artificial intelligence in e-commerce

E-commerce & Its Evolution

If you ask people how they prefer to shop or what store they buy their products from, you will probably hear about some e-commerce store rather than the usual brick and mortar one. So why did they choose the e-commerce store over the usual brick and mortar store that might be closer to them? The simple answer would be because it’s more convenient. All they have to do is open their internet-enabled gadget, choose the products and checkout the cart and the very next day, they’ll find the delivery guy ringing their doorbell.

E-commerce is the purchase of goods and services electronically from a digital store hosted on the internet which can be accessed with the use of internet-enabled computers or smartphones. The key technologies involved are mobile commerce, electronic fund transfer, internet marketing, etc.

A brief history of e-commerce

People would’ve hardly imagined that there would be such a thing as e-commerce before 1994. The year brought the revolutionary idea of shopping through the internet which would be called e-commerce. The major breakthrough in e-commerce was in 1994 when Netscape released the Navigator browser under the code name “Mozilla”. It came with SSL encryption that made online transactions secure which was one of the major hurdles in bringing this technology to the masses.

Ipswitch Inc. and OpenMarket partnered to release the Ipswitch IMail Server that became the first software available online for sale and download. This was followed by the removal of strict prohibition of ‘commercial stores’ on the internet in the year 1995. The restriction was put forward by the US National Science Foundation. The first-ever secured online shopping transaction was in the form of a book that was purchased by Paul Stanfield, the product manager for CompuServe UK. In the same year, today’s e-commerce giants like Amazon and eBay were established. eBay was founded by Pierre Omidyar as AuctionWeb during that time, it was one of its kind as it supported person to person transaction. 

The growth of the e-commerce industry

E-commerce found its way to Asia in 1999 and was not just limited to Europe and America. The year 1999 saw the foundation of Alibaba Group which launched its e-commerce business in the form of Other companies like the ATG store launched its online store business to sell home décor items online. The popularity of e-commerce ventures grew among 21st-century entrepreneurs and many countries started seeing growth in the e-commerce segment with domestic counterparts.

If we talk about numbers, below is the chart presenting the growth of the e-commerce industry over the years.

artificial intelligence in e-commerce
Source: Statista 2018

AI & the Big Data in the E-commerce Landscape

The need of the hour for e-commerce giants was to know their customers better and offer those products and services that they need instead of just pushing them to shop for what they were offering. And how did they do it? Through data science technology.

Today data has been the fuel for the growth in almost all tech-related industries and the e-commerce industry is no exception. With the availability of large volumes of categorised data that is readily available to e-commerce sellers, they can easily target their prospective customers with more focused advertising and marketing techniques. 

Artificial intelligence works in close conjunction with big data to provide concrete solutions to the problems faced by e-commerce sellers. Some of the cases where AI technology eases the pain for online sellers comes in the form of dynamic product pricing, reducing cart abandonment, etc.

New Product Testing

Big data also helps them to test a new product. They can evaluate whether the product they are about to launch would be accepted by individuals. One can easily assess if a product’s demand is increasing or plummeting, to make a decision to sell that product in a particular region or not. In addition to this, it also influences customer behaviour pattern by creating a supplier induced demand and generating urgency. In aggregate, it provides a holistic insight into the buying habits of your prospective customers.

Dynamic Pricing

The dynamic pricing method uses real-time information about the demand and supply of the product to set the price point. The AI also helps to evaluate which is the optimum price point for selling the product by assessing the information gathered from the dynamic pricing method.

Reducing Cart Abandonment

Another important application of AI in the field of e-commerce is in the form of reducing cart abandonment. Cart abandonment is painful for the seller, to say the least. It is almost like losing a customer who was on the way to becoming one. There are AI-powered tools that help to study the customer’s behaviours and how likely they are to purchase the products. Serious customers are offered more context about the product that will help them choose better.

Web Design

In addition to this, the AI also helps to optimise the website design which in turn induces a prospective customer to visit the online store and make a purchase, increasing the customer conversion rates. Buying recommendations and better customer engagements are also some of the key AI assistance methods that help to increase the conversion rates for e-commerce stores.

E-commerce Companies Using AI

The benefits of using artificial intelligence technology are such that everyone would want to hop on to this cart. Listed below are two e-commerce giants who use AI for increasing their profitability and adding more loyal customers to the base.

Alibaba Group

This Asian e-commerce giant changed the game of purchasing through the internet. It uses AI to solve one of the major problems of any e-commerce seller, the delivery timeline of the products. One of the biggest deterrents for customers to buy from any online website is the delivery time. Alibaba uses AI to map the most efficient delivery path that will help in reaching the customers in the shortest period. This has helped Alibaba by reducing the travel distance by 30%.


Amazon, the e-commerce giant, today sells almost every product out there in the market which people search online, although it started with the niche segment of selling just books. With the advent of AI, Amazon has reorganised itself. It uses the AI management strategy Flywheel which is designed to smartly conserve energy and channel it into effective use. Alexa by Amazon is one of the most remarkable AI products that help in driving the algorithms which are essential to companies that focus on marketing strategy. AI helps Amazon to provide customised recommendations for its customers. Amazon’s recommendation engine helps in driving around 35% of the total sales.

The e-commerce industry has evolved drastically in the 21st century under the influence of AI technology and Big Data. These technologies have helped curtail the significant challenges faced by the e-commerce players in the market. It helps to increase conversion by optimising the price points and figuring out the best route for cutting the delivery time and improving customer satisfaction levels.
If you are interested in learning the practical applications of AI in e-commerce, sign up for Great Learning’s PG program in Artificial Intelligence and Machine Learning.



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