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The benefits and challenges of AI in e-commerce

February 29, 2024
16 min read
Ioana Neamt

Ioana Neamt

Contributing Writer

One of the most profound quotes attributed to AI is likely one that very quickly summarizes the importance of integrating the new technology in e-commerce:

Hasta la vista, baby!

– T-800, Terminator 2: Judgment Day

While the recent meteoric rise of AI in the public scene might dominate the conversation around this technology, AI has been employed for a while now across different domains. So, while it’s only now reaching the masses with its huge potential to streamline repetitive processes or become a top star personal assistant, its time-saving benefits are not new in many fast-growing industries.

Take e-commerce for example, another quickly rising field in the past years, which has revolutionized the way we shop and receive products. It’s not surprising that such a dynamic field as e-commerce would be quick at adopting AI, so let’s go over some common use cases and the top benefits and challenges it poses. We’ll go beyond the many general definitions of AI and explore how it’s been implemented in e-commerce.

BigCommerce and WordPress can be set up if WooCommerce is way too complicated.

Main types of AI technology used in e-commerce

Generative AI has become widely known as ChatGPT in recent years, and it has quickly taken over the tech scene. However, AI can fulfill many other roles, beyond the realm of tech and IT, depending on the goals that need to be reached. There are a few top AI technologies worth mentioning here, as they are the main ones with broad applications in e-commerce.

  • Firstly, data mining is a process through which companies can collect and analyze vast quantities of data, thus enabling them to make data-driven decisions. For example, dynamic and instant product recommendations can be optimized if data mining is properly leveraged. Combining advanced statistics with artificial intelligence is the recipe for successful business initiatives. You will also save valuable time, as data can be analyzed in an automatic manner and recommendations will be powered by AI.
  • Secondly, machine learning opens up a wealth of opportunities, and predictive analytics can power up any processes. Combining data mining and machine learning will allow you to spot patterns and train your own models to suit your needs.
  • Thirdly, applications such as computer vision or speech recognition can help businesses advance their image and video processing. Indexing large databases of images can be made easy through the use of AI, and your e-commerce business will benefit, as the visual aspect is often key in being successful.

While these concepts might be more difficult to grasp, their applications are everywhere around us, even if we don’t always realize it. To take things closer to our daily lives, let’s go over some actual use cases of AI in e-commerce.

AI used in manufacturing to assemble cars

AI use cases in e-commerce

AI opens up so many opportunities and can be applied to many business needs. To better illustrate this, we will present some use cases that are varied and take advantage of different technologies. The list of use cases is, of course, much longer, and it will likely only continue to expand as adoption becomes more widespread, but here’s a selection that should give you an idea of the field’s vastness.

1. Robotic warehouse keepers

This is likely something most of us are familiar with, at least by having a clear image of modern warehouses or AI-powered manufacturing plants, where many tasks are automated through robots. And while some might be afraid that jobs are being displaced, the focus should rather be on the time-saving opportunity and fewer repetitive tasks assigned to humans, who instead can work on more complex processes. The advantage with robots is that processes can be more easily automated and quality control clearly enforced.

2. Personalized experience and purchase recommendations

Personalization and recommendations are another use case we are all very familiar with, whether we realize it or not. Very often, when accessing an e-commerce platform, our usage and selections are tracked and used to provide us with suggestions on similar products, best prices, and comparable products. AI plays a key role in how advanced these recommendations have become, not only using past data to optimize the experience but actually making predictive recommendations.

3. Chatbots and automated messages

Our experience with contacting companies and getting support significantly changed due to the rise of chatbots, which are conversational tools that are generally ready to perform easier tasks and provide information. However, in recent years, chatbots have been trained more and more in order to advance their capabilities. Making sure chatbots are well-trained and can promptly assist customers can boost e-commerce sales and reduce the load on staff.

Furthermore, clients often prefer the convenience of chatting with a chatbot rather than having to hold the line to reach a support representative.

4. Content classification and writing solutions

Content is one of the fields where AI has shown promising results. E-commerce businesses often need to handle large inventories of varied items, and content classification is essential here. With trained AI models, this task is no longer so time-consuming and often less exposed to human errors. Furthermore, having a lot of inventory to present means product descriptions are important, and this job can be performed with generative AI in e-commerce. Of course, editing and checking the results is always recommended, but it helps if a lot of the heavy lifting is already done.

A person using a laptop to look at demand charts

Top benefits of using AI in e-commerce

When introducing the use cases above, we already touched on some of the benefits of using AI for inventory management in e-commerce, but let’s go more in-depth on this topic by reviewing the key advantages.

Improved targeting and personalization in advertising

Advanced data mining techniques and predictive analysis will enable businesses to improve targeting and personalize advertising to maximize sales. Marketing is one of the fields quick to adopt AI and apply it to everything from mailing lists segmentation, conversion optimization, and boosting sales through spot-on recommendations. This is likely a trend most of us have experienced lately, as advertising has become more targeted and personalized based on our past online behavior.

