4 Reasons Why Online Retailers Need to Use AI Behind the Scenes

Thought Leadership

By Gautam Lohia | August 04, 2020
Hand touching a screen

Packages delivered by drones and customer experiences tailored by AI sales associates are often what come to mind when you bring up the latest, greatest, and most exciting advances in AI for eCommerce.

But it’s AI operating behind the scenes that give online retailers a truly impressive competitive edge. Predictive algorithms forecast future sales, machine learning reacts to even the smallest changes in the supply chain, and AI security guards track down fraudsters faster than any human could. These are just a few of the reasons major retailers are bringing AI into their backend operations.

We have four potential benefits for you to consider if you’re wondering whether integrating AI is worth it.

#1: Forecasting the future to increase sales

AI can give you a glimpse into the future of your customers’ behavior, not with a crystal ball but instead using well-evolved algorithms that predict purchase patterns months in advance with startling precision.

By examining historical patterns, buying trends based on seasons and holidays, demographic data, and the impact of unexpected events — like pandemics — custom AI algorithms are offering retailers incredible insights into the future purchasing behaviors of their customers.

For example, UK supermarket and grocery goods delivery chain Morrisons experienced massive success using an AI forecasting algorithm to improve ordering and stocking for their 400+ stores. This algorithm predicted future buying patterns using historical data as well as constantly updated external data sets, and also learned from its errors. As a result, Morrisons experienced a 30% reduction in its shelf gap, improved holiday time sales, and reduced staffing hours.

Computer

#2: Fighting fraud before it happens

Online sales are on the rise, and so is digital fraud. There’s a good chance you’ve been affected by this unfortunate trend, but luckily AI technology can help you strike back against future would-be fraudsters.

Two areas where AI is already flexing its fraud-busting powers are in the worlds of copyright infringement and payment systems protection.

It just takes a glance at Amazon to know that counterfeit items and copyright infringement are rampant in the eCommerce space. Now retailers can tap into AI to fight back. Companies like RedMarlin are putting AI-enabled machine learning tools to work chasing down knock-off products across endless digital marketplaces. Once a potent copycat is identified, the AI reports back with details including similar features, owners, and SEO tags.

On the payment front, AI blocks fraudsters from making bad transactions in two key ways. The ability to crunch data at lightning-fast speeds gives AI an edge as it tracks and analyzes literally thousands of attempted digital payments at once in order to flag those likely to be fraudulent in the blink of an eye. AI-enabled machine learning tools take this one step further, identifying subtle and hidden events in user behavior that are more likely to lead to attempts at fraudulent transactions further down the line.

#3: Faster delivery through optimized route planning

AI takes the guesswork out of one of the biggest hurdles of eCommerce fulfillment — the timely, cost-effective, and reliable shipping of purchased items.

Several technologies are at work here. Internet of Things (IoT) collides with AI to track items during each step of their journey, and automatically keeps internal systems in the loop. Machine learning comes into play to give customers an accurate estimate of when their product will arrive by analyzing current inventory levels, historical and current GPS data, and other factors. And online retailers draw these insights into proprietary algorithms to streamline their distribution and delivery systems.

International marketplace Alibaba and UK’s Tesco are already using AI-optimized route planning in their shipping operations. And India’s Flipkart has taken AI technology one step further, using route optimization to untangle their country’s unstructured postal system and set up a customized delivery classification system. As a result, address inconsistencies are a thing of the past, with the algorithm finding the location correctly an impressive 98% of the time.

Person Riding Bike

#4: Smarter pick and pack procedures in the warehouse

AI accelerates pick and pack procedures. This allows orders to get to customers’ doorsteps much more quickly, and for warehouse staff to be much more productive.

Automated Storage and Retrieval Systems, or AS/RS, are one of the most influential AI pick and pack tools already reducing delivery times and costs in eCommerce environments. AS/RS uses robotics, along with customized software, to select, carry, and separate inventory. Sometimes these devices are as simple as a shuttle darting back and forth on fixed tracks, but AS/RS systems are rapidly becoming more advanced. These days, one of these systems even takes the form of a climbing robot called Skypod which roams freely in warehouses across North America and Europe.

Walmart is also making its pick and pack processes smarter and has recently launched a fleet of robotic carts called Alphabot for this purpose. Built to streamline online grocery orders, these robots identify and select items and then bring them to human staff for packing and delivery.

Bringing your AI dreams to life

If you’re in an online retailer, you’ve likely faced all of the challenges mentioned above in one way or another. But incorporating AI solutions into an already working system can seem intimidating.

In reality, integrating AI is as simple as matching the right digital tools to your current data and infrastructure, while also creating a plan that serves your long-term vision. There are some out-of-box AI software solutions that can help you with this transition, and working with a digital product partner can help you customize or even build your own AI solution from the ground up.

Planning is key when it comes to smart AI integration. My colleagues and I here at Apply Digital can help you with every step of that process. This may include identifying your best current data sources, setting a course for the business outcomes you want to achieve, and codifying business requirements. We’ll also help you seek out the best AI digital tools for your business and can build custom software for AI systems tailored for your needs.

Of course, the right AI solution will be as unique as the challenges and strengths of your business. We’re always up for the challenge of finding the right solution for you. To get started, send us a message at hello@applydigital.com.

Co-Written by Liz Goode.