AI in E-Commerce: Examples, Benefits and How to Get Started

One recent study by Accenture found that 84% of C-level execs worldwide now see artificial intelligence (AI) as being key to meeting their growth goals. Expectations are rising accordingly for AI in e-commerce, especially as customer demands increase.

With the above in mind, we have prepared a guide on this fast-emerging and exciting field. We'll look at how artificial intelligence works in e-commerce operations, share some examples from well-known brands and retailers, and show you how to implement it successfully in your own company.

What is AI in e-commerce?  

Artificial intelligence (AI) is a branch of computer science that aims to develop intelligent technologies with human-like cognitive abilities. AI processes large amounts of data and uses it to make predictions.

AI applications in e-commerce help brands, retailers and manufacturers to better understand the purchasing behavior of their customers and make more informed decisions regarding prices, product ranges and advertising messages.
 
In addition to analytical AI models that answer questions and solve problems, there is also generative AI (GenAI). Using complex algorithms, it interprets language and patterns in order to learn from the data and make decisions independently. Due to their great complexity, they are also referred to as large language models.

Well-known examples include Google Gemini, Dall-E and ChatGPT. Their analytical and creative capabilities help retailers to improve customer interactions and the overall customer experience by delivering personalized content and continuously optimizing business processes.

The potential of AI in e-commerce  

The breakthrough for AI in online retail came at the end of 2022 with ChatGPT: just a few months after its release, ChatGPT was being used by over 250 tech companies, almost 100 service providers and 35 online retailers - so AI is also becoming increasingly important in e-commerce.

The figures also show how fast-moving the technology is. To keep up, retailers need a tech setup that can easily adapt to changes and seamlessly integrate AI tools into the existing IT landscape - like Actindo Core1, a powerful and flexible commerce ERP platform. 

Starting already to think about AI in e-commerce is worthwhile: large e-commerce providers and start-ups are equally using algorithms to optimize their customer journey and internal workflows, further develop their business models and offer a positive customer experience (CX) in order to stay attractive to customers.  

Thanks to digitalization and providers such as OpenAI, AI can now be used by all companies. IDC forecasts annual growth of around 73 percent to USD 143 billion for GenAI investments by 2027.

According to Gartner, the drivers are CX improvements and stronger customer loyalty. 48% of companies see CX optimizations as one of the most important AI benefits. Customer care in particular benefits from this: virtual assistants ensure efficiency at the interface between customer service and sales, and reduce the workload of service employees.  

Benefits of AI in e-commerce 

What are the specific benefits of AI for e-commerce companies? In short, AI enables brands, retailers and manufacturers to use vast amounts of data to make better decisions, optimize processes and ultimately increase sales. 

With AI, e-commerce leaders are also securing important competitive advantages for their companies - primarily through machine learning (ML). Thanks to this technology, AI systems can independently perform real-time analyses and create highly accurate forecasts. This is where AI shines by predicting trends and demand.

By analyzing customer data and making AI-based optimizations within seconds, brands and retailers can achieve:

• Simplified and accelerated processes, for example in content production: 58% of US retailers were able to improve their performance when producing e-commerce content with GenAI.
• Better conversion rates: up to 15 percent more sales and up to 20 percent higher return on sales are possible thanks to AI analyses.
• Informed business decisions to better respond to changing market conditions.
• A personalized customer experience: retailers use AI to recommend products and predict what customers want.
• Automated workflows in warehouse management with intelligent robots - AI will bring a new wave of automation to inventory and order management.
• More protection against fraud, which has affected around 90% of online retailers at some point. AI recognizes fraudulent patterns and reduces the risk of financial losses.
• Better ROI in marketing, as reported by 72% of US companies that use AI.
• Excellent post-purchase experiences with even faster deliveries, accurate tracking, easy returns and top customer services.
  

By automating daily business processes and tasks, e-commerce companies can also free up their employees for higher value activities such as strategic planning and business development. This in turn leads to increased productivity, reduced costs and more efficient processes overall.

AI in e-commerce: 5 example use cases 

The following examples of AI in e-commerce show how online retailers can benefit from machine learning and GenAI:

1. ​​​​Improve customer communication with chatbots (Zalando)

Chatbots can answer customer questions around the clock, simplify product searches, collect feedback and relieve customer service. Fashion retailer Zalando also uses chatbots as fashion assistants that offer fashion advice and simplify purchasing decisions.

However, just 18 percent of the largest German online stores currently use chatbots. This figure should increase in the future, as the market could reach a volume of USD 1.25 billion by 2025 due to the progress of AI.

