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The library of essays of Proakatemia

AI-powered E-commerce: Transforming Customer Experience



Kirjoittanut: Kaili Cui - tiimistä Satku.

Esseen tyyppi: Akateeminen essee / 3 esseepistettä.
Esseen arvioitu lukuaika on 7 minuuttia.

 

1. Introduction

 

Artificial Intelligence (AI), as one of the fastest-growing computer technologies, has been widely used in e-commerce to improve business performance and reinforce customer experience. AI can establish a strong relationship between businesses and customers by providing personalized information and changing lifestyles. AI allows e-commerce companies to collect additional information about customers, including their preferences, behaviors and professions, to customize their products and services to meet customers’ needs. Moreover, AI has reformed customer purchasing beyond just flexibility and saving time. It helps with every step, from browsing to making the payment. One example is Amazon’s chatbot, Alex, designed to respond to customer inquiries regarding product information, delivery, refunds and other related issues.

Furthermore, AI-embedded technologies, such as voice assistants, robotics, data mining, augmented reality (AR), virtual reality (VR) and mixed reality (MR), are enhancing the customer shopping journey for emerging online retailers. Therefore, it is necessary to provide an overview of the positive effects that AI has on customer experience, based on previous studies. This will help to clarify AI’s role in e-commerce and guide marketers in refining their offerings. This essay covers the concepts of AI and E-commerce, their roles, and how AI advances the customer experience while facing current challenges. Additionally, it highlights the value of AI applications in operation management for online retailers.

 

2. Artificial Intelligence and Electronic Commerce

 

2.1 Artificial Intelligence (AI)

Artificial intelligence, based on the processing of data, is different from human intelligence. Nisreen Amee et al. (2022) mentioned that in the field of AI, intelligence is typically defined as the capacity to compute and transform data into information that can be used to guide goal-directed behavior. Specifically, AI conducts orders under human commands and operations to solve problems and achieve specific goals. It can replace humans to analyze problems and perform tasks accurately and continuously in a changing environment.

To simulate the human brain, AI involves various technologies, such as Image and Speech recognition, Machine Learning, Data mining, Robotics, Computer Vision, the Internet of Things (IoT), etc. These intelligent technologies are the foundations of the e-commerce revolution in today’s digital era.

2.2 Electronic Commerce (E-commerce)

Electronic commerce refers to the buying and selling of goods or services through electronic means. Alibaba, Walmart, and eBay are good examples of online shopping platforms. It is important to point out two relevant terms. One is Electronic data interchange (EDI), which refers to a company selling its products directly from its online shop to customers with all business information shared electronically. The other one is Electronic fund transfer (EFT), which means the payment method is electronic, such as an online bank, Alipay or Apple Pay.

In addition, with the dramatic development of information technology, e-commerce drives global businesses to grow rapidly without geographical location or face-to-face payment restrictions. AI has made e-commerce much smarter. AI tools are especially useful for pricing, advertising, customer service management and manual analysis of marketing in the retail sector. Therefore, deploying AI is valuable for enhancing the competitiveness of online retailers.

 

3. AI Enhances Customer Service and Support

 

3.1 Personalized Recommendations System

The AI-powered personalized recommendation system is a method used in e-commerce to select digital content that matches users’ demands. This allows customers to find the best fit quickly and easily.

This data analysis technique can capture customers’ information, such as their preferences, browsing history, reviews, and purchase behaviors, to accurately understand their needs and recommend the most appropriate products or services. Personalized recommendation systems simplify online shopping by instantly comparing similar products and providing the most relevant and desirable option. This method greatly reduces the time and effort spent by individuals to find the perfect product among the wide range of available choices.

On the other hand, AI enables e-commerce retailers to forecast marketing trends, and thereby provide hyper-personalized products and services by improving the existing ones or creating new ones to enhance customer value and finally reach their sales targets. For example, AI can help marketing managers understand the availability of a particular discount coupon to consumers. This can improve the accuracy of marketing efforts in the targeted market segment.

3.2 Seamless Shopping Experiences

To increase customers’ experience, retailers utilize AI tools to provide seamless service throughout the whole purchase.

