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Has AI Permanently Changed Online Selling on the Amazon Marketplace?

The good old days are gone forever. But are all of these AI-driven transformations actually good for ecommerce brands?

  • August 30, 2023
  • /
  • Chuck Kessler
Decorative. A group of people stand staring at their phones in identical clothes. The light is dark everyone except for the blue light on their face.

It’s pretty much impossible to overstate the effects of artificial intelligence on our lives today. It’s a little bit like dropping a stone into a pool of water. The disruption to business from generative AI has been significant. 

Workplaces throughout the globe are viewing generative AI through the lens of before, and after. The line we’re all hearing again and again is that “your job won’t be replaced by AI tools, instead, it’s going to be replaced by a human with the ability to use AI.” 

There’s no doubt that AI-powered systems are changing the ecommerce landscape. They’re improving operations, enhancing customer experiences, boosting conversion rates, and have demonstrated the ability to drive profits to your online store.

AI is also responsible for a certain percentage of uncertainty that has crept into conversation. The real question is; can AI-based virtual assistants be trusted? 

To get the latest on the subject and also answer a few important questions, this blog post will explore both the positive and negative effects of AI on ecommerce and, specifically, on selling through Amazon.

Are Ecommerce Businesses Willing to Try AI? 

Ecommerce businesses selling on Amazon can be a challenging group to get a bead on. While there are aspects of online selling entrepreneurship that are very conservative – for example, the secrecy of Amazon sellers and their products – the industry is also attracted to the latest hacks and software tools.  

Because of that, the big question concerns how willing is the industry to embrace the generative AI model. 

The most recent McKinsey Global Survey on the growth of generative AI technology and machine learning reinforces our understanding of the tidal wave of acceptance. It’s been less than a year since the debut of many of these AI-driven tools and already, one-third of survey respondents say their organizations are using gen AI regularly in at least one business function. 

At the same time, 40 percent of respondents indicate that their organizations will increase their investment in AI overall because of advances in generative AI. As many of us who have been using artificial intelligence-based tools such as ChatGPT know, generative AI is not without its own built-in risks, particularly those having to do with inaccuracy.

AI is Redefining Ecommerce Operations

AI’s impact on ecommerce is multidimensional and ranges from inventory management to customer service. AI helps retailers predict customer behavior, anticipate sales trends, manage stock levels, and reduce storage costs by using advanced analytics. 

AI also helps with personalizing shopping experiences. Machine Learning (ML) algorithms analyze users’ behavior, preferences, and historical data to generate tailored product recommendations, increasing the likelihood of conversions.

AI can also enhance ecommerce customer service. AI-driven chatbots and virtual assistants address customer queries, automate tasks, and provide round-the-clock support. They significantly reduce the response time, ensuring customer satisfaction, fostering loyalty, and enhancing retention rates.

Decorative. A young woman with virtual reality goggles reaches toward the camera against a purple background.

Amazon and Ecommerce are Already Leaning Heavily Into AI 

In terms of both market cap and revenue, Amazon is the world’s largest ecommerce platform. It harnesses AI to optimize seller and buyer experiences. Below are key ways AI is influencing selling on Amazon:

Improved Search Functionality

Amazon’s A10 algorithm leverages AI to provide accurate and relevant search results. It studies the buying behavior and search history of shoppers to display product suggestions that align with their needs. 

Ecommerce sellers count on continued improvements to AI to level up the Amazon search engine’s functionality. These improvements are beneficial for Amazon sellers. If AI performs effectively, it will ensure that your products – and Amazon Store – are discovered by the appropriate customers. Consequently, this will result in increased sales opportunities.

Pricing and Sales Forecasting

AI helps Amazon marketplace sellers with dynamic pricing strategies. Machine learning algorithms analyze multiple factors including demand, competition, and historical sales data to optimize pricing and ensure competitive advantage. AI also helps forecast sales, enabling sellers to manage inventory effectively and avoid stock-outs or overstocking.

AI-Enhanced Advertising

Amazon’s AI-driven advertising platform provides you with insights to enhance your advertising strategies. Through ML algorithms, it analyzes customer behavior and demographic data, enabling you to target your ads more effectively, optimize your ad spend, and ultimately achieve a higher return on investment.

Fraud Detection

Amazon’s Fraud Detector is a fully managed service enabling customers to identify potentially fraudulent activities and catch more online fraud faster. Its AI-based systems help detect and prevent fraudulent activities, helping ensure a more secure platform for sellers and buyers. 

AI-powered algorithms analyze patterns in user behavior, flagging suspicious activities and reducing the chances of fraud.

Improved Customer Experience

There’s a reason why the Amazon marketplace is so popular. AI enables Amazon sellers to improve customer experiences through personalized product recommendations, automated customer service via chatbots, and rapid resolution of issues. Happy customers translate into repeat purchases and positive reviews, which in turn drive more traffic to sellers’ product listings.

