Max Firsau is cofounder and CEO at Accel Club. He is a serial entrepreneur with over 15 years of experience in e-commerce.
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Our newsfeed is continuously bombarded with eye-catching headlines such as “ChatGPT provided better customer service than his staff. He fired them” or “Generative AI Will Change Your Business,” heralding the wonders of artificial intelligence (AI). While they make sensational soundbites, AI is not going to magically turn around businesses overnight. It is a powerful tool that must be planned for and integrated with human judgment.
Misconceiving AI As A Magic Wand
From customer service chatbots to inventory management and predictive data analysis, we are led to believe that machines will inevitably dictate the way we run businesses in the near future. All this hype can be misleading and confusing.
Let’s call out the elephant in the room. AI is not replacing human creativity or critical thinking any time soon. What it does is help automate tedious tasks, process huge amounts of data, and provide guidance for better decisions (not make the decision for you). Notwithstanding, creativity and empathy are still required to develop successful marketing campaigns or deal with nuanced consumer engagements.
Where AI Wins Big
No doubt leading brands such as Amazon and PayPal have been paving the way in terms of AI implementation and achieving tangible business outcomes. Their success signals the future of AI adoption and has a trickle-down effect on the e-commerce industry. Let’s look at some use cases.
1. Customer experience evolves from personalization to bespoke.
Amazon and Netflix are leaders when it comes to personalized experiences. With AI, Amazon personalizes product recommendations based on user behavior, which results in a more engaging shopping experience and higher spend. Each customer’s experience is unique. Netflix takes advantage of AI to understand viewership patterns pertaining to key metrics such as viewing duration, genres, and completion rate, runs A/B tests using AI-powered algorithms to push bespoke recommendations on content to viewers, and on the backend, makes decisions about future content creation.
When it comes to bespoke playlists, Spotify comes to mind. The manner in which they employ AI to curate and tailor music preferences for users is akin to having a DJ in your pocket. As of August 2023, Spotify’s “DJ” has been rolled out in over 46 countries worldwide. The jury is still out on the tangible gains for Spotify in this case, but for many, it’s been music to their ears so far.
2. E-commerce operational costs decrease.
Alibaba has been applying their deployment of AI to their core e-commerce operations to reduce costs and dependence on human labor. Fellow e-commerce giant JD.com uses AI to optimize storage space as well as automate picking and packing processes to reduce errors and speed up order fulfillment. For China, a country with an aging population, the benefits of improved productivity outweigh the displacement of jobs.
3. Interactive customer experience is the new norm.
In April 2023, Zalando, a leading European fashion retailer, developed a fashion assistant powered by ChatGPT to create an interactive immersive experience for customers and provide them with more intuitive fashion inspiration. It is a step up from a typical chatbot. Later in November 2023, they announced that they were co-creating a new AI-powered assistant with customers. It’ll be interesting to revisit this initiative soon and ascertain the value it brings to customers and the brand.
4. Fending off fraud remains an uphill battle.
Companies like PayPal and Amazon have been fighting fraud with AI long before AI dominated news headlines in 2022. PayPal applies AI to the analysis of transactions and identifying suspicious patterns. AI-integrated systems enable Amazon to analyze customers’ buying patterns, to stop fraudulent activities and detect fake reviews with AI to combat fake review brokers. Unfortunately, advancement in technology is a double-edged sword as fraudsters are just as quick at leveraging AI to launch sophisticated scams and illegal activities.
Setting Realistic Expectations
The reality is that most companies do not have the resources to implement AI solutions, especially for small and medium-sized enterprises. But they can still benefit from the adoption of generative AI by seeking a balanced approach to what, who and how.
First, consider your business needs and your team.
• What are your business goals or critical challenges that AI tools can help you with?
• Who are the people in your team that can benefit the most from AI tools?
• How do you prevent over-reliance on generative AI over time?
From a management point of view, AI-powered technology is not confined to operations. It can assist leaders in making better decisions (embedded link may require registration) by structuring massive amounts of data, challenging hypotheses and perceptions, and even generating executive summaries and actionable insights.
For in-house design or content teams, AI-powered tools such as Adobe Firefly and Canva can speed up your design iteration process. But remember, AI does not replace human creativity.
Second, invest wisely. Find the best AI tools that fit your tech stack and budget.
• What is the budget required for maintenance and future optimization?
• Who do you need to hire, if you do not have the in-house expertise required to implement and use these tools? Instead of hiring more headcount, you could engage professionals to train your team.
• How do you maintain these tools?
Third, but not least, prioritize ethics. AI systems are known to produce biased results that reflect and perpetuate human biases within a society. We can do better.
• What are your company values?
• Who holds you and your team accountable?
• How do you communicate openly with your team and customers about data management and AI-powered operations?
The above suggestions are a good basis to help you and your team manage expectations, but they are by no means exhaustive. Similar to all the technology that came before AI, the best way forward is for us to embrace this powerful tool strategically and responsibly for sustainable growth.
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