The ROI of E-Commerce AI Transformation
The latest technology revolution has motivated many companies to begin the process of digital transformation, integrating the new technology available to us into existing systems or creating new systems that allow for enhanced customer experience and better product quality.
What is AI transformation
When we talk about AI transformation, it is the stage within digital transformation that incorporates Artificial Intelligence into a company’s infrastructure. The two must be implemented, and digital transformation is required beforehand. This is because AI training is dependent on digital data, just as the AI solutions will require digital processes that come from digital transformation. Once the digital processes are in place, AI will enhance the intelligence of the operations. Companies can take advantage of higher automation levels, freeing up other resources as their processes will become more efficient.
AI transformation isn’t limited to one particular industry or company size. It will soon become necessary for any company looking to stay ahead of the competition and keep up with the expectations of today’s consumers. According to IDC, at least 90% of new organizations will be using AI technology by 2025.
Why do we need to start the AI transformation process now?
From start to finish, it can take anywhere from two to three years to carry out AI transformation in a company. Now imagine how much technology will change at that time; it is crucial to start now so that you don’t delay the process any longer and risk getting left even further behind. Although it may take a couple of years to complete the process, some organizations begin to see the return on investment within as little as six to twelve months.
What are the advantages of AI transformation?
First and foremost, rather than seeing this as an advantage, AI transformation is essential for any company that wants to revolutionize its business processes, save time and money, and boost productivity. One of the principal reasons is that it allows for automated processes, computers taking over many of the trivial tasks that humans are doing, and doing them much faster. There are also fewer mistakes made when using AI, as human error is no longer a factor.
Companies today are gathering massive amounts of data. Forbes stated that 2.5 quintillion bytes of data are created each day. 90% of all the data available in the world has been created in the last two years. If a company is not jumping on this trend, it is hard to imagine it being able to compete with data gatherers.
AI can take this data, organize it, and then produce practical insights that businesses can use to make better decisions promptly. We can also use these insights to better understand customer behaviors and preferences better so that a company can adopt practices and processes to provide customers with the service they require and expect.
The following statistics give a clearer picture of the advantages of AI transformation:
- 44% of executives felt that their business operated more efficiently with AI
- 42% said that there was an increase in productivity
- 90% of companies felt that AI creates more opportunities than threats
- By 2030, AI is expected to contribute $15.7 trillion to GDP
- Big Data injection allowed companies to outperform the competition by 5% in productivity and 6% in profitability
- Companies that execute AI transformation faster are able to double their cash flow
- On the contrary, those that are slow to implement AI transformation could see a 20% decline in cash flow
It’s not just the benefits to a company that should be mentioned. From a customer’s point of view, the experience of a company is greatly enhanced; from the first moment of digital contact, AI improves the use of a website and the after-sales follow-up.
Most specifically, consider how chatbots are being used to improve customer engagement: in today’s world, customers expect answers in real-time. Any doubt about a product, a complaint, or help that might be required can be answered through highly sophisticated chatbots. A customer is able to contact a company and get the solutions they need 24 hours a day, 7 days a week, without a company having to hire customer support around the clock.
What challenges do companies face with AI transformation?
Initially, the main problem will be preparing or creating an in-house team that is experienced enough with AI technology. A company will need experts who are confident with algorithms; they will need data scientists and database managers, not forgetting IT security specialists who are up to date with the latest AI security solutions.
It is possible that the in-house team doesn’t have the right knowledge and experience in order to implement and maintain AI technology. In this case, companies may have to hire additional staff, whether to increase their in-house team or outsource various parts of the AI transformation.
AI technology is still considered to be rather immature and will take time to reach its maturity. There may be some risks when deploying AI, which might encourage some companies to delay the process. Some need to consider the potential advantages and whether they are enough to compensate for the potential risks.
Finally, some executives and managers are still not clear on the advantages and value of AI in their organization which causes AI transformation to be delayed.
Creating an effective AI transformation strategy
It’s impossible to wake up one morning and say, “let’s implement AI technology in our organization“. AI transformation takes time, investment, and training. An effective strategy is crucial for the success of AI transformation.
The plan that a company will create very much depends on the size of the organization. Smaller companies might be better off looking at using consultants and outsourcing aspects of their AI transformation as they will be able to keep the costs lower. Not only will they not have to contract new staff themselves, they will also benefit from not having to heavily invest in new AI technologies, as the outsourcing company will often have the resources in place.
For larger companies, here are the steps that should be taken to create an effective AI transformation strategy.
