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Artificial Intelligence and Machine Learning in the Context of E-commerce: A


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Artificial Intelligence and Machine Learning in the
Context of E-commerce: A literature Review

Richard Fedorko1[0000-0003-3520-1921], Štefan Kráľ2[0000-0002-0584-3934] and Igor Fedorko3[0000-


0003-1974-7465]

1 Faculty of Management and Business, University of Presov, Prešov, Slovakia, Corresponding


Author
richard.fedorko@unipo.sk
2 Faculty of Management and Business, University of Presov, Prešov, Slovakia

stefan.kral@smail.unipo.sk
3 Faculty of Management and Business, University of Presov, Prešov, Slovakia

igor.fedorko@unipo.sk

Abstract. Artificial intelligence is now becoming increasingly popular as the


development of information and communication technologies continues to ad-
vance. The goal of companies operating in e-commerce is to influence customer
behavior and prompt customers to purchase selected products. It is the use of
innovative tools of artificial intelligence in the field of e-commerce that may
seem like the right step forward. The paper aims to provide an overview of the
issues of e-commerce, machine learning, artificial intelligence and their bene-
fits. The aim is also to appraise the importance of artificial intelligence, ma-
chine learning and their purpose in the context of e-commerce based on availa-
ble studies on this issue.

Keywords: Artificial Intelligence, Machine Learning, E-commerce, Electronic


Commerce.

1 E-commerce, Artificial Intelligence and Machine Learning

The modern information age has brought along new possibilities, software and tech-
nological innovations that could be used in marketing and shopping. New technolo-
gies lead companies to think creatively, help raise the quality, efficiency, and cost-
effectiveness of services offered by organizations [1,2]. Current trends in creativity
are mainly based on the development of information and communication technolo-
gies, which extensively affect the advancement of the business environment [3]. One
of the sectors where the digital transition and the significance of electronic commerce
is principally pronounced is retail, where digital tools, for instance websites largely
replace or complement traditional commerce [4].
2

1.1 Meaning of E-commerce

The Internet advancement and the progress of digital technologies have led to mod-
ification of consumer habits. Nowadays, people are more and more using e-commerce
to shop instead of visiting brick-and-mortar stores in person [5].
Electronic commerce/ e-commerce takes place in the online environment of the In-
ternet, with the Internet being considered a single platform that connects the seller and
the buyer [6]. According to Ullman [7], e-commerce includes all commercial transac-
tions carried out online. This can be described as digitally empowered business trans-
actions between companies and their customers [8].
Online purchasing is thus a type of electronic commerce in which consumers
browse the Internet and buy products or services directly from a retailer's website [9].
Online shopping is becoming a regular, everyday activity. In recent years, this way of
shopping has become very popular, especially because people appreciate the conven-
ience and ease of making a purchase from the comfort of their own home [10]. B2C e-
commerce is the most common type of e-commerce. Within it, merchants try to attract
and win individual customers. Over the next 5 years, B2C e-commerce is projected to
grow by 20% annually [11]. Online retailing is currently the fastest growing retail
channel with the fastest growing customer base and an ever-expanding range of goods
[12].
The advantages e-commerce brings to online retailers and customers are shown in
Fig.1 [13,14].

Fig. 1. Advantages of e-commerce for online retailers and customers.

E-commerce is the result of economic, scientific, technological and cultural devel-


opment. The progress of e-commerce is changing the way businesses do business as
well as consumer behavior, and is making a significant contribution to the progress of
the global economy [15]. As the importance of the Internet grows today, the adoption
3

of online commerce is a source of competitive advantage. It is necessary to monitor


trends in online shopping and changes in shopping behavior and preferences of online
shoppers in a rapidly evolving Internet environment. As a result, online retailers can
tailor their range of products and services to consumers' shopping habits and meet
their needs [16]. The implementation of e-commerce in the company requires a fun-
damental modification of current business models and business activities, as well as
the implementation and use of sophisticated digital technologies [17].

