Generative AI’s impact on the ecommerce industry

Dec 4th 2023ai

When was your last online shopping trip, and how did it go?

For consumers, it’s becoming arguably tougher to resist addiction to ecommerce shopping in the game-changer era of AI. Why leave home for the physical-shopping world if you can do considerably more online — plus be helpfully guided in a variety of ways — by just sitting down with your smartphone or at your desk?

Generative AI started slowly reshaping the ecommerce landscape a while ago. Forward-acting ecommerce companies like Amazon have been integrating it to enhance and fine-tune their shopper experiences, both on websites and in apps, with the benefit of wildly driving up their conversions and sales as a result. Other ecommerce brands are just getting their feet wet with exploring AI-related features, but the momentum is only building.

Regardless of where your site is in the AI-enhancement process, you’re probably always looking for more pertinent information that could impact the ways you run your business. With that in mind, here’s a rundown on some of generative AI’s compelling benefits and features.

More-rewarding experiences for shoppers

These are just some of the ecommerce-platform elements that could result in the draining of your virtual wallet, not to mention your real one:

• Virtual assistants enlisted as chatbots that are personable, good listeners, and attuned to your needs
• Clothing stores with the advantage of virtual dressing rooms
• A furniture-shopping feature that shows you how items will look in your home
• The ability to virtually customize items before buying 
• Virtual-reality features that vividly show — not just tell — what it’s like to use a product
• Irresistibly on-point product recommendations
• Friendly post-cart-abandonment instant messaging that leverages real-time data

Higher revenue for retailers

While proving to be pure joy for consumers, AI advancements being applied to the ecommerce user experience are, of course, a boon for digital businesses. Profit-enhancing advantages gleaned from this cutting-edge technology include fine-tuned management of the supply chain, effortlessly written product-description copy, marketing images that your human designers may not be able to rival, and hard-working bots taking the load off of human customer-service agents.

Yes, it’s safe to say that utilization of generative artificial intelligence is nothing short of radically renovating the ecommerce industry. The enhanced engagement brought on by personalized marketing has the potential to generate staggering bottom-line changes. With the market forecast to hit $191.8 billion by 2032, look out. 

Shaking things up

Ready for generative AI tools to elevate your ecommerce operations? If they haven’t already arrived on your virtual doorstep, ecommerce features that go beyond the likes of ChatGPT are heading your way for consideration and prospective implementation.

Whether your business is a recent startup or you’ve been around since way before COVID, you’ll want to wrap your brain around the potential of generative AI to affect the ways your enterprise site operates, from the highest-level workings to the nitty-gritty, as well as be aware of some significant risks.

Here’s our quick take on the state of this dynamic situation.

What’s generative AI?

If someone asked you to define AI and its various subgroups, could you? With terms like large language models, natural language processing (NLP), and conversational AI thrown around recently, it can be a challenge to figure out the differences between modern AI technologies and how they complement or compete with each other.

As you can probably guess by the sound of it, generative AI is the branch of artificial intelligence focused on creating new content in the form of humanlike text, images, video, answers to questions, voice, even lines of code.

Generative AI models are trained by feeding them voluminous amounts of data; they can then make sense of and mimic patterns, styles, and nuances in the training examples and produce unique output that exhibits creativity and problem solving seemingly on par with human intelligence.

Examples of generative AI models include:

• GPT (Generative Pre-trained Transformer), OpenAI’s language model that generates coherent and contextually relevant text based on a given prompt. It’s demonstrated impressive capabilities in tasks such as text completion, translation, and creative writing. If you want to enliven rote responses to your online shoppers or jazz up your social media posts, it can assist. 
• DALL-E: If you’ve ever wanted to see “a modern landscape in the style of Van Gogh”, here’s where to request it. Also developed by OpenAI, this generative model creates original images from textual descriptions and can even visualize non-existent objects and scenes. 
• Midjourney: Want to sharpen the look of your logo and product images? This platform can turn rough outlines into visually stunning and detailed illustrations, bridging the gap between imagination and reality.

Generative AI and ecommerce 

This transformative technology has made inroads deep into the world of digital consumerism. Here’s how it’s improving life for shoppers on ecommerce sites:

A better customer experience 

Recent research found that almost half — 48% — of businesses using generative AI in ecommerce have enhanced their shopper experiences. By analyzing shopper data and customer preferences, the algorithms allow retailers to provide tailored product recommendations (e.g., as Instacart does) and take other steps that proactively align with prospects’ needs.

