The Benefits and Ethical Questions of Using AI In the E-Commerce Industry
Sat, April 10, 2021

The Benefits and Ethical Questions of Using AI In the E-Commerce Industry

Global AI in retail and e-commerce is forecasted to grow at a CAGR during the forecast period 2019-2025. / Photo by: Monsit Jangariyawong via 123rf

 

Chatbots and smart logistics? It’s no surprise that AI is transforming the e-commerce industry, making day-to-day operations quicker and more efficient, according to Mark Kirby of news analysis website InformationWeek and Irina Linnik of Jaxenter, a developer news website. 

However, we must also focus on the ethical aspect of using AI in e-commerce. In a study conducted by research institute Capgemini, 77 percent of executives were “uncertain about the ethics and transparency of their AI systems.” Executives from 9 out of 10 organizations said that during the last two to three years, using AI systems have sparked ethical issues. Given that, almost half of consumers “have felt the impact of an ethical issue caused by an AI.” While AI is helpful in e-commerce, are we prepared to tackle ethics and transparency? 

AI In E-Commerce and Retail Market Statistics

Strategic consulting partner Kenneth Research reported that global AI in retail and e-commerce is forecasted to grow at a CAGR (compound annual growth rate) during the forecast period 2019-2025, as cited by media company Market Watch. By 2025, the market is expected to reach a revenue of $19.37 billion. Currently, retail and e-commerce industries are investing in big data, IoT, and AI to keep abreast of the competition. 

AI-based solutions are being incorporated to boost performance and achieve higher business growth and profits. These solutions are helpful in merchandise and sales planning, product promotions, and pricing strategies. 

The Benefits of AI In E-Commerce

1. Smart Visual Assistants and/or Chatbots

Customers love personalized services, as they are eager to wait for a personalized product or share personal information in exchange for a personalized offer. Store owners can use AI-powered virtual assistants to cater to the needs of customers. Smart visual assistants can “learn” about your previous purchases and draw insights from your behavior, building much more accurate forecasts for your actions. Moreover, these assistants can also ask you certain questions and eventually, your answers will lead to a successful purchase. 

Smart virtual assistants perform the roles of sales assistants in a brick-and-mortar store, except that the former is faster and more accurate with its AI learning capabilities. On the other hand, chatbots will also revolutionize a store’s customer service, wrote Vipul Srivastav of entrepreneurship and business news site Entrepreneur. Chatbots can troubleshoot, handle a variety of manual tasks, help customers 24/7 without the presence of human customer support, and understand a customer’s needs. 

 

Store owners can use AI-powered virtual assistants to cater to the needs of customers. / Photo by: malp via 123rf

 

2. Smart Inventory Management

AI and machine learning can help owners manage their inventory storage more efficiently. Imagine taking a photo of your inventory and the app tells you which item is missing just by scanning the photograph. Object Recognition can be utilized for that purpose, which can drastically transform an owner’s inventory management experience. 

Further, leveraging machine learning allows an owner to anticipate which items “will be needed the most in the future” and which ones will have the lowest demand. The digitization of inventory management will result in fewer financial loses and higher customer satisfaction, which will have a positive impact on a business’s growth. 

3. Precise Product Search

What if you want to find the exact product you’re looking for? Machine learning and image search will come and save the day. Unlike keyword search, image search makes the process faster and more precise. Companies that use visual search end up with satisfied customers as well as have an edge over other competitors. 

One example of an image search in e-commerce is Pinterest Lens. All you have to do is take or upload a photo of an item. Then, the system can help you find similar or relevant items based on Pinterest’s existing data. 

Ethical Dilemmas Surrounding the Use of AI 

Justification for Its Use – Should you adopt AI just because it’s more useful and practical? This is a question that many industries with dynamic pricing have to answer. A 2018 study by ProPublica and NPR found that health insurers are gathering consumer data “to drive their pricing algorithms,” reported Marshall Allen of non-profit newsroom ProPublica. However, algorithms may determine that low-income, minority individuals live in dangerous areas, which may lead to higher prices in insurance. 

2. Bias – Humans write the rules for the AI’s algorithm. However, these rules are written by developers, who may not understand how customers will be affected. Bias in AI may not be intended, but if it discriminates someone based on gender, age, etc. and goes undetected, it will definitely raise ethical concerns regarding AI. 

3. Culture – Cultural norms and ethics vary in each country. Also, there are some norms that may be acceptable for younger people that may be deemed unacceptable for older generations. How can businesses, especially those with a global footprint, deal with cultural differences? Hence, the need for e-commerce businesses to define what is “ethical.”
However, it does not mean that businesses should not implement AI. Getting the ethical aspects of AI rights involves hard work, but it pays off since it builds customer trust and satisfaction. Alternatively, the unethical practice of AI damages a business’s reputation. 

Therefore, it is best for e-commerce business owners to take ethics into consideration before incorporating AI into their day-to-day operations. AI is helpful but never forget how ethics will drive the success of a business in the long run.