1. Develop an outline of your strategy
It’s necessary to know all of your data sources and which ones are the most important to the company. Then, one should turn the focus to process that can be automated, for example, file transfers, email automation, report generation, spreadsheet automation, etc.
A company will have to analyze the current infrastructure that can be used for the AI transformation and what resources will have to be invested in. Finally, a company should look at the business targets they hope to achieve with AI technology implementation.
2. Create pilot projects to begin
A big mistake that companies make is going straight for the large, valuable project to begin using AI. There will be a steep learning curve, therefore it is not advisable to choose such an important project. Preferably, companies should select projects that are more likely to succeed with AI while the company gets used to the new processes. Not everyone will be quite so welcoming of AI, so smaller successful projects give people a chance to see the advantages and learn to trust the process.
The ideal solution for your pilot projects is to have external AI experts working alongside your in-house team, who are experts in your field. This will allow you to start seeing the benefits within months rather than years. Two good projects to start with are data mining tools (helping to make a more significant impact on projects by identifying processes that can be improved) and automating document-based processes (reducing the number of manual tasks requiring human input).
3. Expand communications
With all of the changes, you will need to ensure that communications are frequent and effective both externally and internally so that every member of the organization is on the same page. Discussions should be carried out with investors, local governments, customers, potential hires, and of course, each department of the organization.
4. Building the in-house team
If you have started your pilot project with outsourced talent, you might be comfortable to continue in this way. Outsourcing has a variety of models for different company needs; continuing with this strategy may provide your in-house team with valuable AI training.
On the other hand, you may feel that your organization will benefit more from adding to your own team and even restructuring your teams so that there is a dedicated AI team headed by a Chief Digital Officer/ Chief Data Officer (CDO) or a Chief AI Officer (CAIO). The team would be responsible for developing AI processes that will support the entire organization and cross-functional projects.
5. Include broad AI training
We have also seen massive improvements with digital learning, enabling companies to take advantage of the endless digital content rather than increasing expenditure of multiple consultants. MOOCs (massive open online courses), eBooks, YouTube, and software communities are rich sources of knowledge and training. By employing a highly skilled Chief Learning Officer (CLO), a company will have one person dedicated to developing a curriculum for the whole organization using online resources. The CLO should also be responsible for implementing a plan for long-term training.
6. Review your AI strategy
The initial plan should, at this point, be reviewed to incorporate what has been learned up until now. The pilot projects will have provided ample information on what is going well and the areas for improvement. Look at whether your original short-term targets have been met. Understand what infrastructures are prepared to take you to the next level and where you need to continue investing.
Now that we have a clear understanding of what AI transformation is and how to implement it let’s focus specifically on e-commerce.
What is the impact of AI on e-commerce?
Even before the recent health pandemic, online shopping was growing in popularity. Websites were becoming more trustworthy, payment methods secure, and shoppers were happy with the ability to buy anything in the world.
When you consider how technology and AI have further improved the experience, plus the need to shop online during confinements, E-Commerce is booming. In May 2020, online shopping increased by 77% compared with the previous year, with total spending of $82.5 billion online, far exceeding the expected $4.8 billion by 2021.
Imagine that 10-15 years ago, hardly any of us would have had a smartphone, and the idea of self-driving cars was still something to be seen in movies only. Today, we can pick our smartphone, activate voice-controlled AI services to buy anything you need with a couple of clicks. Similarly to digital transformation, AI has changed the expectations of shoppers, no longer willing to wait weeks for a product when next day delivery meets our needs to get things done immediately.
Fortunately, voice automated messages and chatbots have had time to iron out the kinks and are now far more accurate than in their early days. So much so that 1 in 5 shoppers are happy to buy products and services from a chatbot.
It is possible that by 2021, 80% of all customer interactions will be managed by AI technologies and not requiring human involvement.
How Are Shoppers Benefitting from AI Intelligence?
A smaller scale of automating processes
Google Duplex is an AI-enabled digital assistant that can help with the organization of shoppers’ lives. For example, a shopper can look at their kitchen cupboards and storage while using Google Duplex and their voice to create a shopping list, which is then automatically ordered for them online. Amazon Dash has the ability to automatically order ink cartridges when a customer’s ink is running low, so they never run out.
Chatbots allow for 24/7
As customers are now shopping globally, chatbots and virtual assistants are being used to provide around the clock support removing any potential time zone differences. With AI technologies, these chatbots and virtual assistants are becoming far more intuitive, with 2 out of 3 consumers not aware they are communicating with a bot. The 24/7 intuitive support enhances the customer experience thanks to Natural language processing (NLP) and self-learning abilities.
