Role of AI in driving eCommerce

Updated: Jan 11

Artificial Intelligence, from SIRI to self-driving cars its applications can be experienced everywhere around us and its use is growing rapidly. AI has empowered machines from being rule followers to rule creators, making them truly smart. Top eCommerce companies are leveraging on this technological advancement to improve their conversion rates multi-fold and improving their profitability.

  • Amazon’s recommendation engine drives 35 percent of total sales

  • Alibaba’s AI assistant technology reportedly processes 95 percent of customer inquiries

  • Alibaba’s smart logistics has resulted in a 10 percent reduction in vehicle use and a 30 percent reduction in travel distances

  • eBay Shopbot has driven their conversions by a significant number

Given AI’s wide array of applications, this article would focus on the role AI is playing in the evolution of the eCommerce industry. The focus will be to explore the qualitative and quantitative contributions of AI towards the direct revenue aspect of eCommerce.

Qualitative analysis of AI’S contribution to eCommerce

Scrolling to more than 3 pages on an eCommerce store has certainly become a rarity these days. Marketplaces with literally thousands of products are able to offer products that we like in these first 3 pages. Well, this convenience is all thanks to their advanced AI systems that are constantly trying to learn and predict your tastes so that they save a user’s time and cater to their limited attention span.

New user acquisition: These personalized suggestions drive a deeper emotional connection with users and this results in improving brand familiarity and the user’s probability to give your brand a try. We have analyzed new user data pre and post-AI implementation and have witnessed that it takes 25% less visits for a user to try a brand for the first-time post implementing AI. The following graph shows the visits taken for users for the first purchase of a new brand.

Convert visitors to buyers: A prime quality of a master salesman is to convert a visitor into a buyer and AI has proven that it can take over this trait to the virtual store. With the ability to study a user’s buying behavior and show personalized products, product recommendations and personalized offers that can appeal to the user, stores with AI were able to deliver high eCommerce conversion rates. Dynamic messages and intent-based offers prove to be delivering effectively in capturing the impulse and converting a casual visit into a successful sale.

We have witnessed a 219% increase in conversion rate for a premium brand within 4 months of implementing AI and this is a clear reflection of the AI’s influence on triggering user purchase intent

Better control over products sold: Cross sell becomes a key part of a salesman’s jobs where some products that drive a brand’s interest are piggybacked over the fast movers and high demand products. This is a key aspect of sales with makes brands profitable and prevent product loss due to expiry. Well AI brings provides the same control of product outflow by intelligently driving long tail product sale combined with the fast movers. This makes the online channel more predictable and acts as a lever that can compensate for the monetary discounts needed to drive a purchase

With the implementation of AI, we have witnessed a 235% increase in longtail product sale for a brand with a large SKU count.

Complaint handling: Data shows that the percentage of customer issues being satisfactorily resolved by AI-powered chatbots is increasing rapidly. Chatbots have virtually zero response time and are active 24hrs a day. The quick response and resolution impacts user experience in a positive direction. Data from chatbot queries is being used to push product innovation mandates thereby AI acting as an effective mechanism that is helping brands listen to and attend customer pain points more effectively.

Quantitative analysis of AI’S contribution to eCommerce

Improved revenue: Online stores with AI capabilities have shown significant increase in the revenues generated. AI drives more conversion rate which by extension increases the number of orders being placed from the same set of visitors. AI’s ability towards driving user engagement also results in users being loyal to the brand for a longer period of time, increasing the lifetime value of a user. With automated remarketing and automated restocking reminders, AI becomes that go to salesman for all their needs.

AI has enabled a new brand increase its revenues by 638% in just 4 months of launch

Improved profitability: AI drives effective cross-sell and upsell, increasing the average order value. This helps in optimized shipping charges. The ability to drive subscriptions helps in brands generate revenues for all the future orders placed by the client and in better planning stocks and logistics. Many large eCommerce firms are letting AI plan their shipping routes and optimizing logistics costs for delivery. AI, in the form of chatbots, reduces the cost of customer service by more than 30% and this is a significant addition to the bottom line.

With AI automating marketing, the probability of errors has significantly reduced. Improved micro consumer segment targeting optimizes customer acquisition costs and plays a vital role in driving the online revenues towards profitability. With personalized offers, brands can prevent discounting to target groups that would not require discounts for making purchase decisions, further adding to profits.

The bottom line

How effective are your physical shops with just offers and products lying around for people to pick up and not having any sales staff around in the shop? Such stores neither serve user goals nor the brand’s goals and there will be absolutely minimal control over the revenues with discounting being the only lever that one can use. Building on the popular analogy of an Ecommerce website being a brand’s virtual shop that has no geographic limitations aren’t all the eCommerce websites virtual shops without sales staff. AI, I believe is that missing sales guy that can be deployed into your virtual shop that can be a real game-changer.

AI has a huge upside in driving eCommerce revenues and the benefits of having AI drive Ecommerce far outweigh its implementation costs. So, the real question I feel here is can I really afford the handicap of not having AI drive my eCommerce store.