Almost all retailers have been using AI or machine learning in some form or another for years, but we’ve recently seen some of the top e-commerce stocks utilize the technology front and center to boost their offerings. Although e-commerce is still a growth industry, it’s becoming increasingly saturated. That means these firms have to peddle harder to keep up with the pack when it comes to attracting and retaining the public’s attention.
This is made even harder by the challenging macroeconomic conditions e-commerce players are facing. Margins in retail tend to be thin at the best of times, so many retailers are trying to find ways to protect their profits as input costs continue to soar. There are only so many costs you can pass on to customers before the price hikes start to dent demand. Internal cost-cutting and efficiency improvements are two of the only levers to pull. Luckily, we’re living in a time when technology is making it easier and easier to do more with fewer hands.
There are quite a few ways AI is cropping up as part of the growth story for e-commerce stocks. From using the technology to reduce workloads to speeding up tedious processes and enhancing the consumer experience, AI has become the next frontier for online retailers.
Admittedly, Amazon (NASDAQ: AMZN) is much more than just one of the many e-commerce stocks. In fact, you could argue that the success of its cloud arm, AWS, makes Amazon more of tech company than anything else. While AWS has recently become the group’s bread and butter, its e-commerce empire is still a valuable part of the business. It is likely to become even more valuable as Amazon integrates AI.
One of the things that make AI work is having a huge trove of data to learn from, and Amazon has no shortage of customer data, making the group a prime candidate for leveraging the technology effectively. Amazon is working to make AI a much larger part of its value proposition to investors, and doing so is likely to land the group more firmly in the tech sector.
There are plenty of reasons AI will help Amazon’s e-commerce business, from improving search to anticipating future purchases. But, ultimately, the real benefit of AI will be within AWS and Amazon’s ability to roll out its own AI capabilities.
Shopify (NYSE: SHOP) is a one-stop shop for merchants looking to build out an online presence. One of the top e-commerce stocks to buy at the moment, investors became relatively bearish on the stock after growth started to teeter. But management as started selling off non-core parts of the business in an effort to re-focus on the core business, which is likely to set growth back on track.
Part of that is incorporating AI into its suite of services. A big part of Shopify’s competitive advantage is its position providing a host of services to its merchants. Merchants using Shopify for many different things, taking advantage of its many revenue services, will find it much harder to leave.
Shopify is enhancing those services using AI. Specifically, the group is using AI to help its sellers come up with their product descriptions. Quality product descriptions help people find what they’re looking for, boosting sales. That’s a good thing for both the merchants and Shopify. Using AI in this way should be a win-win for Shopify and its investors.
Spotify Technology S.A.
Spotify (NYSE: SPOT) made a name for itself among e-commerce stocks as the go-to music streaming provider around the world. But streaming has become increasingly crowded over the past few years, making it difficult to keep customers from switching to a cheaper provider. Spotify’s managed to keep hold of its cache by spending on big-name content creators that are unique to the platform. But its latest release of AI features represents a much more cost-effective way for Spotify to grab users’ attention.
The group’s AI DJ offers its customers a personalized song selection courtesy of AI. Notably, Spotify’s been using AI for years to serve its listeners music that fits with their preferences. But it’s clear that management is keen to leverage the explosion of interest in AI to underscore just how well its algorithms work.
While some have criticized the DJ as being too gimmicky, it’s likely to provide an overall boost to the user experience. Not only will listeners get the benefit of AI helping them discover music they may have otherwise missed, but they get some insight into how and why the songs were chosen from the DJ’s “voice.”
On the date of publication, Marie Brodbeck did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.