How AI is Redefining eCommerce

AI has transformed industries worldwide, and eCommerce is no exception. With the ability to automate processes and enhance decision-making, it is redefining how businesses engage with customers and operate in this space. As more businesses integrate this technology into their operations, the global AI in eCommerce market, valued at USD 7.25 billion in 2024, is projected to exceed USD 64.03 billion by 2034, highlighting its immense potential.

This growing interest in AI is driven by the need to address and keep up with changing consumer preferences and increasing competition to deliver interactive & personalized experiences. As AI becomes more than a helping hand, this write-up will explore its utility in the eCommerce space, how businesses are using it, and what challenges they face.

AI in eCommerce: How Businesses are Adopting it

Today, the use of AI in eCommerce has gone beyond simple automation. In fact, modern eCommerce businesses are using AI’s accuracy and imaginative potential to enhance and automate their overall product experience management (PXM). In this process, AI creates engaging and highly personalized experiences at every touchpoint in a consumer’s journey, from coming across your ad and landing on the product page to internally searching for products and finally making the purchase. The applications mentioned below make it all come together:

  • Improving Audience Segmentation and Marketing

With AI, eCommerce businesses are analyzing customer behavior and their interactions in real-time. Based on some commonalities in the insights, they create micro-segments or precise groups that can be targeted with similar, relevant ad campaigns and other marketing efforts. 

  • Making Internal Search Smarter

eCommerce businesses are integrating AI into their workflows, particularly their internal search systems. With AI, the internal search system can better understand user queries, provide autocomplete suggestions, and even correct typing errors. Adapting to users’ search behavior, it then maps the query with the most relevant search results, making it easier to find the right product. This also reduces search abandonment and improves conversion by as much as 30%!

  • Optimizing Price 

AI is also being used to monitor competitor prices, seasonal market trends, and demand fluctuations. Based on this information, it recommends price adjustments and even adjusts them dynamically to optimize profit margins without compromising sales. 

  • Streamlining Supply Chain with Order Intelligence 

A significant portion, over 20% as per McKinsey Research, of logistics costs are incurred due to process inefficiencies, particularly “blind handoffs (transferring of the shipment at some point between the manufacturer and target location).” AI is helping eCommerce businesses streamline this and reduce wasted resources by suggesting the fastest and most cost-effective delivery routes. Additionally, when combined with IoT devices, it provides real-time visibility of a shipment’s location.

  • Providing 24×7 Customer Service through Conversational AI Chatbots 

eCommerce businesses are integrating conversational AI chatbots to deliver instant, uninterrupted, and human-like responses to customer inquiries, resolving up to 75% of queries. Powered by natural language processing (NLP), these bots accurately understand customer intent, greet users, answer questions, and assist with tasks like order tracking. Additionally, they can be custom-trained with targeted datasets to provide precise responses to specific prompts.

  • Analyzing User Sentiment

With AI in eCommerce, businesses are evaluating customer feedback, reviews, and social media interactions. Based on this evaluation, they can identify emotions and preferences, uncover purchasing patterns, and predict buying behavior, allowing them to adjust their products/services/offers accordingly. 

  • Securing Payments  

Juniper Research projected that online payment fraud will reach $206 billion by the end of this year, emphasizing the critical need for secure eCommerce payment solutions. AI is helping businesses address this by monitoring transactions in real-time, detecting anomalies such as failed logins, location mismatches, or unusual purchasing behavior, and preventing malicious activity. Moreover, AI’s insights also help in improving security measures like biometric authentication and two-factor verification by providing newer action points. 

Concerns Surrounding AI Adoption in eCommerce

While AI is transforming eCommerce with automation and data-driven efficiency, many businesses are still apprehensive about its implementation. This stems from the following concerns of using AI in eCommerce:

  • Cost of Implementation and Maintenance of AI: Developing and maintaining AI systems, chatbots, etc., can be expensive, especially for small businesses, due to the need for modern technology and skilled developers.
  • Potential Lack of Human Interaction: Over-reliance on AI, particularly consumer-facing chatbots, reduces the human touch. In fact, the majority of consumers (64%) still prefer that companies should not rely on AI in customer service because of its inability to empathize and solve complex issues. 
  • Availability of Data: AI requires huge volumes of high-quality training data, and that might not be readily available. To get this data, you may have to rely on third-party service providers to either augment the data you have or process it for better quality. 
  • Scalability: Scaling AI solutions to handle customer queries, inventory, or marketing tasks can be overwhelming due to increasing costs and technical demands. 
  • Data Privacy: Handling vast amounts of data also raises concerns about compliance with regulations like GDPR and the potential misuse of sensitive information.
  • Lack of Skilled Talent: Implementing AI in eCommerce requires expertise in data science, ML, and eCommerce-specific development practices. Finding and retaining such specialized talent in this competitive space can be challenging.
  • Biased Results: AI systems often inherit biases from training data, leading to unfair outcomes or inaccurate recommendations. 

eCommerce Virtual Assistants: Bridging the Gap Between AI and Human Interaction

Some of the above concerns, such as implementation cost, data availability, and biases, arise from the evolving nature and limitations of AI technology. 

While these challenges often require refinement and oversight during the development phase, others—such as consumer resistance to AI interactions and data privacy—call for a more balanced approach. 

Hence, many businesses are adopting a human-in-the-loop model by hiring eCommerce virtual assistants. With this approach, they combine AI’s accuracy and efficiency with human oversight to address gaps in customer engagement, comply with data privacy & security regulations, and boost PXM. 

  • Virtual assistants for eCommerce stores offer cost-effective support for various tasks, including manual data entry, product content updates, and order management, reducing reliance on expensive AI systems for non-core processes.
  • Outsourcing eCommerce virtual assistant services offers flexible, scalable support. Businesses can scale resources as per their requirement. 
  • Virtual assistants provide the much-needed human oversight to AI-integrated processes, ensuring errors are identified quickly, and customer interactions are handled with empathy where AI falls short.
  • eCommerce virtual assistants are also aware of data privacy and security regulations such as the GDPR and CCPA. 

End Note

As AI advances and online shopping continues to grow, its role in eCommerce will evolve beyond automation and personalization. AI will drive immersive and realistic digital shopping experiences. However, to maximize its impact, businesses must strategically integrate AI at key stages of the eCommerce journey while remaining mindful of consumer expectations. Without a balance between AI and human involvement, challenges will persist, limiting its effectiveness and potentially compromising the customer experience. A balanced approach, with responsible and thoughtful AI adoption, is key to maximum impact and consumer satisfaction.