Research firm Gartner estimates that chatbots will become the most important customer service channel in one in four organizations by 2027.

• What AI does: Chatbots contribute to transparent post-purchase communication or increase e-commerce sales with recommendations.
• Implementation notes: In order for virtual assistants to have detailed order information and intelligent product recommendations at their fingertips, they need access to product and customer data. Ideally, this data is consolidated in the backend and is available in real time - as in the DataHub in Actindo Core1.
• How Actindo can support: The Core1 platform orchestrates all e-commerce processes and connects order data and product recommendations with AI chatbots. This turns the customer care cost center into a revenue stream. The platform also includes a chatbot for service teams so that customers receive correct and up-to-date data even when in personal contact.

A recent study by Actindo and YouGov provides exclusive insights into what chatbots will have to achieve in the future:

How important to you are the following capabilities of AI chatbots for customer service inquiries about an online purchase?

2. Reduce the returns rate with AI (Otto) 

Operating various e-commerce channels while optimally planning stock levels and managing returns is a challenging task, especially during peak periods such as Black Friday.

Which is why German retailer Otto deployed its own deep learning algorithm to reduce the returns rate, by analysing customer feedback and anticipating which items are most likely to be returned.

• What AI can do: With AI support in omnichannel, online retailers can plan their stocks better. Algorithms predict which items will perform particularly well, analyze returns and suggest improvements. They also help to optimize the supply chain.
• Implementation notes: In order for AI tools to optimize procurement, warehousing and returns management - for example with Byrd - central store management is required.
• How Actindo can support: The omnichannel module makes it possible to centrally control and optimize online stores from providers such as Shopify and all relevant marketplaces. Retailers can use AI to find out which products are currently active in a particular channel.

3. Generate smarter AI-driven search options (Flaconi)

The faster customers can find what they're looking for, the faster e-commerce sales increase. Beauty products retailer Flaconi, for example, has increased its average order value by ten percent by introducing intelligent search technology.

Powerful search & discovery functions are essential for webshops. However, onsite search in e-commerce must be able to compete with the likes of Amazon and Spotify and reflect changing search habits - because AI assistants such as Alexa and ChatGPT are making search terms more complex and dialog-oriented. 

• What AI can do: Algorithms support intuitive searches across all digital touchpoints and provide suitable results for customer input. AI also makes it possible to use voice input or images for product searches in addition to words.
• Implementation notes: Instead of laboriously programming a flexible search function for their own store, e-commerce teams can use the advanced AI search infrastructure of providers such as Algolia, which Flaconi also relies on and which is one of Actindo's numerous technology partners.
• How Actindo can support: AI search functions can be integrated directly into the store via the platform so that customers can reach the destination of their product search more quickly.

4. Personalized product recommendations (Klarna)

Off-the-shelf marketing and standardized content are out. Young people in particular want personalization in e-commerce: 57% of 18 to 42-year-olds expect personalized shopping experiences in the future.

Swedish payments platform Klarna is developing AI technologies for personalized shopping in order to align products and shoppers' interests. 

• What AI can do: Artificial intelligence enables personalization in real time. It provides insights for marketing campaigns and suggestions for individual customer approaches, for example via personalized newsletters.
• Implementation notes: For customer-centric marketing strategies and product offers, e-commerce decision-makers need insights into customer behavior, their preferences and current market trends.
• How Actindo can support: The BI module of the Actindo platform enables precise data analysis across all e-commerce processes and channels. Combined with partner technologies such as the analysis tool from Econda, the basis for individual customer experiences is created.

5. Accelerate the e-commerce content of sellers (Amazon)

In addition to smooth back-end processes, visual experiences contribute to sales growth in e-commerce. Until now, however, content production in retail has been associated with high effort and costs. Amazon therefore offers its Marketplace sellers a generative AI tool for product descriptions as support. 

• What AI can do: GenAI quickly and easily creates product images, article descriptions, video ads or 3D visualizations for online stores or social media channels. AI can also be used in e-commerce for translations or product texts for articles with many variants.
• Implementation notes: Content needs a tidy home, such as the AI-based creativity platform from Actindo partner Cloudinary. The platform generates product images and videos and organizes them centrally. Online retailers also need up-to-date product information, which is best organized in a Product Information Management (PIM) solution.
• How Actindo can support: The Actindo PIM bundles product data from all channels centrally and can be seamlessly connected to AI solutions such as Cloudinary.​​

Our Digital Synergy Sessions offer more insights on how Actindo collaborates with its partner network to the benefit of our clients.

