AI in e-commerce: how artificial intelligence can support your online retail today

Fatih-Kağan Taşkoparan

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For many, artificial intelligence (AI) still sounds futuristic, and some people are generally uncomfortable with the topic. For you as a retailer in e-commerce, however, it is fundamentally relevant. After all, online retail as a whole is a huge wave of innovation that has been rolling unabated since its beginnings.

What actually is AI or machine learning? Where is AI already being used in e-commerce today - possibly hidden in software solutions that you use? And what new developments can you expect in the future? Find out more about the trend of the future here.

What are AI and machine learning?

Artificial intelligence is software that can solve problems independently and learns in order to achieve better and better results. The idea behind artificial intelligence is an old one and has often been taken up in sci-fi literature, even before people started thinking about how something like this could be technically implemented.

Machine learning refers to the implementation of the AI concept in the real world - outside of mere fiction. Machine learning is a sub-area or application example of AI. It enables the development of software that is able to perform certain tasks ever more efficiently and reliably based on data and feedback from users or in the form of KPIs.

A well-known example of how this works is the freely accessible translation program DeepL. Before its launch, the translation algorithm was fed with a lot of data to translate content into other languages live and directly as it was being typed. But what makes DeepL so good (and getting better every day) is the fact that users themselves help to develop it.

You can give DeepL feedback on whether a suggested translation is accurate and choose the most suitable wording for your context from a range of different formulations. The software remembers this. Accordingly, in the future it will suggest the translation that most users consider to be particularly appropriate. In this way, DeepL is developing into an increasingly "natural" translation program.

What applications for AI already exist in e-commerce today?

AI is already supporting online retail processes in many areas. Users and customers may just not notice it directly. Here are a few examples that illustrate how present artificial intelligence already is in e-commerce.

Predicting shopping behavior with AI

Amazon has made the "Other users bought these items" feature big, but Shopware, for example, also offers a corresponding solution for smaller retailers.

However, an even more effective AI-driven solution for e-commerce is the provision of individual landing pages for different users. Shoppers who visit a specific shopping website immediately see items of interest to them (suggested on the basis of previously viewed and thus related products). This makes for a more satisfying and motivating shopping experience.

Digital advertising benefits from AI

If you launch campaigns for your store via the Google or Meta network (Facebook, Instagram & Co.), you also benefit from AI. Your ads are not displayed randomly, but are constantly optimized using analysis algorithms. This means that your content is preferably displayed to users who are likely to have a high affinity for this content based on their surfing and shopping behavior. Ideally, you pay less for your campaigns this way, but achieve better results.

"Buy now, pay later" becomes more secure with AI

Many people use payment services where they pay their bills later. For example, after 14 or 30 days or in installments. AI could help to reduce payment defaults with this form of payment.

The debt collection company Coeo is researching, among other things, how debt collection processes can become more efficient based on AI while remaining empathetic. The more that can be automated in this area without targeting defaulting customers in the wrong way, the better the chances of success.

Smart AI chatbots support service employees

In e-commerce, AI is also increasingly being used in service. Instead of communicating with real people, customers in first-level support initially communicate with a chatbot. The bot is able to sort requests and solve simple problems. This saves resources and ensures that more complex requests can be processed more quickly by humans.

Corporate groups lead the way in AI

Major players in e-commerce, such as Otto, have even more plans for the use of AI in e-commerce. In the future, AI-based software will be available that enables propensity modeling - i.e. the prediction of sales trends and returns. This would simplify staff deployment planning in the warehouse, for example.

Customer lifetime value (CLV) should also be able to be better predicted in the future using AI - based on specific customer segments that are again formed with the help of AI. This requires large amounts of data, a lot of development work and time. After all, machine learning is improving day by day, but not overnight.

Many options have already been implemented in large stores, even if there is still a lack of affordable solutions for small retailers and the price-performance ratio of in-house developments must be weighed up depending on the size of the company.

Is the use of AI-based applications worthwhile for online retailers?

Smaller online retailers are naturally not in a position to develop complex AI tools for e-commerce themselves. The possible applications and therefore the potential return on software development are too limited for this.

However, you can assume that easy-to-use, specialized tools will become increasingly available in the future. Computing and storage capacities are increasing enormously and there are many start-ups developing AI software solutions for the broad mass of online retailers.

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