We all know how focused Amazon is on its customers’ experience on the platform. That’s why it’s a foregone conclusion that Amazon is going to keep investing in artificial intelligence as a way to help ecommerce shoppers connect the dots between shopping and purchases. 

Decorative. An orange detour sign in a city.

What Does AI Get Wrong? Why Does It Matter To Amazon Sellers? 

The generative AI model is not without its challenges. To maintain a level playing field and look at the subject of AI from a more neutral perspective, here are five potential ways AI could complicate ecommerce in the coming years:

Data Privacy Concerns

The accumulation of data is double edged sword. Data privacy remains one of the main challenges AI poses to the ecommerce ecosystem. AI systems, particularly in ecommerce, rely on analyzing vast amounts of consumer data to function optimally. It’s where most of the previous section’s benefits come from. 

However, this dependence on data creates potential risks related to data breaches, unauthorized access, and misuse of personal data. Ensuring that AI systems adhere to stringent data protection regulations can be a significant challenge for online businesses, including marketplace heavyweights like Amazon.

The Cost of Implementation and Ongoing Maintenance

While AI can streamline processes and enhance profitability, implementing AI solutions can be costly. It involves significant upfront investment in technology, infrastructure, and talent acquisition. Furthermore, ongoing maintenance costs for AI systems can be substantial. This could be a barrier for small and medium-sized ecommerce businesses that may not have the necessary resources to invest in AI.

Decorative. A middle aged man takes off his glasses while leaning against a white wall.

AI’s Skill Gap Can Leave Some Workers Behind

The use of AI in ecommerce necessitates a certain level of technical expertise. Businesses need professionals who can implement, manage, and understand AI systems. However, there’s a significant skills gap in the market, making it challenging for ecommerce businesses to find and retain suitable talent.

Even worse, the rise of AI can work as a lever to separate some long term workers from their jobs. As mentioned earlier in this post, AI won’t replace workers, but workers with AI skills probably will. 

Is Amazon’s A10 Algorithm to Be Trusted?

AI systems are only as good as the algorithms and data they are based on. If there are inherent biases in the data or issues with the algorithm, this could lead to inaccurate predictions or recommendations. For instance, biased product recommendations or inaccurate pricing strategies could adversely impact an ecommerce business’s reputation and customer satisfaction.

Is Amazon’s A10 algorithm to be trusted?

Most of us would answer “yes” to that question. What happens though if other, less well-built algorithms are given more latitude to decide other aspects of our ecommerce lives? 

Customer Trust and Social Proof

Consumer trust and social proof are similar in one very important way. They’re both hard to achieve, and very easy to lose. While AI can enhance personalization and customer experience, some customers might be wary of AI due to concerns about how their data is being used. This mistrust can affect customer engagement with AI-powered features like personalized recommendations or AI-driven customer service. 

For those of you taking advantage of the benefits of an Amazon Agency, it’s why establishing a relationship with your Amazon Customer Service Management team is so important. Knowing that you have a human with their hands on the wheel of your Amazon business 24 hours a day makes all the difference. 

Building and maintaining customer trust while employing AI technologies is a challenge that ecommerce businesses must address. Navigating these challenges requires a balanced and thoughtful approach and includes investment in robust data protection measures, and transparent AI processes to ensure the ethical use of AI. 

Decorative. A rocket ship launches into space, flames trailing.

There’s No Turning Back from AI

The role of AI in ecommerce and Amazon is set to expand even further. With advancements in technologies such as natural language processing and deep learning, the ecommerce experience will become more personalized and seamless. We can anticipate AI-driven virtual shopping assistants, sophisticated visual search capabilities, and further improvements in predictive analytics.

Moreover, sellers on Amazon can expect to see more AI tools that simplify and optimize the selling process. These tools may include advanced features for ad optimization, inventory forecasting, fraud detection, and automated customer service.

The advent of AI has fundamentally altered the ecommerce landscape, driving efficiency, personalization, and profitability. As AI continues to evolve, it promises to further revolutionize the ecommerce experience for both sellers and buyers on platforms like Amazon and Walmart. Embracing these changes and understanding how to effectively leverage AI tools is key for sellers striving for success in the dynamic world of ecommerce.

Canopy Management Can Help You Stay Ahead of the AI Curve

While many of the new uses for artificial intelligence are outside of your control, there are still dozens of ways that you can use it to your advantage, starting now. Many of these tools are ready to use out of the box, while still others require advanced knowledge of how to integrate them into your existing systems and processes.

If you’re already keeping up with the breakneck pace of technological change, you’ll have a clear advantage over those who don’t. 

On the other hand, if you feel that you’re behind the curve and want to quickly regain lost ground, Canopy Management’s tech-savvy Amazon experts are here to help with an unbeatable synergy of bespoke software tools combined with deep marketing experience.

Canopy’s full service account management team brings both artificial and human intelligence to the table to accelerate your growth. Start the conversation about how you can better use AI to level up your Amazon business!

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