How is AI disrupting the online retail industry?

For high-end eCommerce retailers, AI is becoming hard to ignore. In this blog post, we’ll be considering potential uses for AI in eCommerce, where we’re at now, and what the future might hold for this fast-developing part of the online retail industry.


A recent report from Forrester, entitled ‘Predictions 2017: Artificial Intelligence will drive the insights revolution’, predicts that business investment in Artificial Intelligence (AI) will triple this year alone. Certainly large vendors such as IBM, Google and Salesforce are busy embedding components of AI into their systems and solutions to impact their marketing, eCommerce and product management capabilities, says the report, while the vice president of Facebook’s messaging products, David Marcus, recently said that a number of companies are seeing an increase in sales, bookings and productivity due to AI tools such as Facebook messenger bots.

The current state of AI in eCommerce

AI – which includes all machine learning applications – is already a big part of the online retail experience, even though the average user might not have noticed. Aspects of eCommerce, such as personalisation and predictive recommendations, are all made possible through the use of artificial intelligence. Observing the way that the customer interacts with a site has always been of vital importance when it comes to understanding the motives that lead to successful eCommerce and online marketing, but never before have we been able to pinpoint and predict customer movements with quite such accuracy.

Research by Boston Consulting Group (BCG) has found that brands that create personalised experiences by integrating AI are seeing revenue increase by 6–10 per cent – two to three times faster than those that don’t. BCG suggests that those leading the personalisation charge “stand to capture a disproportionate share of category profits in the new age of individualised brands while slow movers will lose customers, share, and profits”. BCG argues that over the next five years in retail, healthcare and financial services, the 15 per cent of companies that get personalisation right will see combined revenue increase by $800 billion.

So what does such personalisation look like in the eCommerce landscape? A summary of a new report by BI Intelligence, which includes case studies of retailers gaining a competitive edge with AI, reveals several applications of personalisation using AI. These include: personalising online interfaces, tailoring product recommendations, increasing the relevance of shoppers’ search results, and providing immediate and useful customer service.

An example of these applications coming into play would be a customer who’s shopping online for a dress. According to the data mined about her search preferences, her previous purchases, her age and size, the city she lives in, her price point preferences and extra pieces of information such as the season, a chatbot might pop up and make personalised recommendations for her, or her search results can be tailored towards the clothing that will interest her.

AI and the future of retail

The ways in which AI might be used within eCommerce in the future are endless. Indeed, the Forrester report states that 2017 will be the year in which the ‘big data floodgates will open’. Companies want more in-depth insight, and through artificial intelligence, they are able to get that. AI means online retailers are able to access information much faster, as well as harness the power of social media to better understand potential customers.

One new avenue for understanding the consumer is a form of AI called Artificial Neural Networks, which attempts to recreate how a human brain works through abilities such as pattern recognition. An application of this is to analyse why we respond to certain advertisements and not others, and tailor accordingly. When Microsoft used BrainMaker Neural Network software to maximise returns on their direct mailing campaigns, they increased their open rate from 4.9 per cent to 8.2 per cent.

Another use of AI we will see increasingly is product search applications, with visual and voice search applications already emerging on the market. According to an article by The Drum one eCommerce company that is working with visual search capabilities is Neiman Marcus. The company enables app users to take photos of products they desire, and then directs them to similar products in the Neiman Marcus catalogue. Similarly, eCommerce stores are starting to enable voice-activated searches, and a new product by Amazon called Echo will enable shoppers to search for and order products using their voice.

Thanks to AI, it’s also possible that every facet of the retail experience could one day become linked up. In the way that the Internet of Things (IoT) enables a fridge to now communicate with a supermarket, according to Business Insider an Amazon Dash Button – connected to the wifi – can be pressed every time you want to reorder a favourite item. Or a beacon set up by retailers can pick up the fact a consumer has walked into a store or entered a webstore and send notifications or discounts to the customer’s mobile phone in real time.

The integration of AI will soon mean customers will be able to find the products they need fast, and with hardly any manual effort. Artificial intelligence might even one day render customer help desks manned by human staff redundant, due to the powerful problem-solving capabilities of AI which are able to find solutions for any problem in a matter of seconds. Eventually, customers might never even see products that online sites know they will have no interest in buying. It is perhaps important, however, to ensure that the controls put in place by AI are limited to a point, to ensure freedom of choice for the customer is always maintained.


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