How the Magic of AI is Transforming E-Commerce

May 31, 2023 11:00:00 AM
12 min read

Remember the days when artificial intelligence only popped up as a villainous
storyline in an 90s action movie? These days, AI is becoming a lot more commonplace, especially in the world of e-commerce where it’s been making some ground-breaking changes.

Person with computer chip brainFrom personalization to chatbots to supply chain management, AI is reshaping how online retailers do business. It’s becoming so popular that 84% of e-commerce businesses are either actively using AI technology or have it as a top priority. It’s no wonder then that AI-powered e-commerce solutions are anticipated to be worth nearly $17 billion by 2030. 

Clearly, more and more digital stores are adopting this AI technology to find innovative ways to optimize their operations, elevate the customer experience, and boost revenue. But how exactly is artificial intelligence revolutionizing digital commerce and transforming the way we shop online? Let’s find out, shall we?!

Awesome Ways AI is Impacting E-Commerce 

Magnifying glassThough it would be fun to list all of the capabilities, approaches, and uses artificial intelligence provides for e-commerce businesses, we could be here for a while. So, rather than forcing you to take a few personal days to get through it all, we thought we’d narrow it down to some of the most compelling ways AI is changing the world of e-commerce.

It delivers endless personalization. 

Oh, personalization – the hot topic that has taken consumer demands to another metaverse while forcing retailers to ask themselves, “Do I really know my customers as well as they want me to?”

With 80% of shoppers more likely to buy from a retailer that provides a tailored experience, delivering personalized shopper journeys is more of an expectation than an add-on these days (Source: Slideshare). Luckily, AI algorithms can analyze colossal amounts of data, providing valuable insights into things like customer behavior, preferences, and trends. This information helps e-commerce businesses make data-driven decisions, optimize marketing strategies, and customize their offerings to each shopper's needs. 

Shopper making a purchase at homeThe result? A bucket load of customer satisfaction, increased engagement, and higher revenue. Personalization has also been proven to strengthen brand loyalty—70% of consumers say that how well a company understands their individual needs impacts their loyalty. Give them what they want (personalized, relevant experiences), and watch their support grow.   

Personalized Product Recommendations 

Two people talkingYou can’t talk about e-commerce personalization without mentioning its compatriot, AI-generated product recommendations. These subtle suggestions can create quite the shopper stir when delivered at the right time and in the right way (We happen to know a thing or two about that).

First, AI algorithms analyze customer data, like browsing behavior and purchase history to identify shopping patterns. Then, that information is used to recommend products that might interest the shopper. By creating new opportunities for shopper discovery, the likelihood of purchases increases by 75% (Source: Automat).

Related: Why Do Product Recommendations (Even) Matter?

Intuitive Cross-Selling + Upselling

Sales associate helping customerRemember that important customer data we previously mentioned? AI systems can use it to identify relevant cross-selling and upselling opportunities. Even better, AI has a large capacity to learn and adapt, which means that over time you’ll be able to maximize your supplementary sales, propelling and improving your customer lifetime value.

It enhances the overall customer experience.

One of the most meaningful ways AI is evolving e-commerce is by providing marvelously engaging customer experiences. From the very first search to the final post-purchase adieu, AI enables your digital store to function in a way that makes each shopper feel like it was created just for them.

Smarter Site Search

While it might seem somewhat unassuming, an e-commerce site’s ‘search’ can tell a mighty big story. And when powered by machine learning technology, its narrative includes advanced algorithms that are enhancing product discovery for online shoppers. 

Curious person looking through magnifying glassAI uses advanced natural language processing (NLP), making a user’s shopping experience faster, easier, and more intuitive. By understanding consumer language and combining keyword search and vector search into a single query, results are more accurate, and relevant. This means shoppers have a higher chance of finding exactly what they’re looking for. 

Here are two ways artificial intelligence is taking search optimization to the next level:

Two people talking with a lightbulb between them representing a 'eureka' moment1. Voice Search 

Tried, tested, and used by many, voice search has changed the way people search online. This well-known speech recognition technology allows shoppers to search phrases quickly without using a mobile device’s keyboard.