Increased automation

In close connection to improved targeting, advances in AI boosted progress made in automating processes that are often time-consuming and exposed to errors. Everything from email communication, to order management and payments can benefit from being automated to a certain extent. Once a process is automated and your staff no longer needs to spend time on it, opportunities arise for innovation and testing in other areas.

Four autonomous transportation robots carrying boxes in a warehouse

Better customer retention and sales processes

Applications such as chatbots and automated product tutorials have the goal of improving customer experience and, ultimately, retention. Repeat customers are very valuable for businesses, as acquiring brand-new prospects is often more costly and time-consuming. Well-designed buying flows and messaging have a positive impact on sales, and AI can be used to automate and personalize online experiences.

Improved supply chain management and logistics

When it comes to supply chain management, AI can improve many processes, from real-time monitoring to spotting trends and predicting demand. As mentioned above, robots are now a common occurrence in modern warehouses. And it’s no surprise that AI was quickly adopted in this field. Having to handle dynamic inventories and honor quick shipping deadlines is no easy task, but AI can take away some of the pressure.

Accurate trend monitoring and forecasting

Advanced forecasting and staying on top of consumer trends are definitely key to boosting sales and maximizing profit. With data mining and machine learning, analyzing big data sets becomes doable even for smaller businesses. There are various products that offer this type of data, so you don’t have to spend too much time digging through records. As e-commerce is such a dynamic field, having accurate forecasts can save money and resources.

Emergency stop button being pressed by a worker, an example of a manufacturing challenge.

The main challenges of using AI in e-commerce

As one might expect from a fast-growing technology, AI also poses its unique challenges, so we will review some of the difficulties we need to be aware of.

Faulty implementation

This part is crucial, as any new tech stack is only as good as its implementation. If things fall short in practice, then many of the benefits we discussed so far can be overshadowed. Many things can go wrong at the implementation stage. For example, having staff trained and ready to handle advanced solutions is fundamental. Processes need to be clear, and thorough testing should be performed to ensure AI works as expected, especially as many use cases might still be experiments. No e-commerce business can afford to miss the mark in today’s dynamic business environment.

Unclear goal setting

This challenge is in some ways connected to the previous one. Goals for using AI need to be clearly set well before implementation. Businesses can’t afford to make the mistake of implementing AI-powered solutions just because it’s the new top trend in tech. Rather, it’s healthy to start by establishing clear goals. So, for example, a goal might be to improve shipping time and reduce returns and incorrect orders. In this case, both a chatbot for quick customer communication and robotic assistants might help. Even more, by using predictive analysis, consumer demand may better be met.

Difficulty with internal adoption

AI adoption isn’t always smooth sailing, as one of the dominating debates is focused on robots taking people’s jobs. So, making sure your staff is onboard and ready to make the most of it will define your success. It’s not just reluctance that can pose a challenge — more often than not, it’s the lack of training and exposure to the opportunities offered by AI. E-commerce was a disruptive trend in itself, often seen as a threat to brick-and-mortar retail, but it quickly gained popularity due to its convenience and now complements regular stores through omnichannel retail. Things are quite similar when it comes to AI, but it’s still very important to educate everyone on the powerful tools it can help build.

Fast-paced domain

It can be tough to adjust and adopt a technology that is still quickly developing. It takes a particular mindset to be able to handle changes and setbacks. As with any new field, there will be roadblocks and a few sources of confusion. E-commerce businesses focus on being prepared to meet demand, and having to work with tools that are sometimes at the experimental stage can be a source of stress. However, in the long term, the benefits will likely be bigger than the challenges.

Potential high costs

Not to be ignored, new technologies and innovative solutions often don’t come cheap. On the contrary, having access to the latest advances can have a considerable price tag. Being ready to accommodate the initial investment can make a big difference. If the competitive advantage gained over the competition is significant, then it’s a price worth paying to ensure your e-commerce platform stays at the top.

Power your e-commerce business with Katana

Katana gives your business a competitive edge through streamlined cloud inventory management, resulting in efficient operations and optimized inventory. For e-commerce, a wealth of integrations are made available, enabling you to connect all your sales channels and keep everything aligned. Katana also offers real-time inventory tracking, in-depth reporting, and production management, setting you up for success.

These tools enable e-commerce businesses to boost sales and increase performance. Overstocking will become a thing of the past, while emerging consumer trends will no longer be a secret for your e-commerce business when using Katana. Get in touch with us now to learn more about Katana and see it in action!

Ioana Neamt

Ioana Neamt

Contributing Writer
With more than 10 years of copywriting experience, Ioana has a fondness for longform writing, investigative journalism, cats, and Victorian-style mansions.

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