Role of AI in E-Commerce

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In the last few years, there have been phenomenal advances in technology, and because of this, the world has shifted to online platforms. Things that people used to do physically, like booking hotels, booking tickets, grocery shopping, etc., can all be done online now. This technological advancement has given birth to a whole new space named E-Commerce (Electronic-Commerce). E-comm can be defined as the exchange of services over the internet. This exchange of services includes buying or selling goods, transferring data or funds over the internet, etc.

Based on the requirement, E-Commerce is majorly classified into business-to-consumers, business-to-business, consumers-to-consumers, and consumers-to-business.

E-commerce is not the only thing that has gained popularity over the last few years, there is one more concept that is now being used by different organizations to improve their business, and it is AI (Artificial Intelligence). AI is a broad term that is comprised of Data Science, Machine Learning, and Deep Learning subfields. The idea behind AI is to make machines capable of doing tasks that are often hard for humans with great accuracy.

In this article, you will learn about how AI plays an important role in improving the e-commerce experience.

How is AI Changing the E-Commerce Space?

Nowadays, there are plenty of e-commerce platforms available for daily product and service needs. Each of these platforms is available in the form of a website or mobile application and has a lot of unique things to offer to the customers. Adding a blend of AI can surely improve the customer experience, conversion rate, and customer retention. There are a lot of scenarios in e-commerce that are now improved with AI and are continuing to do so. Starting with the chatbot services that now enable e-commerce platforms to resolve user queries within seconds without any human interaction.

After this, the important function that generates a major part of the revenue for these companies is product recommendation. Ever wondered how you get the most accurate product suggestions when you are searching about one on the e-commerce platform? That’s AI, which makes it possible. These are just a few of the scenarios that help e-commerce platforms to increase their customer base and convert their website visitors to actual customers.

Now that you are aware of some of the scenarios, it’s time to discuss what different machine learning/deep learning techniques are used for e-commerce applications.

Recommender System: This one is majorly used by the e-commerce and online entertainment industry. In this concept, different products are recommended to the customers based on the customer’s historical data. Whenever you look for a product or movie online, your search is normally recorded by different platforms, and then algorithms like Collaborative Filtering and Content-Based System are applied to that data to get the recommended product.

Classification and Clustering Algorithms: Sometimes, there are scenarios in e-commerce platforms where you need to segment different customers for customized offers or handle scenarios like fraud detection. For these cases, Classification algorithms like Logistic Regression, Decision Trees, SVC, etc., and Clustering algorithms such as K-means Clustering, DBSCAN, etc., are used.

Convolutional Neural Networks: There are a lot of e-commerce websites that allow you to click different product images and then search for the same product. Also, some applications let you click your images to try out different outfits or glasses. For this, a deep learning technology called CNN is used.

Customer Life Time Value Analysis: Customer retention rate is the most important thing among all that is necessary for business for these e-commerce websites. CLV Analysis of Churn Analysis algorithms helps these platforms with the same.

Benefits of Using AI in E-Commerce

Now that you know what all algorithms are normally used by E-Commerce platforms, it is time to check what benefits AI provides to the E-Commerce space.

Automation: Moving workflows from physical to online takes a lot of effort and team strength. But to keep going in the online space requires some kind of automation for faster customer request handling. The whole integration of AI/ML is somehow the automation of the entire system. But to call out a few of the important automation features, Chat Bots, Invoice Processing, Image Recognition, etc., are majorly used by these e-commerce websites for faster user request handling and to resolve user queries as efficiently as possible.

Enhanced Customer Retention: Some websites have a lot of visitors, but they are not able to convert their visitors to customers. The whole point of an e-commerce website is to increase the business, so having visitors only does not help. In this case, using different ML algorithms help these e-commerce companies to identify their potential customers as well as try to retain their existing customers by providing personalized offers and benefits.

Price Optimization: You might have seen some scenarios where the same product lists for different prices on different e-commerce platforms. This is not something done manually, but it depends on different factors like product demand, area of product sale, etc. And after knowing these different features, machine learning algorithms are sometimes (not all the time) used to optimize the prices of these products.

Demand Forecasting: Inventory management is one of the challenging issues that these ecommerce platforms have to manage. Imagine ordering a product, and it comes from 2000 KMs and takes 15 days to deliver. Would you still be interested in buying that product? No right. This issue can happen if the ordered product is not in the inventory of your residence and may be coming from a different location. Using ML algorithms, these platforms predict the demand for products in an area and, based on that, and the whole inventory is managed.

Product Recommendation: Predicting different products based on the customer’s preference is one of the best things that ML algorithms can offer. This improves the sales of services and other offerings of these e-commerce websites.


After reading this article, you now know what is e-commerce and AI. You have also been introduced to different ML and DL algorithms that are used for improving the e-commerce experience. In 2020, The e-commerce market was set to make a profit of $4.9 Trillion globally in 2021, but you would be amazed to know that the actual profit that was recorded in 2021 was $13 Trillion. Now you can think of the future of e-commerce websites and applications. This is not it; in the time of the Covid-19 pandemic, these online platforms were the only ones that fulfilled our needs.

Working on AI/ML solutions makes the e-commerce platforms future-proof, but it takes a lot of time and expertise to think of a scenario where you can use these solutions to improve your business. Is there any way you can improve your sales without any of this hard work? I will say yes, there is. Check out Amasty, a company that provides tools to sell your products smartly and at a rapid pace.

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