Interviews, insight & analysis on Ecommerce

Michael Wu

Four AI essentials for ecommerce success

By Michael Wu, Chief AI Strategist at PROS

Despite the chaos many businesses have experienced over the last 18 months, the pandemic has created an opportunity for businesses to change how they compete in the market. The virtual and remote reality of the “new normal” has seen digital engagement and selling between businesses and customers dramatically increase, resulting in skyrocketing eCommerce sales.

While digital transformation has long been attempted by many global enterprises, COVID-19 has greatly accelerated these digital initiatives. The challenge today lies in making your ecommerce model stand out in an increasingly crowded digital market. For those that have succeeded, the secret ingredient is almost always artificial intelligence (AI).

Amongst thousands of AI tools and applications available, a majority can be classified into four areas that are crucial in today’s digital world. Some are more developed for ecommerce, while others have yet to realise their full potential. Here is how each category of AI has been used in ecommerce and why it’s crucial to a successful ecommerce strategy:

1. Internet AI: Developing relevance and personalisation

Internet AI is widely used in ecommerce to provide a personalised recommendation of products and services. The data used to train this type of AI has traditionally derived from user behaviours on the internet. This category is also referred to as Personalisation AI, because the primary use case supports recommender systems and personalisation engines.

With ecommerce lacking traditional in-person interaction, personalisation is crucial to providing users with relevance and individualised context to improve their experience. In a market where everyone is online, it’s essential that you tailor the experience to each individual customer as much as possible. Because the attention economy is far more competitive in the digital world.

2. Perceptual AI: Creating an engaging end user experience

The dominant use case of Perceptual AI is human-computer interaction. The virtual assistants, like Cortana, Google Assistant and Siri, as well as chatbots (i.e. conversational AI) on websites, are some examples. Because these tools often require machines to mimic the higher cognitive function of humans, like voice recognition and speech understanding, this category is also known as Cognitive AI.

The proliferation of conversational agents made perceptual AI extremely popular in eCommerce. Since most eCommerce sites lack the engagement of physical shopping experiences, perceptual AI can make your online experience far more interactive and engaging. As a result, many websites, ecommerce or not, are implementing chatbots to help visitors navigate more efficiently and guide them to the information they’re looking for. Perceptual AI can also be coupled with Internet AI to recommend products via conversational agents, adding relevance and personalisation to an engaging and guided user experience.

3. Business AI: Delivering commercial results

Business AI, typically used by business users instead of end consumers, is a very diverse category operating in many different domains. Yet the overarching use case of Business AI is to automate decision-making within a company. For ecommerce, examples of these decisions include setting prices for certain products; the time length for a particular promotion; the discount size to offer to the most loyal customers.

Many businesses lack data-driven decision making, often due to unstructured siloed data. Where data-driven decisions are feasible, Business AI solutions will access all the relevant corporate data, perform the necessary analyses, and produce an optimal decision with the option to automate subsequent actions. Automation can improve productivity, reduce costs, and free up time to focus on value-added tasks, such as customer relations. Business AI can help deliver consistent results amongst significantly disrupted demand and improve margin in many industries.

4. Autonomous AI: Enhancing last mile delivery

Autonomous AI is the kind that powers the self-driving car and other autonomous systems like robotics, drones, and IoT. Although Autonomous AI is mainly used to drive autonomous vehicles today, it offers a huge opportunity for ecommerce. Today’s consumers are able to explore, research, configure, and purchase products or services online, but they aren’t all downloadable with one click. There is often a lengthy post-purchase process to receive the goods or deliver a service in the physical world, often performed by humans: the ‘last mile’ delivery problem. Autonomous AI is perfect for bridging the gap between the physical world and your eCommerce in the digital world.

Autonomous AI is already helping ecommerce automate this last mile delivery of physical goods, with food and package delivery robots, such as Starship, appearing on select campuses and cities. In the UK, Amazon is already experimenting with drone delivery in remote areas. Moreover, since robots can be sterilised easily, these contactless delivery mechanisms will likely grow in demand in a more hygiene-conscious, post-pandemic world.

Standing out from the crowd with AI

Amazon is perhaps the best example of an enterprise leveraging all four categories of AI effectively throughout the business to maintain its leadership position in ecommerce. As an early pioneer of Internet AI, Amazon has developed its famous recommender system: “Customers who have bought this item also bought”. Amazon also uses Perceptual AI in its speakers and mobile app through Alexa. Although less apparent to the end consumer, Amazon makes extensive use of Business AI to price their products. A report in 2013 noted that Amazon performs about 2.5 million price changes a single day, working out to an average of a price change per product every 10 minutes based on estimated inventory levels. This allows the ecommerce giant to constantly match dynamic market demand to optimise its revenue in real-time. Lastly, Amazon is already using Autonomous AI for robots in its warehouses to transport products to be inventoried, processed, packaged, labelled, and shipped. And, it is experimenting with delivery bots and drone delivery.

AI offers huge potential for growth within commerce; it is now down to businesses to choose the solution that will best serve customers and stand out virtually in the ecommerce digital world. Adopting the right AI systems in your ecommerce strategy will not only help you differentiate from competitors, it will also make your business more robust and resilient than ever as we emerge from the pandemic.

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