1.2 Meaning of Artificial Intelligence and Machine Learning

Innovations and more efficient application of technologies have led to the creation
of intelligent systems that can manage and control business models with limited hu-
man involvement [18]. The advancement of artificial intelligence has generated tre-
mendous economic benefits to humanity, to almost all aspects of life, and greatly
promoted social development and taken it into a new era [19].
Artificial intelligence is considered a new interdisciplinary technological branch of
science that advances theoretical approaches, technologies and applications for the
simulation and expansion of human intelligence [20]. The use of artificial intelligence
has been examined in sectors such as healthcare, business, education, manufacturing,
marketing and financial management [21,22,23].
Russell and Norvig [24] summarized the different definitions of artificial intelli-
gence systems within two dimensions. The first dimension is Behavior dimension =
Reasoning, which speaks of artificial intelligence as a system that think and act like
human. The second dimension is Rationality dimension = Human performance, which
speaks of artificial intelligence as a system that thinks and acts rationally.
Artificial intelligence can perform mental work by simulating and augmenting the
intelligence of humans. Artificial intelligence systems can work autonomously and to
some extent adapt their behavior based on the analysis of the previous steps [15,18].
Key generated artificial intelligence capabilities include prediction, planning, and
learning. More significantly, however, artificial intelligence abilities are not inde-
pendent - they mutually cooperate with human skills to generate business values in
view of efficiency and effectiveness [25]. Artificial intelligence has the potential to
transcend human intellectual and physical abilities, offering opportunities to increase
productivity and performance. In order for artificial intelligence to work best in the
company, it is necessary to integrate it with existing business processes [26,27]. Arti-
ficial intelligence can reliably perform computer tasks and automate repetitive learn-
ing. It is also able to analyze large amounts of data more accurately and get the most
out of them. Artificial intelligence adapts through progressive learning algorithms
which become a classifier or predictor [28].
Artificial intelligence systems should have capabilities such as information pro-
cessing for natural sounding communication, the ability to store and present infor-
mation, automatic reasoning - the use of stored data to respond to questions and reach
new inferences, machine learning to cope with new conditions and to discover new
patterns of behaviour [29].
4

At the heart of artificial intelligence is intelligent technology, which develops intel-


ligent tools – a process similar to human intellectual work. These tools are able to
react immediately upon receipt of control commands [15]. Other means of artificial
intelligence include expert systems, decision support systems or machine learning
[30]. One of the means used by artificial intelligence is fuzzy logic. It is a tool that
can display human action, process and interpret information and knowledge as if it
were performed by a human. The use of fuzzy logic in conjunction with artificial
intelligence enables better planning, objective professional evaluation and risk as-
sessment, rational decision-making and management. It can also help eliminate errors
associated with human factor failure [31,32].
Artificial intelligence has an irreplaceable role in the development of society and
has brought revolutionary results in the form of the advantages shown in Fig.3
[27,33].

Improving
work
efficiency

Creating Reducing
new jobs costs

ADVANTAGES
OF ARTIFICIAL
INTELLIGENCE
Optimizing
human Better
resources decision
structure making
Improving
product
quality

Fig. 2. Advantages of Artificial Intelligence.

The dynamic advancement of artificial intelligence in terms of its capability to de-


cide in complex and unpredictable situations in the production in the last few years
has been made possible mainly due to increased investments in innovative technolo-
gies and the accessibility of huge volumes of data [34]. Studies estimate that by 2030,
it is likely that 70% of businesses will use some form of artificial intelligence tech-
nology in their business processes and activities. Adaptation and introduction of arti-
ficial intelligence in companies in line with advanced technologies is projected to gain
in popularity [35].
5

1.3 Machine Learning as a Subcategory of Artificial Intelligence

In order for artificial intelligence systems to advance, they must be able to learn.
Machine Learning helps a lot here. Machine Learning is a combination of statistical
and mathematical models that intelligent systems use to perform their tasks. They will
do so without the need for a thorough input [36].
The history of Machine Learning dates way back. In 1952, a computer program
was created that could play a game of draught. In 1958, the first artificial neural net-
work was built. It was a machine learning algorithm which was based on the general
neuron structure of the human brain. Machine Learning evolved over the next dec-
ades. In 1997, IBM created the Deep Blue computer, which successfully defeated the
world chess champion [37].
Machine Learning is a subcategory of artificial intelligence (see Fig.4). It can be
described as a technique for proposing a series of sequential steps to solve a particular
problem (algorithm) that is automatically optimized based on experience with reduced
or no human involvement. These techniques can be used to find patterns in large data
sets from as diverse and innovative sources as possible [38]. Machine learning algo-
rithms are a group of computer algorithms that apply statistical tools to learn from
instances, called "Training data," in an effort to forecast new data, allowing the algo-
rithm to better capture difficult patterns in the data [39,40]. Machine learning algo-
rithms are designed in a way the machine attempts to learn on its own without being
explicitly coded for every individual instruction and relying on human experts [41].
Algorithms "learn" primarily by recognizing patterns based on as much data as possi-
ble. They then analyze the information and find the trends that are involved in it. Fi-
nally, the algorithm is "intelligent" enough to use what it has learned in the new da-
tasets [37].