Thanks to emerging AI, voice search has seen some impressive upgrades. For starters, speech analysis and contextual reasoning have led us to more accurate voice recognition, enabling more customers to have a ‘speak-browse-buy’ shopping experience online. It also saves customers time by reducing the effort (and chance for errors) of manual typing—which is especially handy for lengthy product names like, “Organic Queen Size Memory Foam Lavender Scented Pillow.”

2. Visual Search

Sometimes, a shopper wants to find a product but doesn’t know its name, type, or the category it falls under. Usually, it’s right about here that their search journey ends. But with visual search, potential customers can look for products using images and nothing else.

Person looking through telescopeIf an online visitor doesn’t know the details of an item they’re interested in, all they need to do is use a picture to find what they’re searching for. Not only does this increase product exposure, but it elevates the customer experience by alleviating the friction between curiosity and acquisition.

Interactive Augmented + Virtual Reality

Both augmented reality (AR) and virtual reality (VR) enhance the e-commerce experience by providing immersive and responsive features that minimize the gap between online and physical shopping.

VR glassesWhen it comes to digital commerce, 70% of consumers believe augmented reality (AR) can provide them with some sort of benefit. Maybe it’s because AR integrates simulated elements with the real world, enabling shoppers to engage with products in their own surroundings. Or maybe it’s because AR can seamlessly work with their existing devices, so they can experience a product from their iPhone or tablet.

Shoppers can try on virtual products, see how items will look and fit in their space, and participate in interactive demonstrations. AR also allows visual search, providing instant product details based on real-world objects. Another cool AI-driven feature: Online retailers can incorporate tailored recommendations and offers for an additional layer of personalization. 

Chatbots + Virtual Assistants 

One of the most significant ways AI is transforming e-commerce is through improved customer service. Most e-commerce businesses don’t have time to compose a personalized response to every incoming inquiry. This is where artificial intelligence can really serve a purpose. Chatbots enable online retailers to provide 24/7 support to their customers. And because they never take breaks or get heated, chatbots can provide a level of service humans can’t match up to. Did we mention they don’t get paid either? 

AI chatbot helping customerChatbots use natural language processing (NLP) to understand customer queries. This allows them to provide immediate and accurate responses, help shoppers make smart purchasing decisions, and assist with order tracking and returns—all of which greatly reduce response times and enhance the customer service experience. These virtual assistants have already been a lifesaver for many digital stores and consumers. Last year, almost 9/10 customers interacted with at least one chatbot while shopping.

Streamlined Checkout 

Did you know that the average cart abandonment rate is 71.82%? The good news is that AI can help to decrease the number of lost customers during the checkout process. 

Shopper with cart AI algorithms optimize the checkout flow by assessing customer behavior and preferences to determine if any recommendations or messaging is needed for that final purchasing persuasion. Machine learning can also save shoppers time by inputting customer information, and offering advanced support by providing effortless payment processing. Together, this creates a more streamlined shopping experience that can minimize cart abandonment and maximize conversion rates.

It improves business operations.

There’s a lot that goes on beyond what a shopper sees on their device’s screen. Artificial intelligence makes managing the back-end of e-commerce easier by providing tools that boost efficiency, save on costs, and help online retailers know exactly who to market to.

Increasing Productivity

The use of AI in e-commerce empowers businesses to automate several procedures that are usually performed manually. By utilizing this innovative technology, online retailers can diminish their time spent on repetitive and arduous tasks, such as packaging items, restocking shelves, and troubleshooting issues. The best part? The more AI software is employed, the more its capabilities improve, resulting in a revolving loop of productivity. In fact, statistics show that 61 percent of employers say the adoption of AI has led to increased efficiency (Source: SnapLogic).

Person with arms crossed, satisfied expressionIt's important to note that automation doesn't mean extinguishing all redundancies or replacing people with technology. Rather, AI and machine learning streamline repetitive tasks, limiting the chance of operational errors. This unburdens your team from monotonous jobs, allowing them to channel their efforts toward more complex and creative responsibilities that have a greater impact on your bottom line.

