How Artificial Intelligence is Changing E-Commerce

8/25/17 11:42 AM / by sterling

For those of you who know Artificial Intelligence as solely the stuff of science fiction, wake up! Whether or not you're aware of it, Artificial Intelligence (AI) has already made its way into many aspects of your life. AI helps to power Google’s search engine, Netflix recommendations, Siri, and many more things you use every day.

Still a little fuzzy on what artificial intelligence actually is, and how it works? You're probably not alone, so here's a brief overview:

Artificial Intelligence is made up of networks of software and hardware which essentially mimic the neurons in our brains. One of the key differences however is that AI has immensely more speed, capacity, and accuracy than any human brain. While the idea of computers out-smarting humans can be scary (especially if you've seen any sci-fi movie), the capabilities of AI are, and will continue to shape countless aspects of society.

AI has the power to analyze huge swathes of data, quickly recognize patterns and relevant connections, and interpret meaningful conclusions. If that sounds like a pretty broad set of capabilities, that's because it is. I wasn't joking when I said AI has the ability to vastly change society, but we're just going to take a peek at one area that is increasingly using AI: online retail. The e-commerce environment has proven to be a perfect petri dish to incubate and refine machine learning technology, and here are some of the biggest ways in which AI has been incorporated into online retail:

1. Inventory

For most e-commerce merchants, managing inventory is a nightmare. Running out of stock can heavily affect merchants’ revenues, while overstocking requires extra capital to meet inventory cost, rentals, and the fear of a commodity losing value if it's not sold in time.

With such a highly saturated, and rapidly changing market, the traditional methods of predicting inventory needs just don't cut it. The problem with traditional methods is that it uses the hindsight perspective, and with both demand and competition changing frequently, this is rarely as accurate as it needs to be. In order to reach operational efficiency, retailers need to be able to accurately foresee demand using predictive analytics.

AI technology now design such analytics models to identify key factors that influence demand, including the changing levels of demand for different products at different times. Because of the nature of machine learning, the system gets smarter and more accurate over time as more and more data is fed in and read. This means retailers can predict their inventory needs with an increasingly high degree of accuracy, even in a highly volatile market.

2. Pricing

I'm sure you've noticed, but e-commerce is kind of a huge deal these days. In fact, according to the most recent statistics, most people prefer to shop online than in-store, and people's zeal for online shopping is only increasing every year.

As any retailer knows, more demand comes hand-in-hand with more competition. This increasingly competitive and rapidly changing market means that the price of each individual product must change frequently in response to market dynamics. Because of retail coming online, and a market that’s getting more and more omnichannel, market dynamics need to be analyzed on a much smaller scale, where operations are measured in minutes and hours, not days and weeks.

Analyzing all the changing data points on such an intensive and time-restricted level is nearly impossible for any human to do, but this is where artificial intelligence comes in to save the day. AI uses complex learning algorithms that continuously assess the market dynamics and changes so that it almost constantly knows the best price at which to set a product.

3. Personalization

It sounds a little backwards to suggest that a robot can make a customer's shopping experience more personalized than a human, but look at it this way: while a typical salesperson can greet a customer and ask about their basic needs, AI has the power and time to engage with the customer at every touchpoint of the shopping experience, and know information about each users shopping behaviors and preferences that a human would never be able to keep track of.

Important information that previously went unknown can now be put to good use. Thanks to AI, companies have access to hoards of information regarding client behavior before, during and after a purchase, which allows them to create

a more personalized experience. Product suggestions can be incredibly accurate, as well as customized deals and promotions.

Whether a user is on your app, website, or even email campaign, the AI engine is continuously monitoring all devices and channels to create a full picture of a customer, their preferences and how they shop. This unified customer view enables e-commerce retailers to deliver a seamless customer experience across all platforms.

4. Searching

One area that is ripe for refinement is your website or app's search capabilities. Most online shoppers use the search function to find an item they are looking for, and most of these searches lead to inadequate or irrelevant results – which is where AI comes in. Traditionally, websites have used static, human-guided algorithms that do a poor job of adapting to changing customer behaviors and new content, and as a result, lead to insufficient results.

AI has the ability to solve the underlying issues of search functionalities to ensure that your results don’t lose relevance over time. One way that it does this is through natural language processing. With natural language processing, the system can learn to infer what a customer is looking for based on the language they use to search. With a better understanding of what a user really means when he or she types something into the search bar, the search engine can respond with more accurate and individual shopper-specific results.

In addition to creating a more efficient and accurate search function within an app or website, AI has come up with some entirely new ways of searching for products. One notable example of this is Pinterest Lens. This feature enables you to search online for things that you see in everyday life. Say you see someone walking down the street wearing a pair of shoes you like. You can simply take a photo of these shoes and Lens can help you find them online. This works by integrating image-detection programs to identify an object, with visual searches to dig up images similar to that object. By using visual searching, AI has found a way to search for something that you may not have the words to accurately describe.


As you can see, Artificial Intelligence has the power to drastically change retail. The impacts it has already made have streamlined the sales process dramatically, and improved the customer experience by reducing irrelevant products and information they are given. It has also made some breakthroughs in searching such as the invention of visual and audio searches.

The vast changes we've seen in the past few years are just the tip of the iceberg, and looking to the future, it is difficult to say where Artificial Intelligence could take technology and innovation. While retail is one area that has been impacted by AI, countless other aspects of our lives are, and will continue to change immensely in the years to come.

What predictions do you have for the future of AI? Leave a comment below and let us know!

Topics: E-Commerce, E-Commerce Trends, Mobile Commerce, AI


Written by sterling