Chatbot is one of the most popular shop assistants extensively used by online retailers. It can recognize text or voice commands to correctly respond to customers’ inquiries with a 7X24-hour online service. This immediate conversation between users and chatbots is based on Machine Learning (ML), algorithms and Natural Language Processing (NLP). It strengthens the relationship between the customer and the retailer by resolving issues without delay and giving the customer the feeling of being treated as a priority.

Moreover, the chatbot is closely linked to the personalized recommendation system. For example, Sephora, a leading cosmetics retailer, uses chatbots on platforms such as Facebook Messenger to provide personalized beauty recommendations. Users can interact with the chatbot to receive product suggestions tailored to their skin type, makeup preferences and previous purchases.

3.3 Improving Purchase Process through AI

3.3.1 AI-powered Image Search

AI-powered image search in e-commerce allows customers to trigger their product browsing on an online shopping platform using visual content, such as photos or screenshots. This technology enables users to upload or capture images of products they are interested in. The e-commerce platform then uses programmed algorithms, including computer vision, to identify and match those products with items available for purchase.

For instance, Alibaba Camera technology has revolutionized the shopping experience by integrating AI-powered image search capabilities. Alibaba Camera allows users to easily search for products by just taking a photo, instead of relying on laborious text descriptions. This innovative solution enhances convenience and efficiency, empowering customers to swiftly find their desired items with ease never seen before.

3.3.2 Online Try-on Experience

Augmented reality (AR) technology is revolutionizing the online shopping experience, particularly in the try-on experience. AR technology displays digital content in real-world environments. Users can visualize products in their own space through their smartphone or tablet camera.

In e-commerce, AR try-on experiences are commonly used for products like accessories and cosmetics. Customers can see how a piece of clothing fits them or how a pair of glasses or makeup looks on their face through their device’s camera. For example, in the Lenseway (an eyeglasses e-commerce platform) glasses try-on, customers can virtually try on different types of eyeglass frames before making a purchase decision. Consequently, it also decreases the sales return or exchange trouble for both sides.

3.3.3 Dynamic Price and Discount Solutions

AI-powered pricing algorithms can strategically apply discounts or promotional offers to deliver personalized discount offers tailored to individual users. A further description is that it can recommend discounts on products that are most relevant and appealing to them by understanding each customer’s unique preferences and buying patterns.

Simultaneously, AI assists retailers in continuously adjusting product prices to maximize sales by monitoring market conditions, including competitor pricing, demand fluctuations, and other relevant factors. This enables e-retailers to refine coupon strategies and offer customers better deals. Therefore, this dynamic pricing strategy ensures that customers benefit from the best possible discounts based on current market trends and conditions.

3.4 Ethical Considerations in AI-powered E-retail

However, AI is in an early stage in building up an intelligent e-commerce ecosystem. To have a fair online shopping environment, some risks should be taken into consideration when using it to reinforce the customer experience.

AI-powered systems often require large amounts of personal data to provide tailored recommendations, which can raise privacy concerns. To mitigate these risks, e-commerce companies should implement strong data privacy measures and obtain explicit consent from customers before collecting and using their data.

In a further step, e-retailers need to ensure transparency and accountability in the decision-making processes powered by AI. Algorithms often operate as a mystery, making it difficult for users to understand how decisions are made and the factors that affect them. This lack of transparency may raise concerns about fairness and lead to distrust. E-commerce businesses should establish mechanisms to provide transparency into the operation of AI algorithms and the data they use. For instance, they should disclose the criteria used to generate personalized experiences and explain how AI-driven decisions align with business objectives and customer preferences.

Addressing these concerns not only improves customer satisfaction and trust but also contributes to the sustainability and long-term success of the e-commerce community.

 

4. The Necessity to Deploy AI Technology for E-retailers

 

The use of AI is particularly beneficial for customer service management. To advance customer service continuously, e-retailers use AI tools to undermine the current market and reduce mismatch.

Hence, the implementation of AI is an essential way to increase the competitive capability of e-retailers. The 2024 PwC Global CEO Survey showed that 70% of business leaders believe that generative AI will significantly change the way their business creates, delivers and captures value (PwC, 2024) .

