Artificial intelligence (AI) technologies have become so efficient and reliable in processing huge amounts of data that digital industries will not make without them in the future. Often defined as the new electricity, AI empowers online retailers throughout the entire value chain, with applications ranging from inventory management to customer services, from dynamic pricing to fraud detection. Enhanced by AI, extended reality (XR) has reached unseen levels of quality, too. E-commerce companies can now provide a product experience that might be just as good – if not better – than the in-store one.
A different shopping experience for every customer
Customers expect a personalized shopping experience tailored to their needs and interests. To achieve that, online retailers categorize shoppers into groups, customer persona, and cohorts. While this strategy worked in the past, it could now be outdated. Online retail is moving towards a much more sophisticated segmentation, i.e.
personalization, as AI tools profile online customers better than ever before. AI-powered product recommendations displayed on e-commerce sites and predictions of customer preferences can be based on more variables: ratings and reviews, purchase history, customer location and demographic data, seasonal trends, previous search queries and browsing history, user interaction, traffic data, and so on. AI can optimize product recommendations to such a level that some
shoppers could hardly identify the AI role behind them.
AI is a machine intelligence trained to communicate like a human – a particularly useful feature in customer care. While
chatbots handle standardized and easily categorized customer requests, AI-driven shopping assistants simulate a customer human agent and can communicate and establish a relationship with the customer. More than that, AI is replacing professional roles in the online retail business, as well as the human customer. Just as voice assistants like Siri and Alexa can place online orders, AI technologies behind autonomous cars or smart devices could finalize a purchase of products and services.
Machine customers are expected to gain momentum between 2025 and 2030, according to most worldwide CEOs.
The potential of extended reality (XR)
The umbrella term extended reality (XR) includes augmented reality (AR), virtual reality (VR), and mixed reality (MR). All forms of immersive three-dimensional digital spaces disrupted the online shopping experience, especially in those e-commerce segments where customers prefer to visualize and test products before buying. In 2022, over one-third of
consumers aged 18 to 35 years used augmented or virtual reality to get a virtual overview of how furniture might look in their homes. AI contributed to making virtual try-ons more accurate on e-commerce sites, unveiling new opportunities for fashion and makeup brands.
In Southeast Asia, trying clothing on different body types or visualizing makeup products on different skin tones induced 16 percent of consumers to purchase.
Consumers are still skeptical
The potential of frontier technologies comes with some risks, as their use requires regular validation. While the output of most generative AI systems is not free from cultural bias and material mistakes, the processing of personal data in AI applications has only recently been regulated. In this context, consumers perceive AI-powered personalization tools as invasive, with up to 40 percent of
online shoppers not being comfortable with them. Although consumers are intrigued by an enhanced shopping experience, they seem unwilling to use AI when paying online. The low levels of trust and awareness explain the reluctance in using AI-driven digital payments, as nearly one in four consumers would like to
feel reassured that their data is not being misused.
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