AI (R)Evolution in Ecommerce: Predictions and Trends for 2024

As the season for year-end summaries and forecasts for 2024 in the ecommerce industry approaches, I am more than certain that one trend will dominate both summaries and predictions, and nobody will be surprised if I write that it’s about AI, which will be discussed extensively.

Author: Marek Molicki | Account Director

Let’s start with the fact that the hottest topic in AI in recent months, namely ChatGPT, is just a part of AI. Undoubtedly the most well-known and accessible product, but it’s only a small part of what falls under the broad concept of AI. AI has been with us for a long time and is used in online stores, logistics, and digital marketing (and obviously many other fields). The biggest players, who can afford to experiment in this area, are definitely leading the way, while players from the so-called long tail are trying to keep up with the giants, adapting changes and trends using less advanced solutions. At least that has been the case so far.

Popularization of AI tools in E-commerce and retail space

I assume that with the popularization of AI tools and the ease of their operation, more online stores, especially those from the long tail, will have the chance to benefit from modern solutions. Although I’m not too optimistic that this will happen on a large scale.

From my own experience, I know that many smaller online stores have had problems with the correct implementation of Google Analytics codes, which later caused problems with data interpretation. The same was true for setting goals to be measured. Now, it seems that the almost exponential increase in new AI-based tools may cause more ecommerce businesses to start using modern tools that better help them overcome previous barriers. The big players, meanwhile, will definitely accelerate even more and increase their advantage over the rest.

I have no doubt that the integration of artificial intelligence (AI) and machine learning (ML) in e-commerce signifies a significant change in how online businesses operate and interact with customers – and this is where I see the opportunity for the most noticeable changes, which demographics will soon enforce. The transformative impact of these technologies is evident in various aspects of e-commerce, including customer service, operational efficiency, and strategic decision-making.

Let’s consider in which areas AI might affect e-commerce next year.

Personalized shopping and customer interaction. Customer segmentation and lifetime value estimation.

We are witnessing demographic changes in the labor market, with the next generation becoming conscious consumers. According to the 2024 Workplace Trends report published by Glassdoor, the upcoming year marks a key cultural shift as Generation Z workers, known as “Zoomers,” are set to outnumber Baby Boomers in terms of full-time employees. This means we will have four generations of consumers – Gen Z, Millennials, Gen X, and Baby Boomers – each differing significantly. Representatives of Gen Z often prefer TikTok over Google for information searches. This shift was confirmed by Google’s Senior Vice President, Prabhakar Raghavan, stating that nearly 40% of young people prefer TikTok or Instagram over Google Maps or the search engine for finding places to eat. These differences pose more distinctive challenges from customer acquisition, through the purchase path, to content presentation on the product page, and finalizing the purchase. These groups will also search for recommendations and reviews differently. Such a complex process without AI support would require enormous teams continuously working on many aspects of the customer journey. Modern AI tools can make life easier for smaller players as well. Moreover, AI and ML enable precise customer segmentation and accurate prediction of customer lifetime value (CLV). This facilitates targeted marketing activities and resource allocation for higher-value customers.

Operational efficiency and business processes.

This is another area where smaller companies can benefit from solutions previously available to the largest (and the largest will certainly engage advanced AI to further increase their advantage). Amazon, for example, already uses robots in warehouses. AI automates the entire order fulfillment process, from picking and packing to shipping and tracking, significantly increasing efficiency and reducing costs. For instance, AI-powered warehouse robots can operate continuously, allowing companies to scale operations without additional labor costs. This obviously also means layoffs, but that seems inevitable. Simple tasks like order picking will eventually be done by robots, not people.

Optimized inventory and price management.

Better inventory management is another area where AI can help significantly. Mainly in predicting trends well in advance. While everyone prepares for higher sales in key consumption periods (KCPs), it is not always possible to estimate the correct scale. Sometimes it is difficult to predict the impact of one event (e.g., the launch of a new product) on the entire seller. There are many such scenarios throughout the year, and AI will definitely be able to predict them. While not every store needs very advanced solutions, each could benefit from analyzing potential future sales trends based on historical data and current analyses combining data from various sources. Add to this better price optimization, taking into account factors such as demand, competitor prices, and inventory levels, thus maximizing e-commerce companies’ profits.

Fraud detection and security.

There is a lot of talk about security in the context of AI, although these conversations often take on a humorous character and boil down to speculations about when machines will rebel and AI will take control of the world. However, I believe that AI can play a significant role in early threat detection, for example, detecting (especially in marketplaces) dishonest transactions and preventing them, thus protecting both companies and customers from financial losses. On the other hand, web-based applications and solutions that can easily check potential opportunities, which may not be opportunities at all, will become more widespread. I think that the next Black Fridays and Cyber Mondays may look quite different.

It seems that the immense popularity of AI and the increasing number of easily accessible AI tools may impact ecommerce in a similar way as the pandemic did. I don’t expect gigantic increases, but we can certainly expect higher profitability due to process optimization and significant progress in content management for different customer categories. The e-commerce landscape will change again.