eCommerce: AI Trends

AI Trends in eCommerce 2024: Key Insights

• Growing Importance of AI: AI, especially ChatGPT and personalized image creation, will transform eCommerce. The AI market is expected to grow from $96 billion in 2021 to $1.85 trillion, driven by AI's role in enhancing user experience and marketing.

• Global AI Economic Impact: AI's global economic contribution could reach $15.7 trillion by 2030, owing to productivity and consumption benefits. This impact is significant, exceeding the combined output of China and India.

• AI Trends in eCommerce: For 2024, AI-driven eCommerce trends include marketing personalization, last-touch attribution importance, retail media network advertising, and a focus on governance and data privacy. Examples like eBay and Alibaba.com illustrate AI's role in improving customer experiences and operational efficiencies.

Artificial Intelligence (AI) is not only on the rise in the form of chat AIs like ChatGPT, but also in the world of eCommerce, the role of AI is becoming more important. Online stores are using chat AIs for their customer service or using their customers' data to create personalized product images created by AI. Analysts are predicting a boom: The overall AI market is expected to reach US$1.85 trillion in 2030, with a CAGR of 39% per year.

Recent trends and predictions show that there is plenty of room for AI not only in eCommerce. PricewaterhouseCoopers (PwC) predicts that AI could contribute up to US$15.7 trillion to GDP by 2030. To put this in perspective, this is more than the current output of China and India combined.

China Will Be AI's Biggest Profiteer

US$6.6 trillion is expected to come from productivity gains and US$9.1 trillion from consumption spin-offs. The huge improvement will be resulted by productivity gains, such as companies automating processes and companies augmenting their existing workforce with AI technologies. The increase in consumer demand leads to the availability of personalized and higher quality AI-enhanced products and services.

In North America, the integration of AI holds great promise for boosting GDP, driven by the rapid adoption of advanced technologies and high consumer readiness. The region is poised for a rapid upswing, fueled by the accumulation of assets, including technology, data touchpoints, and valuable customer insights. Although the impact will remain robust through the mid-2020s, the rate of growth may slow slightly as China, which is catching up in productivity, stimulates the export of AI-enabled products to North America.

Conversely, China's GDP, which is heavily dependent on manufacturing, presents a significant opportunity for productivity gains through the implementation of more advanced technologies. While the initial GDP boost may be slower compared to the U.S., China's consistent reinvestment of profits into AI capabilities and advancements positions it for accelerated gains in about a decade. The country's focus on consumer-driven economic shifts and advancements in high-tech manufacturing and commerce is evident in the surge of AI patent filings. To fully realize the potential of AI, fostering talent development, particularly in the area of analytics, will play a critical role in advancing China's economy.

But how will AI in eCommerce evolve over the next few years?

AI-Driven eCommerce Trends in 2024

Marketing and user experience (UX) will be transformed by personalization through AI. Generate personalized ads and content for each user, set individual prices based on user data, and further develop AI chatbots. The potential is expected to increase customer engagement for eCommerce players and revenue by up to 15%. In addition, research by McKinsey has shown the potential to reduce costs by up to 30% while increasing customer acquisition by up to 5%.

As search engines become more adept at understanding user intent and delivering more precise results, the relative importance of SEO compared to other advertising channels may decline. This shift could change the dynamics of how customers discover and engage with products, impacting the overall effectiveness of eCommerce sales strategies.

Another important innovation for the eCommerce landscape will be the predictive capabilities of AI. These technologies leverage first-party data to improve the user experience, guiding customers precisely to their desired destinations while eliminating unnecessary distractions. The increasing importance of predictive analytics, especially those based on first-party data, suggests a growth trajectory in 2024. This trend is fueled by the need to replace older methods that rely on invasive tracking practices.

The adoption of predictive analytics holds significant potential for retailers, enabling them to better anticipate and understand the behavior of their customer base. This foresight enables businesses to manage their online stores efficiently and implement personalized strategies, such as targeted promotions and recommendations, to improve the overall customer experience.

Growing Importance of Last-Touch Attribution

As data privacy enforcement increases globally, especially with regulations such as the EU's GDPR and California's CCPA, non-compliance is not an option for mid- to large-sized eCommerce companies. In 2024, expect an increased focus on governance, risk, and compliance (GRC) in response to increased litigation. eCommerce businesses must closely monitor their collection and use of customer personally identifiable information (PII), with an emphasis on informed consent and effective opt-out procedures.