Artificial
Intelligence

Machine
Learning

Deep
Learning

Fig. 3. Artificial Intelligence vs. Machine Learning vs. Deep Learning.

While artificial intelligence allows machines to imitate behavior of people, ma-


chine learning is a subcategory that applies statistical tools to allow machines to en-
6

hance the experience. Deep learning is a subcategory of machine learning and allows
the calculation of a multilayer neural network. It works on the basis of layers and uses
an artificial neural network, a design that is inspired by a biological neural network.
The human brain typically processes the received information and attempts to recog-
nize it based on the past information that the brain has recorded. The brain does this
by tagging and classifying information into different categories in a fraction of a mil-
lisecond. Deep Learning just takes data connections among all the artificial neurons
and modifies them following a data pattern. If the data size is too large, more neurons
are needed. It automatically offers multi-level abstraction learning, allowing the sys-
tem to learn to map difficult features without dependance on any particular algorithm
[41].

2 Role of Artificial Intelligence and Machine Learning in E-


commerce

Today, e-commerce is one of the industries that uses artificial intelligence to the best
of its ability by creating a huge customer base, trying to understand the needs of cus-
tomers, doing real-time research, coming up with final solutions to problems and
perform many other activities [35].
Table 1 outlines selected studies that focus on the role of Artificial Intelligence and
Machine Learning in E-commerce. It contains authors of the study, objective of the
study, study theme and main findings.

Table 1. Selected studies about Artificial Intelligence and Machine Learning in E-commerce.

Reference Objective Study theme Findings


Song et al. [15] To analyze the present situa- Artificial Intelligence in Artificial intelligence will be an
tion of the use of Artificial E-commerce essential driver of e-commerce
Intelligence technology in the transformation.
field of e-commerce
Soni [35] To analyze the use of Artificial Artificial Intelligence in
Artificial Intelligence can help peo-
intelligence in e-commerce E-commerce ple excel in their high sales and
business customer relationships in the ecom-
merce business.
Kar and Haldar To analyze specific integration Applying Chatbots to the Chatbots can help consumers find
[44] of Chatbots in the IoT sys- Internet of Things products, check order status, com-
tems pare products and connect them to
the customer support service staff.
Kumar and To present impact of Artificial Artificial Intelligence in Integration of Artificial Intelligence
Trakru [45] Intelligence in E-commerce E-commerce in E-commerce companies can help
create sophisticated solutions and
will impact transactions, customer
retention, satisfaction and efficiency.
Pallathadka et al. To discuss machine learning Artificial intelligence in The most common applications
7

[46] and artificial intelligence ap- Business management, include sales growth, profit maximi-
plications in e-commerce, E-commerce and Finance zation, sales forecasting, inventory
corporate management, and management, security, fraud detec-
finance tion, and portfolio management.
Zhang et al. [55] To explain how Artificial Artificial Intelligence in The key Artificial Intelligence capa-
Intelligence technology, peo- E-commerce bilities generated include forecast-
ple, and processes should be ing, planning, and learning. They are
managed to successfully gen- not independent – they cooperate
erate value with human skills to create business
value.
Shankar [56] To present a framework for Artificial Intelligence in Artificial Intelligence will allow
understanding Artificial Intel- Retailing retailers to improve their under-
ligence, outline standing of consumer psychology by
applications of it in various appoximating to what the consumer
aspects of retail and discuss the brain is thinking at any given mo-
perspective of Artificial Intel- ment.
ligence in retailing
Makridakis [64] To present changes caused by The Potential Effects of Relationship between artificial intel-
Artificial Intelligence, con- Artificial Intelligence on ligence and humans will strengthen,
trasts with the industrial revo- Businesses, Manufactur- companies will focus on creating
lution, the effect on developed ing, and Commerce values through collaboration be-
and developing countries, and tween the human workforce and
the dominant firms in Aritficial artificial intelli-gence tools.
Intelligence
Luo et al. [65] To study the impact of Artifi- Impact of Artificial Intel- Prior experience with AI induces
cial Intelligence Chatbot dis- ligence on customer more customer purchases and is
closure on customer purchases purchases helpful in reducing the negative
disclosure effect.
Loureiro et al. To give an insight into the Artificial Intelligence in Future trends in Artificial Intelli-
[68] current state of research in the Business gence are the development of ad-
field of Artificial Intelligence vanced automated systems, integra-
in the business context and tion of neurostimulators and na-
propose an agenda for further nochips into the brain, smart devices
research connected to Artificial Intelligence
systems.
Martinéz et al. To develop machine learning Prediction of online Important characteristics are number
[51] framework for predicting fu- consumer behavior by of purchases, mean time between
ture purchasing Machine Learning purchases, time since last purchase,
mean value of purchase.
Cui et al [52] To develop a good data-driven Prediction by Machine Predicting variables were sales,
model to forecast the quantity Learning time, product features, retailer, pro-
of returned products in the duction process and resources, mul-
future ti-product order and historical re-
turns. Sales are the most significant
variable.
8

