The Benefits of AI and eCommerce for Retail

The world has been moving increasingly online for the better part of the last two decades. From suppliers moving large percentages of their business to e-commerce, to the rise in retailers tapping into artificial intelligence (AI) solutions, a successful supply chain must adjust to online and automation trends in order to survive.

As the shift towards AI and e-commerce reshapes the supply chain, retailers and suppliers should use this opportunity to strengthen their business moving forward.

Defining Key Terms

Before jumping into the details of how retailers and suppliers can leverage AI to grow their business, let’s define some key terms:

• Artificial intelligence (AI): Systems designed to perform tasks that typically require human intelligence.
• Machine learning (ML): AI systems that learn patterns from data to make predictions or automate decisions.
• Generative AI: Models that produce new content (text, forecasts, summaries) based on learned patterns.
• Large language models (LLMs): AI models trained on vast datasets to process, summarize, and generate human-like language.
• E-commerce: The buying and selling of products online.
• Marketplace: Third-party platforms where brands sell directly to consumers.
• Direct-to-consumer (DTC): Sales model where brands sell through their own e-commerce storefront.
• Search engine optimization (SEO): A marketing strategy to ensure that products and keywords rank as high up on the google search list as possible.
• AI engine Optimization (AiEO): A relatively new concept, AI engine optimization is a marketing strategy to ensure that products and keywords are pulled into AI (generative and LLM) results.

The Relationship of AI and E-commerce

With the rise of AI, e-commerce is changing. Retailers and suppliers must depend on more than just SEO but also leverage AiEO. This looks like retailers and suppliers utilizing AI through:

• Partnerships with AI engines
• Adjusting search optimization strategies to include AI engines
• Implementing AI chatbots on e-commerce storefronts to help customers find what they want within marketplaces
• Using AI powered chatbots for customer service

Related Reading: How Artificial Intelligence is Reforming the Supply Chain

How Can Retailers and Suppliers Use AI to Benefit Their Business?

E-commerce has already taken the supply chain by storm, and retailers and suppliers who have adjusted to include e-commerce in their business have gotten a leg up. For example, during the COVID-19 pandemic, e-commerce options were the difference between a business thriving or going under.

E-commerce is a well-established part of the supply chain, but it is continuing to evolve with the rise of AI. As customers using AI to shop becomes more mainstream, it has become necessary for retailers and suppliers to adapt and utilize AI to their advantage.

Walmart and Target have both recently announced partnerships with OpenAI, which will allow customers to shop at both retailers directly through ChatGPT. This is just one way in which retailers can utilize AI. Some other ways that both retailers and suppliers can leverage AI for their business are:

• To improve demand forecasting and inventory planning through automation.
• To scrape and analyze competitor pricing, reviews, search rank, etc.
• Help validate label accuracy, pallet configuration, packaging specs, and other compliance requirements.

Some suppliers and retailers are leveraging AI through shopping assistance and agentic storefronts, which is having its own unique impact on sales trends and demand planning.

AI Shopping Assistance and Agentic Storefronts

Amazon’s Rufus and Walmart’s Sparky are two examples of how retailers are leveraging AI as part of their e-commerce business. Rufus and Sparky are home-built AIs that e-commerce customers can chat with directly on the retailer’s website to help them find the products they are looking for. For Walmart specifically, by its partnership with ChatGPT and its investment in Sparky, it is able to leverage AI both within and outside of its e-commerce storefront.

Agentic storefronts, such as with Shopify, allow major retailers to promote their products wherever customers are conversing with AI. Shopify is specifically connected with ChatGPT, Copilot, and Perplexity. Through Shopify, suppliers dictate what, how, and where their products appear in AI chats.

With advertising moving beyond search engine results to AI chatbots, this is an important way suppliers can ensure their products are getting in front of consumers on all fronts.

Challenges to AI Shopping and Agentic Storefronts

One major challenge that suppliers and retailers might face in implementing AI shopping or agentic storefronts is ensuring that item data is accurate. Inaccurate data could lead to AI chatbots offering incorrect product information to customers.

As customers come to increasingly rely on chatbots for online shopping, misinformation is immediately apparent to the consumer leading to a lack of trust in the products the retailer and/or supplier are trying to promote. Additionally, when customers don’t immediately notice the incorrect information, retailers and suppliers may see an uptick in returns as customers buy the product only to find it was not what they were looking for.

AI is not just a trend; it is accelerating the supply chain faster than retailers and suppliers can execute. Utilizing AI to keep up with demand requires clean and connected data. AI features will only work as well as the data it is processing. Retailers and suppliers should not implement AI for AI’s sake but should utilize AI to work with and for them in the real world of supply chain.

How SPS Commerce is Leading the Way

SPS Commerce has integrated AI into its core solutions to ensure retailers and suppliers stay ahead in the digital age. By leveraging AI for demand forecasting, operational efficiency, compliance automation, and real-time data analytics, SPS Commerce empowers businesses to optimize their supply chains and adapt to evolving market trends.