How AI Is Revolutionizing E-Commerce

CIO Review Europe | Monday, June 27, 2022

In operations, fraud prevention, and customer experience, AI has a fundamental role to play. Here are intriguing ways AI might assist as e-commerce and omnichannel retailers compete to give the greatest experiences

FREMONT CA: Since the onset of the pandemic, artificial intelligence has played a prominent role in making online shopping easier and more realistic. Virtual try-on has made it easier for people to buy clothing from home for Zoom meetings and leisure time, while 3D product previews have removed much of the uncertainty from larger purchases such as sofas and rugs.

Nevertheless, AI is also important in other aspects of customer experience, fraud prevention, and operations. Here are some of the most interesting ways that AI can help e-commerce and omnichannel retailers compete to deliver the best experiences and optimize their operations.

Using AI to boost order approval rates

Revenue must approve as many good orders as probable. It's also important for creating CX that entices customers to return. Very often, online retailers fall on the side of caution by rejecting any order with any kind of discrepancy, no matter how minor. For example, a new customer's order may be rejected if they enter a ZIP code that differs by one digit from the Address Verification System record. Alternatively, they may reject any order from a returning customer because it was placed from an unfamiliar device, such as a new phone.

Businesses potentially lose the rejected clients in addition to the profit from the fraudulently declined orders. 40 per cent of online buyers in five countries surveyed by ClearSale in March 2021 indicated they would avoid a website if it experienced a drop. That implies that the entire marketing expenditure, including any personalisation used to entice the buyer to complete the checkout process, was for nought. The customer's potential lifetime value is the same.

By leveraging behavioural biometrics, historical customer data, and other data to swiftly determine whether an order is fraudulent or legitimate, AI can reduce erroneous declines and improve order approvals. Expert manual review is the next critical step when AI-screened orders are detected as potentially fraudulent. The AI algorithm becomes wiser, the company approves more good orders, and fewer customers have a bad experience with the website or app by assessing flagged orders and feeding the decisions back into the algorithm.

Segmenting clients continuously for seamless personalization

Many internet shoppers, especially younger ones, value personalization. 18% of those who responded to our study between the ages of 18 and 24 claimed that "featured items picked particularly for me based on my shopping patterns" would keep them from visiting physical stores again. Only 11% of customers 65 and older expressed the same sentiment.

Unsurprisingly, younger customers are more willing to share data than older generations to appreciate catalogued online shopping experiences. Businesses that cater to Gen Z shoppers and retailers looking to break into this market require a platform for permissioning, collecting, analyzing, and deploying data for personalized interactions across touchpoints. Consumer habits and preferences, on the other hand, change over time, and as we've seen in previous years, they can change rapidly.

Retailers can use AI-powered customer data platforms that continuously analyze customers' online and in-store activity to adjust their segments as they age, change, and grow to keep up with these changes and continue to offer accurately personalized offers in real-time. With the proper permissions, this data can also be used to inform fraud prevention, lowering the risk of false declines as customer behaviour changes.

Efficiently managing inventory, logistics and forecasting

Since the epidemic started, many retailers have seen a significant improvement in their e-commerce inventory management. At that time, many customers stocked up online while many shops — particularly in the food industry — were hastily shifting in-store stocks online due to the unknown length of lockdowns and a need for safety. Stockouts, post-order complications, and disgruntled customers were frequently the results.

The top-performing shops have now resolved their concerns with inventory visibility. They have had the time to develop unique operational models and inventory monitoring systems for their online platforms, which is very significant.

Having distinct strategies for each channel helps greater CX optimization, even if the in-store and online inventory systems are combined on a single backend platform. If a retailer's e-commerce store, for instance, is dependent on in-store inventory that is only updated sometimes during the day, the retailer runs the risk of disappointing online customers when things that were in stock at the time of the order aren't available. Supply chain management presents another inventory difficulty, particularly when production and transportation hubs throughout the world are struggling with outbreaks, employee shortages, or lockdowns.

AI can assist with inventory and logistics management by learning where and when demand for specific products is highest, where shipping and delivery bottlenecks are most likely to occur, and how retailers can move inventory from a region with low demand to one with high demand. Because of these benefits, the global logistics automation market is expected to grow at a CAGR of 12.4 per cent through 2026.

Similarly, AI and machine learning can assist retailers in more accurately forecasting demand by analyzing not only past and current customer behaviour in their channels, but also their searches and shopping across the web and apps. Improved forecasting can assist stores in anticipating spikes in demand for specific products and avoiding waste on items with declining demand. By providing online shoppers with a more tailored, frictionless, and loyalty-building customer experience, all of these advantages together pave the way for retail success.

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