HC3152 E-Business Applications - Holmes Institute

Develop a report based on the following article:
1. ‘How e-commerce companies are using Artificial Intelligence to drive Higher Sales & User Experience.'
2. ‘How e-commerce companies are using Artificial Intelligence

Learning outcome 1. Critically analyse information technology issues for e-business and provide solutions to these issues using their knowledge of information technology and practical techniques in e-business applications.

Learning outcome 2. Apply theoretical and practical knowledge of Information Technology in the leverage and adoption of e-business applications to provide competitive advantage and strategic solutions for businesses.

Learning outcome 3. Understand the ICT profession in e-business

Learning outcome 4. Communicate using effective oral and written communication tools, act in a professional manner

Learning outcome 5. Review and describe the major privacy, legal, ethical and societal issues with respect to managing digital information and e-business

Solution:

Introduction
Artificial intelligence (AI) comprises of the powerful ability of acquiring and analysing large volumes of data and based on the same, they are able to offer decisions for actions to be taken. As a result of the same, e-commerce has been adopting this technology for identifying the patterns that are based on browsing, account information, credit checks, purchase history and so on. The data that are collected are then used as the foundation for creating customised recommendations for individual customers. Majority of the e-commerce businesses have already initiated the implementation of varied forms of AI so as to gain a better understanding of their customers and thereby provide them with an enhanced consumer experience (Kakkar, and Monga, 2017).

Apart from providing prediction regarding the customer purchase behaviour, AI has also provided an automation regarding the management of the stock and thereby provides the organisation with the notification regarding re-ordering of the stocks, along with the ability of creating a manufacturing schedule in accordance with the variations that occur in demand, during specific time period, in an accurate manner (Lingam, 2018). The following discussion would focus on the implementation and integration of AI in the ecommerce businesses and the manner in which the e-commerce organisations have integrated the AI technology for enhancing their business processes and operations. Furthermore, the case of Amazon Australia has been taken into consideration to gain an understanding regarding how the organisation have been using AI technology have been using the forecasting techniques for critically planning the inventory orders.

1. Select an E-commerce business to be the focus of this assignment - Amazon Australia

2. Briefly describe the current operation of your selected E-commerce store.

Current Operations of Amazon Australia
Amazon had launched its full online services in Australia around late 2017 and this allowed the customers to make purchase of the products directly from the Australian store, without needing to pay for international deliveries. For the operations purposes, Amazon had officially opened a 24,000 square metre centre in Dandenong South of Melbourne. The flagship fulfilment centre of Amazon is located in the M2 Industry Park of Pellicano that provides easy access to the Eastlink, Monash Highway and South Gippsland Highway (Ryan and Jager, 2017). It is expected that Amazon shall be able to gain more sales and business in Australia, after its successful launch in 2017. Although during the first operations month Australia was not able to perform with excellence and quality, thereby resulting in losses of about Australian $9 million. However, eventually the company has been able to improve its sales and achieve better profits by enhancing its business processes and operational functions. The major products that are sold in the e-commerce site of Amazon include electronics, books, cloths, accessories, toys, groceries and so on. Apart from these products, Amazon also offers the services of Amazon Prime that comprises of options of prime delivery and Prime Movie and Music streaming.

3. Why is the Artificial Intelligence important for your business survival?

Importance of Artificial Intelligence for Survival of Amazon's Business
The applications of artificial intelligence (AI) and machine learning has been drastically increasing within the ecommerce industry. It has been determined through a survey that with the help of integration of AI in the e-commerce retails, the changes in the sales and the predicted approximate sales by 2021 on the basis of the existing patterns, is expected to rise steadily (Kumar and Trakru, 2019). This can be represented with the help of the following figure.

Figure 1: Worldwide Retail E-Commerce Sales between 2014 to 2021

(Source: Kumar and Trakru, 2019)

Therefore, it can be stated that the sales of retail e-commerce is being influenced highly by the AI and machine learning and hence, the same is vital for the survival of the business of Amazon Australia as well because with the help of integrated AI Amazon shall be able to overcome the losses that it has experienced initially. Another study has also predicted that more than 80 per cent of the consumers of the retail e-commerce are to be handled by the AI (Kumar and Trakru, 2019). Presently, AI is also already been employed by other retail e-commerce organisations such as eBay, Alibaba for detection of the fake reviews, management of the big data and product recommendations (Kumar and Trakru, 2019).