Related: 8 Ways E-Commerce Companies Can Do More with Less

Predictive Analytics Tools

Person gaining machine learning insights with binocularsAI-driven predictive analytics tools can examine enormous volumes of customer data to forecast market trends, potential risks, and future opportunities. These insights enable e-tailers to make informed decisions and customize their sales and marketing strategies to better align with shopper needs and preferences. 

Predictive analytics tools also play a crucial role in helping e-commerce businesses with supply chain management – but more on that later. 

Customer Segmentation

Thanks to AI technology, hyper-segmenting audiences based on psychographic and demographic data like browsing history, life stages, and even major hurdles, has become easier than ever. This information helps online retailers gain knowledge about everything from a customer's preferences and behaviors, to their sentiments about products and services.

As a result, e-commerce businesses can tailor marketing campaigns and sales offers toward select shoppers. Doubly, it allows online merchants to get incredibly specific about targeting, messaging, and timing, which increases the chance of a better return on investment (ROI).


Generating high-quality copy can be expensive and time-consuming. That's where artificial intelligence can play a major part. When compared to conventional methods, machine learning tools like ChatGPT produce relevant content in a fraction of the time. Users simply add in the necessary details, and ChatGPT generates messaging in return.

AI brain plugged into computerFor example, product descriptions can be formulated based on information such as brand identity, product features, specifications, promotional offers, and more. On the flip side, ChatGPT can also be integrated with your help center to assist customers with complex questions and even provide personalized content based on their preferences.

ChatGPT has been wildly popular since it launched in November 2022, attaining one million users within its first five days (it currently has 100+ million users, which was achieved within only two months). And if you’re questioning whether AI-generated content has the same influence as human-generated content, consider this: A study from Tooltester found that 53% of participants believed ChatGPT-generated copy was written or edited by people. It’s fair to say that this tool works wonderfully for basic content that’s needed in a pinch, for help getting content ideation started, or for when your team needs to do higher-priority tasks. But to make it more engaging, add a human touch. 

Superior Supply Chain Management 

Open boxAI is modernizing the e-commerce industry by providing greater efficacy and automation in supply chain management. Predictive analytics can help optimize stock levels, streamline delivery routes, and forecast potential disruptions. Here’s a breakdown for you:

Demand Forecasting

Green up arrowMany online retailers rely on artificial intelligence for sales predictions to make demand forecasts more precise. Instead of using historical data, AI software makes sales and demand predictions using real-time data like weather, demographics, and online reviews, to name just a few. This allows e-tailers to adjust inventory levels and enhance operational adeptness.

Inventory Management 

Methodical inventory management focuses on monitoring stock levels to ensure sufficient supply is always available to meet customer demand.

Artificial intelligence helps e-commerce stores maintain adequate inventory levels by utilizing data such as sales trends from previous years, projected changes in product demands, and impending supply-related issues that could affect stock availability. And unlike humans, AI robots can be used 24/7 to dispatch items immediately following an order, fetch inventory, or stockpile merchandise.

Optimized Pricing Strategies 

AI-powered dynamic pricing lets e-commerce businesses adjust their pricing based on supply and demand.

piggybankUsing data analytics and machine learning methods, AI algorithms evaluate market trends, customer behavior, and competitor pricing to determine the best price for any product. Dynamic pricing algorithms can then adjust prices in real-time to enable digital retailers to boost revenue and maintain a competitive edge.

Wrapping Up

In summary, AI is leading some of the most exciting advances in retail. Whether it’s transforming e-commerce by delivering endless personalization, enhancing the overall customer experience, or improving company operations, the AI revolution is changing the way we do business.

Present with lid offAdoption of AI technologies such as augmented reality, virtual assistants, and predictive analytics tools are further challenging the business status quo and rapidly evolving the customer experience. In turn, this is leading to increased revenue growth and customer satisfaction. And one thing is for certain: we’ve only scratched the surface of AIs possibilities.

Embrace the Power of E-Commerce AI

Rocket Blasting Off - SmallReady to unlock the full potential of AI in your e-commerce business? Granify harnesses the power of AI to deliver personalized experiences and enhance customer engagement. Schedule your free consultation with our team of experts to discover how AI can transform your e-commerce experience and help you stay ahead in today’s competitive digital landscape. 

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