This will require a reevaluation of certain marketing technologies, such as third-party cookies and the sale of third-party information. In essence, the era of unregulated eCommerce is coming to an end, forcing sellers to bring their practices in line with evolving standards before regulators step in.

Last-touch attribution will also be important for many marketing teams in eCommerce, even as tracking becomes more difficult. Although these methods require a significant investment in data and analytics, their synergy with last-touch attribution provides a highly accurate means of evaluating the effectiveness of different marketing channels. The impact of measurable elements such as browser extensions will further enable retailers to gain a clearer understanding of their customer base and improve insights into store performance.

The impending extinction of third-party cookies in late 2024 will increase the importance of retail media network advertising, exemplified by platforms such as Walmart Sponsored Search and Amazon Ads. This shift is expected to become an enduring trend, with revenue from these networks projected to surpass television by 2028, reaching an estimated US$126 billion by the end of 2023. The resilience of these ads lies in their targeted approach, leveraging first-party data derived from factors such as purchase history, device type and location.

Positioned to reach users during their shopping activities, these ads tap into a prime "buy" mindset. Given the dominance of four companies that control half of U.S. eCommerce, retailers must prioritize these channels and expect further developments in data-driven advertising options as these marketplaces mature.

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AI's Significant Role in eCommerce

One example of a successful application of AI in eCommerce is eBay. The C2C marketplace is using AI to improve the customer experience on several fronts. "Find It On eBay" streamlines the search process by allowing users to quickly locate desired items through photo uploads, while image search facilitates the discovery of previously unknown products. eBay's ShopBot on Facebook Messenger goes a step further by offering personalized shopping suggestions.

Alibaba.com will introduce a "Instant Help" feature to its AI-powered global sourcing tool, Smart Assistant. This new addition leverages an AI-powered chatbot to provide real-time insights, answer basic questions and offer valuable resources. Positioned as the next phase in the evolution of sourcing, Instant Help improves buyer-supplier communication, provides information on different verticals and product types, and empowers small businesses to make informed purchases.

The feature joins the suite of smart assistant tools launched in September, including enhanced image search and smart RFQ (request for quotation), which have already demonstrated a remarkable success rate of 28% higher than customers using traditional text search only. As Alibaba.com continues to advance its AI capabilities, these innovations aim to streamline and enhance the sourcing experience, fostering creativity, efficiency and accessibility for all buyers.

eCommerce giant Amazon has already implemented AI in many ways, such as detecting damaged images, writing better product descriptions, or improving clothing shopping, to name a few. The next steps are Prime Air drone deliveries, which are already available in Texas and California, with plans to expand the service to more cities in the U.S., the U.K. and Germany.

AI-driven robots will help Amazon's fulfillment centers speed up the process by up to 75%, resulting in faster availability on Amazon.com and a 25% reduction in delivery time. The system, called "Sequoia," seamlessly combines sophistication with simplicity. Using vehicles to transport totes of product to designated sortation machines, robotic arms with advanced computer vision quickly identify inventory and streamline the delivery process for efficient dispatch to workers.

AI Trends in eCommerce: Closing Remarks

AI's ascendancy in eCommerce is undeniable, evident in its current applications, such as chat AIs and personalized product imaging, reshaping online retail. Forecasts predict an impressive grow, with the overall AI market expected to rise from US$96 billion in 2021 to US$1.85 trillion, showcasing yearly growth of 39%.

The global economic impact of AI is set to be transformative, potentially contributing up to US$15.7 trillion to GDP by 2030. North America and China stand as pivotal players, with the former experiencing rapid growth while the latter, fueled by consistent AI investment, gears up for accelerated gains in the coming decade. Looking ahead to 2024, AI's imprint on eCommerce will deepen, steering marketing, user experience, and advertising dynamics. As real-world applications in industry leaders like eBay, Alibaba.com, and Amazon demonstrate, AI in eCommerce will show a journey providing innovation, efficiency, and customer-centricity, where AI is not just a tool but an indispensable partner in the industry's evolution on a global scale.