Artificial intelligence has the capacity of obtaining and breaking down the vast volume of data and thereby offers choices to the activities that are conducted by the organisation and consumers. The e-commerce businesses such as Amazon are required to embrace the innovation for recognising the designs and patterns with respect to purchase history, account data, credit checks and so on and these acquired information is used for making recommendations and suggestions that are particular and specific to the consumers (Srinivasan, et al., 2018).

The major applications of AI in the retail ecommerce include voice and visual search, chatbots and AI assistants, smart logistics and the recommendation engines. The sorting and searching of the data pattern vary every day. With respect to retail categories consumers using the visual search of varied domain of the e-commerce can be presented as follows.

Figure: Visual Search in the Domain of E-Commerce

(Source: Kumar and Trakru, 2019)

It has also been determined that the image and voice search is expected to make up about 50 per cent of all the searches by the year 2020. It has also been predicted that by 2021, the revenue of e-commerce would rise by 30 per cent, due to the popularity of the voice search (Kumar and Trakru, 2019). Therefore, the integration of the voice and image search program within the search engine of Amazon would allow the company to gain an increased revenue, along with efficient consumers service with respect to customised search of products. The advanced visual search introduced by the AI technology enables the consumers to search a product using the image of the product that can be selected either from the gallery or can be taken real time (Raturi, 2019). The implementation of such search is of high significance for Amazon as it allows the business to provide the consumers with a more seamless service with respect to product search.

The chatbots and AI assistants aid in responding to the consumers as per their inquiries and virtual assistant is one of the popular aspects of this segment. It also offers the consumers with efficient suggestions regarding the referred problems. Furthermore, these are also used for the system of product recommendations through the Natural Language Processing (NLP) (Kumar and Trakru, 2019). These systems are already in application by the competitors of Amazon, Alibaba and eBay and therefore, it is important that Amazon also integrates the same within its system so that the company is able to compete against its competitors and maintain a strong competitive position in the market.

Artificial intelligence can also be used within the ecommerce businesses as virtual personal shoppers that assist the consumers to make smart decisions regarding their shopping. The rival of Amazon, Flipkart had introduced the messaging service known as Ping that works as shopping assistant, however, it was shut down in 2016 (Kakkar, and Monga, 2017). It was primarily powered by the AI technology for assisting the consumers in quickly discovering the items that they had been searching for. The home assistant of Amazon, Alexa, has also been enabled with virtual personal shopping assistant that offers the consumers with modern shopping experience and requires only verification of the voice patterns of the customers for processing the orders (Kakkar, and Monga, 2017). Therefore, AI has become highly important for the survival of the business processes of Amazon.

AI has been identified to aid in managing the online warehouse operations as well as the delivery processes. Amazon has already integrated the same within their businesses and therefore, it has become an integral part of the survival of its business (Kumar and Trakru, 2019). AI and machine learning have been identified to have the capacity of analysing the consumer behaviour on the websites itself. This utilises the training data sets that are based on the searching patterns and algorithms for predicting the kind of products that may be preferred by the consumers and thereby provide them with recommendations (Kumar and Trakru, 2019). The rival of Amazon, Flipkart is already the system and therefore, it is important the Amazon improves its recommendation engines so as to be able to enhance consumer experience on their ecommerce site.

The artificial intelligence technology is helpful in managing the inventory research and development of the pricing strategy, which otherwise require data scientists and is a very time consuming process. The AI and machine learning technologies are useful in managing these daily tasks and aid in generating highly automated processes (Lingam, 2018). For instance, the AI is useful in generation of purchase order for the products that are more in demand in the market. The AI then notifies the sellers regarding the products that are running out of stock on the real time basis. Furthermore, with the help of the AI technology, automated reports can also be developed with regards to the changes in the demands of the markets and therefore, the time consumed for the estimation of the stock reduces (Lingam, 2018). Therefore, the integration of AI and machine learning is significant for the business process of Amazon so as to survive in the modern competitive market.

The inventory strategies that can be employed with the help of integration of artificial intelligence include hybrid warehousing, outsourcing the e-commerce fulfilment, first in first out (FIFO), cross platform tracking, drop shipping and information regarding the real time inventory (Lingam, 2018). In the hybrid warehousing, a combination of third party stocking and self warehousing is employed, although the company has the authority of deciding the products that are to be kept in the warehouse of the suppliers and their own. Smaller products such as electronic gadgets, books and so one can be kept in their own warehouses, whereas the heavier products such as durables, are to be delivered from the location of the supplier. This method is helpful in moderating the costs of the supply (Lingam, 2018). These methods are highly helpful for the maintenance of the stock as well as management of the costs of the supply by Amazon and therefore, the company is required to integrate the same within their inventory management system so as to further enhance their business processes.