Why brands and online retailers should start with AI now

The analyst firm Gartner has named generative artificial intelligence as one of the most important strategic technology trends for 2024. By investing in AI now, e-commerce companies can position themselves as industry leaders and gain a competitive advantage in their markets.  
 
Furthermore, the earlier e-commerce companies start implementing AI, the more data they can collect and analyze over time, giving them an even greater advantage in the long run. 

In addition, AI can help growth-oriented online retailers to navigate through an increasingly complex market environment. With so many channels to choose from, it becomes easier to decide where to best allocate resources and which platforms to prioritize by analyzing data and providing clear strategy recommendations.

What tech setup is required to start with AI in e-commerce?  

Do you want to get started with AI as quickly and easily as possible? Then it's important to overcome technological hurdles first.  

The biggest blockers to innovation are outdated e-commerce systems. They are neither open nor flexible enough to connect and scale AI applications. In addition, access to data from various e-commerce channels is often limited and prevents AI tools from being able to exploit their analytical strengths.

As AI systems develop rapidly, the most important prerequisite for AI transformation in e-commerce is therefore a flexible, scalable and open IT infrastructure. This enables retailers to:

• Integrate, test and customize AI tools
• Consolidate and securely process data from different sources
  

The MACH architecture promotes the integration of AI in e-commerce by providing flexible APIs that enable rapid customization and automation. This allows companies to effectively use AI solutions to collect and optimize data.

Actindo's composable commerce ERP system, which is based on the MACH architecture, offers all of this. Microservices, APIs, cloud technology and a headless approach allow retailers to quickly adapt business processes so that they can react flexibly to trends such as AI without burdening their development resources.

Overcome implementation challenges with Actindo 

Entering the AI era presents e-commerce companies with a few hurdles that they can easily overcome with Actindo at the heart of their tech setup:

• Lack of data standardization: Data is the basis for training AI models, and the fuel for AI-supported success in e-commerce. For 32 percent of companies, data management is the biggest technological obstacle to AI implementation. With an e-commerce platform that consolidates data from all channels, retailers can overcome this hurdle with ease.
• Rigid or fragmented infrastructure: Retailers often use rigid and outdated software that cannot keep up with the speed of AI development, or IT systems that resemble a patchwork quilt and are only held together by plugins. Future-oriented retailers create an AI-open IT landscape with Actindo Core1.
• High development costs: New AI tools can often only be integrated into existing IT systems at great expense in terms of time and money. This is because suitable modules or interfaces usually have to be developed first, which ties up IT resources and blocks the development of prototypes and MVPs. Smart retailers rely on MACH principles and composable commerce instead.​​​

Exploiting opportunities for AI in e-commerce with Actindo

The IT landscape in e-commerce is characterized by monolithic systems. However, AI requires agile and scalable platforms, for which Gartner has coined the term "composable commerce". These systems can orchestrate processes and best-of-breed applications in a centralized environment.

Actindo Core1 has been part of the MACH Alliance since 2021 and was one of the first commerce ERP systems to be MACH-certified.

A playground for your AI ideas  

Normally, the implementation of AI applications in classic store systems is expensive and cumbersome. With the MACH architecture, however, the integration and adaptation of AI measures is completed quickly.

This saves IT managers time and money and conserves valuable IT resources. There's also good news for data protection officers: the Actindo Core1 platform is developed and hosted in Germany, and meets the highest security standards. 

Actindo offers numerous out-of-the-box features. Nevertheless, the platform is flexible enough to adapt to the needs of e-commerce companies and their channels. AI chatbots or translation tools can be implemented via low or no code, for example. This means that you can try out new AI trends more quickly and change processes again.

Actindo provides AI models with sufficient learning material so that they can be deployed quickly: a central data hub provides product and customer data centrally. AI tools can use this data to derive recommendations for effective marketing campaigns or strategic decisions. ETL functions (extract, transform, load) ensure that the AI uses standardized data from different sources. 

Moreover, AI solutions pay for themselves quickly if they are scalable: Companies that have scaled with AI achieve a threefold return on their AI investments.

Conclusion: The future of AI in e-commerce

Three out of four executives believe that companies need to invest in AI if they don't want to be left behind in the next five years. If you start now, you can position yourself for the future and help shape the change in e-commerce.

With Actindo's AI expertise from numerous e-commerce projects, you can prepare your processes for the next stages of the AI evolution. Until then, you can master current challenges such as personalization with AI support. Actindo provides the technological basis that strengthens your competitive position and can even improve it.