The future of AI in e-commerce

Artificial Intelligence (AI) is a buzzword that is often used today to hide behind almost any automated system for use in the online industry. Many companies and startups boast about implementing AI just to make their products more attractive, but in reality they often have nothing to do with AI at all. While this mischief has spread across various industries, that doesn't mean that AI doesn't realistically have something to offer anymore. Quite the contrary.

Let's now take a look at arguably one of the most dynamic areas where AI can deliver real results if approached correctly, and that's e-commerce. What real use does AI have here and where does its future lie?

Personalisation

Artificial intelligence will increasingly be used to analyse customer behaviour and preferences. Based on this data, e-commerce platforms will be able to provide personalised product recommendations, which will not only improve the user experience but also increase the likelihood of purchase.

In practice, data on customer behaviour on a given e-commerce site is first collected - ideally over a period of one to two months. The resulting data is then fed into prediction models to provide more accurate and personalised recommendations, including based on real-time user behaviour. So, for example, it knows that you'll buy red wine rather than beer with your mince meat because you've done it several times in the past, or other users usually do. But the allure of AI is mainly that if you start choosing beer more often when you make a purchase, the models will recognize this and adjust the recommendation. This capability, called machine learning, therefore allows the models to improve and dynamically adapt based on the growing amount of data.

In the future, most smart whisperers and search will work in a similar way, as will, for example, the management of marketing campaigns. In the case of emailing, it's enough to have a user's purchase history and a predictive model that can forecast what products they might be interested in next. With retention, this is a really powerful advantage.

Demand forecasting and inventory optimization

AI algorithms can also be used to predict current and future product demand based on historical data, seasonal trends and other factors. Put simply, AI can tell you exactly how much to stock for what time of year in the future, whether you sell swimwear, groceries or electronics. Among other things, algorithms can also predict the impact of unexpected events such as a pandemic or a change in legislation.

The principle of operation is then the same as in the case of recommendation. You take historical data for a relevant period - in this case, it will certainly be a comparison of several consecutive years for high statistical relevance - and populate machine learning models with it. You can also use pre-trained models, for example on data from other companies in the same industry. Yes, the use of AI in practice today offers such benefits as well, and can be applied to your specific business.

As a result, retailers can better plan their inventory for the entire year, leading to more efficient use of warehouse space and minimizing (sometimes) unwanted sales. Last but not least, the accuracy of such forecasting can significantly optimize cash flow.

Virtual test rooms and augmented reality

Imagine no longer having to go to the store to choose your furniture in person, because the store will create a virtual room that exactly replicates the one in your home. You upload a photo of your kitchen, for example, and the virtual room opens up for you and you can start choosing the right set. Then all you have to do is put everything in the basket, order the assembly and you have your new kitchen at home within a week. The first steps in this area are already being taken, for example, by the well-known Ikea.

The same is true for choosing new clothes in virtual fitting rooms. Artificial intelligence makes it possible to try on products before you buy them without having to visit a brick-and-mortar store. This, of course, brings a whole different level of user experience to the online shopping experience and also gives retailers the opportunity to save a lot of money with the operation of (often really big) stores.

Fraud detection and security analysis

Fraud can cause significant losses for online retailers and damage the credibility of their hard-built brand. So, AI is logically becoming an increasingly important tool for combating e-commerce fraud. Primarily because it can very quickly identify technical behaviours from data that lead to fraudulent intent, even if they differ only slightly from 'normal' behaviour. So how does it help?

AI can be used to monitor customer behaviour and identify anomalies in it that could indicate fraudulent activity, such as unusual purchases, changes in payment methods or attempts to gain unauthorised access to accounts. Behavioral data analysis using machine learning can also very accurately detect bots and crawlers of automated systems performing fraudulent activities that can be used to manipulate prices, purchase limited products or generate fake reviews. We also filter bot and crawler traffic in detail to more accurately measure the positive impact of our recommendations within Zoe.ai.

Another type of fraud can be, for example, the takeover of a user account by a third party. AI can also detect such behavior very well by detailed behavioral analysis of the user account login process (e.g., by tracking keystroke dynamics when entering usernames or passwords). The analysis of the written text also helps in verifying reviews, comments or other customer feedback and detects if it is fraudulent or automatically generated text.

Conclusion

These are certainly not the only uses of artificial intelligence in ecommerce; we can also mention, for example, fraud detection, customer support in the form of chatbots, or the integration of voice assistants. Artificial intelligence is already an absolutely essential tool for improving customer experience, increasing store efficiency, growing sales and other absolutely crucial factors in the ever-evolving world of online commerce. It's safe to say that its influence will continue to grow in the coming years and will become indispensable for medium and smaller retailers as well. Thanks to the big ones, we've been able to go through some interesting examples of this already...