With respect to the retail ecommerce, outsourcing is considered as one of the successful methods of management of inventory. While outsourcing the inventory, the entire fulfilment process is handed over to another third party vendor for management (Lingam, 2018). First in first out (FIFO) is considered as one of the best adopted methods for the online retailers for managing their inventories in situations where they are required to sell the outdated products, the packing designs and product models are required to be optimised regularly to prevent the stocks from remaining on the shelves unsold (Lingam, 2018). The activities of the inventory across the multiple sales channels require centralisation. This is considered as one of the effective strategies of inventory management in identification of the sales channel that is in need of real time basis stocks (Lingam, 2018). With the help of these processes Amazon is able to provide priority deliveries to the consumers within limited period of time and therefore, the application of AI in the business processes of Amazon is of high significance.

With the help of drop shipping, the retail ecommerce is able to maintain a better relationship with those suppliers who are responsible for maintaining the inventory and the items that are to be purchases as soon as the order has been placed. The drop shipping aids in efficiently sharing the information between the suppliers and merchants regarding the real time order, inventory and invoice (Lingam, 2018). Real time inventory information is considered as the backbone of the effective inventory management systems. The data of the sales are needed to be updated in a periodic manner. The information of real time inventory can be shared directly with the customers in the section of "In Stock" in the ecommerce website (Lingam, 2018). Such services are already present in the ecommerce site of Amazon, whereby the consumers are able check if any particular product is in stock or is out of stock.

4. How your chosen business uses Artificial Intelligence?

Use of Artificial Intelligence by Amazon Australia

The approach to artificial intelligence that is used by Amazon is called as flywheel. With respect to the terms of engineering, flywheel is considered as a deceptively simple tool that has been designed for effectively storing the rotational energy (Morgan, 2018). The flywheel works be storing the energy during the time the machine is not working at the constant level. Instead of wasting the energy by turning the device on and off, the flywheel maintains the energy at constant and thereby spreads the same to the other areas of the machine. The flywheel approach is used at Amazon for maintaining the innovations and encouraging the knowledge and energy spread to the other areas of the organisation (Morgan, 2018). The flywheel approach of Amazon implies that the innovation across the machine learning in any area of the organisation fuels the efforts that are made by the other teams present in the organisation. These teams utilise the technology for driving their products that influence the innovations through the entire company. Fundamentally, what is developed or created in any one part of Amazon essentially acts as a catalyst for the machine learning and AI growth in the other areas. Amazon is one of the initial companies who had applied the AI technology for driving the product recommendations (Morgan, 2018).

The AI systems that are used at Amazon allows the company in deliver the consumers with their orders in the most efficacious possible manner. A major component of the system is the relationship that exists between the individuals who work at the warehouses of Amazon, otherwise known as the fulfilment centres, and the systems that are guided by machine learning and AI (Karlinsky, 2019). Amazon utilises the systems of predictive analysis using the AI technology for powering up its supply chain. The machine learning and AI system is utilised by Amazon for predicting the demands of the product prior to making the purchase and thereby stocking the warehouses. The major components that are considered for the AI systems of Amazon for the predictive analysis comprises of the people power, data and the collaboration with business partners (Clark, 2019).

The voice assistant Alexa is considered as the number one voice assistant and has been designed such that it replaces everything else. The goal of Alexa is to provide the consumers with the opportunity of seamlessly purchasing everything (Ward, 2018). Alexa was initially developed as Echo and this later was developed further that resulted in Alexa as Echo was unable to provide the services of far field speech recognition. Due to this, Alexa has become the number in voice assistant and Amazon has been attempting towards making it further improved version so that it can be free from any kind and provide the consumers with the best quality seamless services.

Conclusion and Recommendation

Artificial intelligence has been identified to offer the ecommerce to offer efficient services to the consumers as well as manage their inventories. The recommendations that can be offered to Amazon regarding the application of AI for improvement of their business process would be the inclusion of credit scoring that would allow the company in identifying the default probability of the consumers. Such systems of credit scoring have already been in practice in the ecommerce businesses of Germany and offers pre-risk check to the risk management system of the organisations (Vanneschi, et al., 2018). Therefore, this should also be included within the business processes of Amazon for its better operations. Furthermore, by using AI, advanced performance of logistics operations can be achieved and therefore, this should be integrated by Amazon in their business processes.

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