Virtual try-on is another way generative AI is improving the ecommerce experience. Is this leather jacket going to flatter your figure and look good with your skin tone? Will this farmhouse table look odd next to the rest of the classic-looking decor? By utilizing computer vision and deep-learning algorithms, generative AI can aid decision making.

Another enhancement is the use of generative AI to smarten up chatbots, whose workings can then easily translate into better-quality customer support.

All this customer-data-driven activity affords personalized shopping that’s conducive to customer satisfaction and loyalty. Plus, standard ecommerce sites aren’t the only beneficiaries. Generative AI is also being used with subscription-model use cases, leveraging visitor datasets to curate content. For example, Spotify is using generative AI to jazz up the customer experience with personalized DJ functionality.

Higher efficiency 

Using AI can make ecommerce content production and image generation much easier. In one survey, 58% of marketers who use generative AI for content creation said they saw improved performance as a result. While standard workflows traditionally require significant manual intervention, going the generative route can save considerable time, freeing teams to focus on strategic initiatives and allocate work in more-productive ways. 

For instance, when given specifications, generative AI can write product descriptions for new items, reducing marketing teams’ need to turn out intensive copywriting drafts. Marketing people can then streamline and edit the content, meaning they have more time to put into optimizing long-term organic and paid campaigns, fine-tuning product launches, and brainstorming ways to better connect with their shopper bases.

More accurate inventory management 

Accurate demand forecasting is crucial for ecommerce businesses that want to optimize their inventory levels and avoid going out of stock. Generative AI models trained on historical sales data can forecast demand patterns with greater accuracy than traditional methods can, and by using machine-learning algorithms, these models can capture subtle trends and seasonality.  The frequent result: reduced costs associated with inventory management and assurance that products are available, which enhances customer satisfaction and minimizes lost sales.  

Innovation and differentiation 

In an oversaturated market, generative AI can empower businesses to excel by offering innovative and fun online shopping experiences. For example, fashion brands can employ generative AI to assist with customizable clothing options, allowing shoppers to design their own garments, for instance by selecting a shirt with a pattern of polka dots instead of stripes. 

Improved conversion rates  

Arguably the most significant benefit of generative AI in ecommerce is the proven ability to drive higher conversion. McKinsey found that businesses that invest in AI are experiencing 3–15% revenue increases and improvement in sales ROI of 10–20%.

How does this work? By analyzing people’s browsing and purchase history, generative AI can identify patterns, preferences, and similarities among a retailer’s customers. This puts a company in the position of being able to better inform their marketing campaigns and present shoppers with relevant product suggestions. Personalized product recommendations generated by AI algorithms have proven to be highly effective in influencing purchasing decisions. Plus, when shoppers like how a site caters to their needs and desires, they’re eager to go back.

Reality checks

Those are some pretty heady benefits, would you agree?

However, a discussion of the ways generative AI technology can augment ecommerce wouldn’t be complete without also noting a few realities.

As a retailer, the last thing you’d want to do is alienate your shoppers, but that’s a risk with the current iterations of this technology. Generative AI systems aren’t always truthful. They may hallucinate (make stuff up; disclaimers state this risk) now and then, so without sustained, in-depth human fact checking, the utterings of gen AI interfaces aren’t exactly reliable.

This can be a nightmare for professionals.

And it’s a showstopper in ecommerce, of course. The last thing a retailer wants is an irate buyer who trusted a site’s seemingly authoritative marketing claims, bought an item, was disappointed, and felt betrayed and angry and inclined to rant on social media. That scenario is not easily remedied with effusive apologies or coupons. The site’s reputation could be irreparably damaged, with unfortunate financial ripple effects.

Then there’s the issue of generative AI possibly operating a little more slowly than standard search functions, prospectively increasing users’ search times, which, in the instantaneous-results world of ecommerce, is potentially very damaging to the bottom line.

Where do these thorny possibilities leave thoughtfully strategizing etailers? Likely choosing a conservative, non-risky approach.

Start with trustworthy search

One way to sidestep these issues is ensuring that whatever AI-augmented search technology you’re using won’t go rogue.

Along those lines, may we present Algolia’s proven NeuralSearch. As the world’s only end-to-end AI search and discovery platform, we’re enabling more than 17,000 businesses of all types and sizes to create personalized user experiences, streamline and automate their operations, and positively impact their ROI.

How positively? You never know until you give it a go, but consider this: Forrester Research calculated 382% as the average ROI our platform can deliver. And even an increase that’s significantly less than that would be gratifying, wouldn’t it?

Let’s generate some excitement

If better ROI is on your to-do list, check out our demo on how search optimization can renovate your ecommerce shopper experience. Or just get in touch; we can’t wait to get you started leveraging AI to grow your online store.