As if ripped from the pages of science fiction novels, Artificial Intelligence (AI) has evolved as rapidly as its integration into the world of business. It seems that every day, AI tools and functions take another groundbreaking leap in their capabilities, and we are seeing the same in the retail sector, more specifically, across the e-commerce landscape.

With online retail having become one of the primary ways for consumers to trade and purchase products and services, the introduction of AI’s far-reaching capabilities feels like an apt and snug fit for online marketplaces.

Many of us may remember the early days of online shopping, with poorly optimised sites, nightmarish user interfaces, and poor logistical optimisation leading to delays and uncertainties about when your purchase would arrive. The modern online marketplace is almost alien in how much it has advanced with new and improved features that bolster trust, user experience, and efficiency. And AI is now providing exciting opportunities for online retailers to take that next leap in the evolution of e-commerce.

In this article, RSM’s consumer products specialists explore these opportunities through the multifaceted role of AI in e-commerce, examining its influence on customer engagement, personalisation, logistics, and supply chain management.

AI’s integration into e-commerce platforms

AI has blended seamlessly with e-commerce platforms, enhancing customer experience and operational efficiencies. “AI algorithms analyse vast amounts of customer data to offer personalised product recommendations, tailored advertisements, and targeted marketing campaigns,” says Jacqui Baker, Head of Retail at RSM UK.

“AI can make smart recommendations of products, including size recommendations, colours, and availability, making the shopping experience more convenient,” adds Nick Stuart, Consumer Products Senior Analyst & Director at RSM US. “Customer service is also rapidly turning to AI to quickly address customer requests, including shopping advice, returns, refunds, and order tracking. The advancements of generative AI models have made this experience considerably more effective than the rule-based chatbots, which many consumers found unsatisfactory.”

On the internal side, AI’s integration has led to more administrative benefits. “Inventory management has become a lot easier by creating accurate predictions of product demand, while dynamic pricing optimisation keeps platforms competitive. Marketing operations become more effective thanks to advanced segmentation and personalisation, increasing return on investment,” adds Nahuel Beccaria, Partner at RSM Argentina.

“Additionally,” as Edgardo Rondó, Partner at RSM Argentina, points out, “AI plays a crucial role in fraud detection, protecting businesses and consumers. Together, AI not only improves operational efficiency and reduces costs, but also creates a more personalised and secure shopping experience, driving e-commerce sales growth.”

“Ultimately,” Baker summarises, “the integration of AI into e-commerce platforms creates a more seamless and intuitive shopping experience for customers while empowering businesses to make data-driven decisions and remain competitive in a fast-moving market.”

The impact of AI-powered personalisationnd preference

As previously mentioned, personalisation is a large part of what AI brings to the e-commerce experience, especially for the consumer.

“The capabilities of AI in client service go far beyond proactive problem identification. They get into sophisticated areas such as sentiment analysis, query classification, and automated responses,” says Beccaria. He continues, “For example, AI algorithms can analyse the tone and context of client queries to understand their sentiment, whether frustration, confusion, or satisfaction. AI-powered personalisation significantly improves the interaction between businesses and clients, optimising the relevance of content and offers, as well as providing highly personalised user experiences.”

“This,” Stuart adds, “combined with the ability to only show products that are available and provide estimated delivery times, makes the shopping experience very convenient. We have seen from Amazon that buyer behaviour is heavily influenced by convenience. This technology will win buyer demand due to its convenience.”

But, of course, there is a strong consumer preference for human interaction during the shopping experience. As Robyn Duffy, Senior Analyst – Consumer Markets at RSM UK, points out, “When employed hand in hand with the human touch, AI-powered personalisation can foster a deeper connection between customers and retailers by anticipating their needs and preferences, enhancing brand perception and trust. Customers feel understood and valued, leading to positive sentiment towards the brand and increased engagement across various touchpoints.”

However, despite the added convenience, customer sentiment can also be swayed negatively by the data collection required for these personalised experiences. When implementing AI-powered personalisation tools, as Rondó says, “It is crucial to approach data management ethically to maximise benefits and minimise privacy concerns, ensuring an implementation that values and respects client preferences.”

The role of AI in logistics and supply chain management

Beyond AI’s capabilities to enhance customer engagement and satisfaction through personalisation, the technology is also revolutionising operational efficiency. “In an era where same-day delivery is a common practice rather than a luxury service, AI-powered smart logistics have become a crucial component of the e-commerce chain of operations,” says Beccaria.

Stuart adds, “New platforms are leveraging AI to evaluate potential supply chain disruptions, optimise distribution networks, and improve the efficiency of supply chain teams in addressing these challenges. Due to disparate systems, large volumes of data, and the complexity of supply chains, technology has not lived up to the expectations of many supply chain teams. The time required to evaluate all the data made optimisation very inefficient. Generative AI models, applied across various data platforms, can empower teams to ask questions and receive real-time insights into supply chains. This will allow teams to rapidly push mitigation plans into action.”

In terms of inventory management, “AI-powered algorithms analyse vast amounts of data internal and external data sets, including sales trends, weather patterns, social media trends and transportation routes, to forecast demand accurately. This enables businesses to optimise inventory levels, minimise stockouts, and reduce excess inventory, resulting in cost savings and improved profitability,” says Baker.

“Furthermore,” Duffy adds, “AI enhances route optimisation and delivery scheduling, leading to faster and more reliable shipping options. Real-time tracking and monitoring of shipments enable proactive problem-solving, reducing delivery delays and improving overall customer satisfaction.”

The AI revolution

AI has undeniably revolutionised the e-commerce landscape, helping to transform it from what was a nascent industry into a highly sophisticated and customer-centric ecosystem. By seamlessly integrating into e-commerce platforms, AI has empowered businesses to understand and cater to consumer preferences with unprecedented accuracy. Personalised recommendations, efficient logistics, and data-driven decision-making have become the cornerstones of successful online retail operations.

However, the journey is far from over. As AI technology continues to evolve, we can anticipate even more groundbreaking applications in e-commerce. The potential for augmented reality shopping experiences, bettered predictive analytics for anticipating consumer trends, and AI-driven supply chain optimisation is immense. While challenges such as data privacy and ethical considerations must be addressed, the future of e-commerce is undoubtedly bright, driven by the innovative power of artificial intelligence.

In our next article on AI and e-commerce, we will examine the current trends in the sector and consider what the future may hold.

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