions of items that buyers buy the most. Recently Walmart launched their AI-powered subscription service.
2. Sellers
- Product listings: AI has not only influenced buyers journey but has also changed how buyers are onboarded and listings are created. Buyers are using Gen AI to create product description. Amazon has launched Gen AI tool to help sellers write Product Description, thereby saving sellers time so that they can focus on selling. Open AI ChatGPT also helps sellers to create product listing just by looking at images.
Not only this, AI can be used to set price and offer discounts. AI tools are also used to edit the product images and create professional looking photos. Sellers are also using AI to engage with customers on Social Media Platforms and other channels. Shopify AI, Magic, is integrated throughout the platform and provides sellers with a host of capabilities – store building, marketing, customer support, etc.
- Inventory Management: It’s another area where AI can make a difference. Sellers and companies are using AI to predict the demand and manage their inventory. Using AI can help sellers and businesses can handle the demand, predict fluctuations, reduce cost, reduce wastage, improve efficiency and fulfill more orders. AI can be game changer for small and medium businesses doing business online.
3. Marketplaces
- Detecting Frauds: Frauds are number one reason for companies and marketplaces to lose credibility and hence the buyers. Without the buyers, sellers would just leave the platform. Hence, Commerce Platform needs to have a robust system in place to catch frauds. Different frauds that Commerce Platforms suspect are: Identity Theft, Fake Products, Fake Reviews, Payment Frauds.
As per Juniper Research global merchants will lose $347 Billion due to online payments fraud. AI fraud detection is supposed to reduce this lose. The benefits of AI over traditional fraud detection system is AI is dynamic and it learns on the go. AI system analyzes various data points – User behavior, buying pattern, IP Address, buying frequency, etc and builds a robust algorithm to detect Identity Theft Fraud.
Companies are deploying AI to detect fake products. According to a report $2 trillion dollars worth of counterfeit products are sold each year. Organizations are using AI to detect anomalies in the listing and save buyers from potential fraud. Amazon is using AI tools to scan over 8 billion listings from sellers each day. AI-powered product attribute tagging is an AI solution to detect and eliminate frauds.
- Personalization: Buyers feel good when an ecommerce platform goes above and beyond to get the buyers’ attention. As per Mckinsey, companies that personalize customer experience, generates 40% more revenue. Marketplaces are making a great effort to personalize and offer a custom experience to buyers based on their usage of the platform. According to Epilson research 80% of shoppers are likely to buy from brands that provide personalized experiences.
Companies are using AI to deliver these personalized experiences to the buyers. Shopify acquired Primer to deliver AI personalization experiences. La Roche Posay has deployed MyRoutine AI to provide personalized skin care products and routine.
- Recommendations: One of the most important use-case of AI is product recommendations in ecommerce. AI-powered product recommendations leverage the power of AI, machine learning, and incredible amounts of data to display personalized product recommendations that help support customer acquisition and customer retention.
Recommendations drive 35% of Amazon’s sales. It shows the value and importance of recommendation system. AI powered recommendation system is making it easier for brands to implement. Buyers expect recommendations to discover products and are 4 times more likely to add them to their cart.
- Customer Support: AI has made it possible and intuitive for commerce platforms to provide an easy-to-use Chat-bot integration to provide customers real-time support and enhance customer experience. Alibaba’s AI-powered customer service chatbot handles an impressive 95 percent of written and spoken customer inquiries. eBay, implemented Shopbot – an AI-powered shopping assistant that helps users to find relevant products.
As per MIT survey, business leaders think AI chat-bot is the leading use-case of AI. As per Capgemini report, at least 54% of customers make daily interactions with chat-bot or assistants. These numbers show why companies are investing in AI chat-bot and how user behavior is changing. It also frees up organization’s time to be invested in more business-critical tasks resulting in improved business outcomes.
In conclusion, AI has a deep profound impact on the ecommerce industry. As AI is evolving the use cases will also evolve to include automating all the manual task and remove human errors. AI is also taking over the logistics industry which is the backbone of any successful ecommerce business. This is an exciting time to be in the industry and witness first-hand how a technology is changing the behavior all around at a rapid pace.
