E-commerce is one of the fastest-growing sectors in India, with a projected market size of $120 billion by 2026¹. The rapid digitalization and changing consumer behavior have opened up new opportunities and challenges for online retailers, who are constantly striving to deliver the best customer experience, optimize operations, and gain a competitive edge. In this scenario, artificial intelligence (AI) has emerged as a key enabler and differentiator for e-commerce businesses, as it can help them leverage data, automate processes, personalize offerings, and enhance decision-making.

In this blog, we will explore some of the ways that AI is revolutionizing the Indian e-commerce industry, with examples from some of the leading players in the market.

One of the most prominent applications of AI in e-commerce is personalization, which refers to the process of delivering customized products and services to customers based on their preferences, behavior, and feedback. Personalization can help e-commerce businesses increase customer satisfaction, loyalty, retention, and revenue.

Some of the ways that AI enables personalization are:

• Recommender systems: These are systems that use AI techniques such as machine learning and natural language processing to analyze customer data and provide relevant and personalized suggestions for products or services. For example, Amazon India uses AI to power its recommendation engine, which suggests products based on the customer’s browsing history, purchase history, ratings, reviews, and other factors². Similarly, Spotify uses AI to create personalized playlists and podcasts for its users based on their listening habits³.
• Chatbots: These are conversational agents that use AI to interact with customers via text or voice, providing information, assistance, guidance, and feedback. For example, Flipkart uses an AI-powered chatbot called Mira to help customers shop for fashion products by asking them questions about their preferences, style, occasion, budget, etc., and showing them relevant products⁴. Myntra also uses an AI-based chatbot called Artie to assist customers with queries and complaints.
• Visual search: This is a feature that allows customers to search for products using images instead of keywords, making the search process more intuitive and convenient. For example, Myntra offers a visual search feature that lets customers upload an image of a product they like and find similar products on its platform. Tata Cliq also uses AI to enable visual search on its website and app.

Optimization: Improving Efficiency and Effectiveness of Operations

Another important application of AI in e-commerce is optimization, which refers to the process of improving the efficiency and effectiveness of various operations such as inventory management, logistics, pricing, marketing, etc. Optimization can help e-commerce businesses reduce costs, increase profits, and enhance customer satisfaction.

Some of the ways that AI enables optimization are:

• Inventory management: This is the process of managing the stock of products in warehouses and stores, ensuring optimal levels of availability and avoiding overstocking or understocking. AI can help e-commerce businesses optimize inventory management by using data analytics and machine learning to forecast demand, track inventory levels, replenish stock, and prevent wastage. For example, Bata uses an AI-based video analytics solution to monitor customer behavior and emotions in its stores and adjust its inventory accordingly.
• Logistics: This is the process of transporting products from warehouses to customers in a timely and cost-effective manner. AI can help e-commerce businesses optimize logistics by using data analytics and machine learning to plan routes, schedule deliveries, optimize fuel consumption, monitor traffic conditions, track shipments, etc. For example, Amazon India uses AI to power its Prime Air service, which delivers packages using drones. Flipkart also uses AI to manage its logistics network, which includes over 1000 delivery hubs and 20000 delivery partners.
• Pricing: This is the process of setting the prices of products or services based on various factors such as demand, supply, competition, costs, etc. AI can help e-commerce businesses optimize pricing by using data analytics and machine learning to analyze market trends, customer behavior, competitor actions, and other factors, and dynamically adjust prices accordingly. For example, BigBasket uses AI to set dynamic prices for its products based on real-time demand, supply, and seasonality. Myntra also uses AI to optimize pricing for its products based on customer feedback, ratings, and reviews.

Innovation: Creating New Products and Services for Customers

A third application of AI in e-commerce is innovation, which refers to the process of creating new products and services for customers that offer value, convenience, and delight. Innovation can help e-commerce businesses differentiate themselves from competitors, attract new customers, and retain existing ones.

Some of the ways that AI enables innovation are:

• Voice commerce: This is a feature that allows customers to shop using voice commands instead of typing or clicking, making the shopping process more natural and hands-free. For example, Amazon India offers voice commerce through its Alexa-enabled devices, such as Echo, Fire TV, and Kindle. Flipkart also launched voice commerce on its platform in 2021, allowing customers to search for products, place orders, and track deliveries using voice commands in Hindi and English.
• Augmented reality: This is a technology that overlays digital information or images on the real world, enhancing the customer’s perception and interaction with the physical environment. For example, Lenskart uses augmented reality to let customers try on different eyewear virtually using their smartphones or webcams. Nykaa also uses augmented reality to let customers try on different makeup products virtually using their smartphones.
• Social commerce: This is a feature that integrates social media platforms with e-commerce platforms, allowing customers to discover, share, and buy products or services through social networks. For example, Meesho is a social commerce platform that enables entrepreneurs to sell products to their network of contacts through WhatsApp, Facebook, Instagram, etc. Similarly, Wooplr is a social commerce platform that allows customers to shop from curated collections of fashion products created by influencers and celebrities.