Product recommendations based on customer behavior
AI technologies can look back at what customers have searched for, viewed, and purchased in order to provide intelligent product recommendations via emails, texts, etc. Online sales orders can increase by up to 3%, with more customers returning and improved customer loyalty and sales.
A more personalized service
E-commerce is another industry that collects massive amounts of data that can be used to improve decision making. The data collected on customers contains valuable information that can achieve more than just product recommendations. This information can help provide an enhanced customer experience that is also consistent, for example, personalized offers and even birthday messages.
Where to implement AI in e-commerce
Let’s take a look at four key areas of e-commerce and how AI transformation can play a crucial role in providing revolutionary IT solutions.
1. E-commerce Strategy
As we have mentioned, the significant use of AI in e-commerce is to analyze customer data to offer a more personalized service. It can also help a company’s position by creating theme-based digitally experimental stores and meet customer needs by providing on-demand grocery delivery.
2. E-commerce Front End
Smart mirrors are one of the latest trends that allow customers to try products in a 3D virtually. This allows customers to try on clothes and get an accurate idea of what they would really look like before buying them. Zara has virtual shopping assistants that recommend styles based on the customer’s measurements. With blockchain technology, companies can create improved loyalty programs, and electronic shelf-edge technology leads to advances in dynamic pricing strategies.
3. E-commerce Back End
From purchasing with Bitcoin to drone-based deliveries, the implementation of AI will covert traditional logistics, improve financial reporting, and simplify the organization’s structure. Employee processes can be automated, and with the help of KPIs, employee effectiveness and rewards can be measured.
AI enabling streamlined Inventory Management
Too much stock reduces your cash flow and increases storage space; not enough stock leads to dissatisfied customers. The balance is not always an easy one to judge. Traditionally, companies have focused on the current levels of stock, but with AI, companies are able to use the intel on sales trends in the past to anticipate highs and lows in demand. It also allows them to get ahead of any possible issues concerning inventory levels.
Automated robots are now in use to support warehouse management, collecting and storing inventory, and doing so 24/7. These robots are able to read the order and prepare it for dispatch with little to no human interaction.
What is the impact of AI transformation on e-commerce ROI?
So, you have invested in a fast-loading user-friendly website, you have personalized the customer experience and focused on a marketing strategy that includes social marketing and the insights of your data collected. AI is being used for the optimal results, but is it worth it?
It’s impossible to list exact figures when it comes to ROI because of the sheer range of factors that influence and e-commerce business:
- Groupon India (an online coupon platform) was able to serve 4 million customers in 33 cities, thanks to AI; it was able to provide customers with 50,000 products at a discounted rate. It’s click-to-open ratio increased by 35.7% through email notifications and a 51.6% increase in revenues from app notifications.
- Amazon’s recommendation engine drives 35% of its total sales
- JD.com used automated robots to improve warehouse efficiency; in 2015, its sales almost doubled from the previous year to 1.26billion. Around 85% of those orders were ready for dispatch in just two days.
- Alibaba employed smart logistics to improve its delivery efficiency; this has led to a 10% reduction in vehicle use and a 30% reduction in travel distances. One can’t ignore the positive impact this has on the environment as well as its ROI.
- According to a recent study by a retail trade publication, 70% of retailers that had implemented advanced AI-driven personalization saw an ROI of over 200%
In Conclusion
The future is clear; the future is AI! Even when you consider how young AI technology is and how popular it has already become, it is safe to say that more and more companies are going to continue their digital transformation with AI transformation.
This is indeed a significant change to the way a company operates and will require the organization’s openness to new technologies for it to succeed. It will also take a great deal of training and, considering at which the speed of digital technology is improving, this training will have to be continuous and become part of a company’s standard operating processes. This is not necessarily a bad thing because employees appreciate the opportunity to advance their careers, and so will, in turn, benefit the company.
Also, because of its use, we haven’t had enough time to see a market full of AI experts with a combination of knowledge and years of experience, and there is a high demand for these experts. Companies will have to improve their recruiting process if they want to be in with the hope of attracting the best talent. Alternatively, outsourcing AI operations is an excellent alternative and will certainly get your AI processes gaining momentum.
Of the 9,100 patents, IBM inventors received, almost 18% were related to AI. Digital textbooks, drug discovery, and automated news reports are what we see today, yet so many of us a still unaware of how powerful AI is and is going to be.
It is safe to say that if you want your e-commerce business to be able to provide improved personalized customer experience, gather massive amounts of data that will enable a marketing strategy that increases traffic to your site and then converts that traffic into sales; it would be wise for you to start considering your AI transformation strategy as soon as possible before your rivals beat you to it.