Specifically, in e-commerce, AI tools are applied to various aspects in pricing, budget allocation, delivery time, and supply chain management. For instance, Walmart streamlines its supply chain operations through AI technology. Its AI-powered demand forecasting models can predict customer needs for various products and adjust inventory levels accordingly, minimizing stockouts, reducing excess inventory costs, and improving overall efficiency in its supply chain.

However, retailers lack comprehensive knowledge of AI. When introducing AI technology, retailers should have deep communication with AI providers and carefully consider their business model to adjust the organizational systems.

 

5. Conclusion

 

The essay presents an in-depth analysis of how artificial intelligence (AI) is revolutionizing the customer experience in e-commerce. It outlines different uses of AI, including personalized recommendation systems, seamless shopping experiences, and enhancements in the purchase process. These applications, which range from chatbots to AI-powered image search and online try-on experiences, are designed to improve customer satisfaction and simplify the online shopping journey.

The essay highlights the role of AI in providing personalized recommendations to customers. E-commerce platforms leverage algorithms that analyze customer data, including preferences, browsing history and purchase behaviors, to deliver tailored product suggestions. This not only helps customers find what they are looking for more efficiently but also increases the likelihood of customer engagement and re-purchases. Moreover, AI allows retailers to predict market trends and adjust their offerings accordingly, enhancing the customer shopping experience.

Additionally, the essay explores AI tools in enhancing shopping experiences. Chatbots offer immediate assistance to customers, particularly with inquiries, which can improve customer satisfaction and trust. Augmented reality (AR) technology allows customers to visualize products in their own space, promoting informed purchasing decisions and reducing the likelihood of returns or exchanges.

In the end, the essay discusses the ethical considerations related to AI-enabled e-commerce, specifically regarding data privacy and transparency. It recommends that e-commerce companies prioritize these aspects to establish trust with customers and maintain ethical AI practices.

Currently, AI in e-commerce is still in its infancy stage, making it difficult to draw extensive conclusions. However, previous studies have shown that AI technology plays an essential role in improving customer experience.

In the future, AI will continue to drive e-commerce companies’ output and enhance customer experiences. It is possible that more industries, including online businesses, will embrace AI-powered solutions.

 

 

Reference

 

[1] Jyoti Rana, Loveleen Gaur, Gurmeet Singh, Usama Awan, & Muhammad Imran Rasheed. (2022). Reinforcing Customer Journey through Artificial Intelligence: A Review and Research Agenda. International Journal of Emerging Markets, Vol. 17( No. 7, 2022), 1738–1758. https://www.emerald.com/insight/1746-8809.htm

[2] Lanlan Cao. (2021). Artificial Intelligence in Retail: Applications and Value Creation Logics. International Journal of Retail & Distribution Management, Vol. 49(No. 7, 2021), 958–976. https://www.emerald.com/insight/0959-0552.htm

[3] Hsin-Pin Fu , Tien-Hsiang Chang, Sheng-Wei Lin, Ying-Hua Teng, & Ying-Zi Huang. (2023). Evaluation and Adoption of Artificial Intelligence in the Retail Industry. International Journal of Retail & Distribution Management, Vol. 51(No. 6, 2023), 773–790. https://www.emerald.com/insight/0959-0552.htm

[4] Anil Kumar Kashyap, Ity Sahu, & Ajay Kumar. (2022). Artificial Intelligence and its Applications in E-commerce – A Review Analysis and Research Agenda. Journal of Theoretical and Applied Information Technology, Vol.100(No. 24, 2022), 7347–7365. www.jatit.org

[5] Nisreen Ameen, Ali Tarhini, Alexander Reppel, & Amitabh Anand. (2022, September 2). Reinforcing Customer Journey through Artificial Intelligence: A Review and Research Agenda. Computers in Human Behavior. https://doi.org/10.1016/j.chb.2020.106548

[6] Vipin Jain, Bindoo Malviya, & Satyendra Arya . (2021). An Overview of Electronic Commerce (e-Commerce). Journal of Contemporary Issues in Business and Government, Vol. 27(No. 3, 2021), 666–670. 10.47750/cibg.2021.27.

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