Orogun and To develop Predicting model Prediction of online Important predicting attributes are
Onyekwelu [53] of Consumer Behavior in Digi- consumer behavior by invoice number, product code,
tal Market Machine Learning description of product (item) name,
quantity of purchase of each item
per transaction, invoice date and
time of each transaction., unit
price, customer ID and country.
Piramuthu [54] To develop a dynamically Prediction of supply The suggested framework automati-
configurable supply chain chain problems in E- cally shapes the supply chain dy-
framework using Machine commerce namically according to incoming
Learning orders and the constraints from
suppliers upstream.

2.1 Artificial Intelligence Use in E-commerce

Digital commerce has evolved over the years, and as customer demand and require-
ments continue to change, the involvement of artificial intelligence is now required.
Artificial intelligence technology is one of the driving forces of innovation in e-
commerce. By introducing artificial intelligence, online stores can not only streamline
the shopping process itself, make it easier for customers and avoid complaints or re-
turns, but also save the cost of running an e-shop. This technology offers a number of
benefits that allow owners to increase their chances of success in the highly competi-
tive environment of a growing number of e-shops [42].
Artificial intelligence can take several forms. When it comes to software artificial
intelligence, AI can take form of so-called virtual assistants, image analysis software,
text analysis software, search engines, and speech and face recognition systems.
When it comes to an artificial intelligence built into material devices, AI can take
form of robots, self-propelled cars or drones [18].

Multicriterial Text Analysis and Machine Translators.


Advanced Text Analysis is a tool that analyzes and processes the texts of all publicly
available user reviews. In practice, this means that after entering the product name in
the application, the user gets a summary of what they need to know about the matter
without having to search for and process reviews themselves. Text analysis comes at
hand in addressing customer requirements and their feedback. Advanced Text Analy-
sis allows for easy deciphering of the essence of notifications, whether it is a query to
the helpdesk, in the chat, or a response to the service in e-mails. Phrase translators are
now being gradually replaced by solutions based on neural networks, with the best
results being achieved by specialized models that are trained using Machine Learning
for specific areas [42].

Artificial Intelligence Assistants - Chatbots.


The e-commerce website is accessible to shoppers 24 hours a day, 7 days a week,
with 24-hour customer support by virtual assistants/ chatbots. The primary function of
9

the chatbot is to automatically answer customer queries, react to simple voice com-
mands, and give product recommendations using a natural language processing sys-
tem. Chatbots can also be defined as a type of software application that uses artificial
intelligence to conduct an online conversation via text or voice media with consumers
visiting a given website or application. Chatbots are able to respond to customer ques-
tions and requests, can help consumers find suitable products, check order status,
compare different products and help consumers pay for their orders. In case of com-
plaints or questions, they will direct customers to the customer support service staff
who will take over the issue [15,43,44].

Recommendations Tool.
Using an artificial intelligence algorithm, it is possible to do statistical programming,
forecasting and analyzing the behavior of consumers and huge data sets to anticipate
which products could interest potential customers. From recent searches by prospec-
tive customers, the algorithm can capture key information of the searched product.
The recommendation tool then generates appropriate suggestions for the search en-
gine and displays what will ultimately help customers find the product quicker
[15,45,46].

Visual and Voice Search.


With the help of artificial intelligence, it is possible to implement visual and audio
searches on websites. Visual and voice search is based on image and sound pro-
cessing algorithms. Customers do not need to enter keywords in the search, they can
search for the product using an image or voice [45,46]. In a visual search, a potential
customer uses an image or photo as input instead of a regular text search. The cus-
tomer takes a certain object or text or uploads an image which is then recognized by
the search engine and displayed in the search results [47]. Voice search allows users
to use spoken language as an input and find results by transcribing a voice query.
Voice search is based on intelligent natural speech recognition and processing tech-
nologies. At the output, the user has either a spoken answer or relevant results in the
form of text or images [48].

Customer Relationship Management.


Customers are an important part of an e-commerce business. In the past, companies
used employees to manage customer relationships. Nowadays, artificial intelligence
systems are becoming more and more popular. Artificial intelligence is able to predict
how consumers will behave when shopping, what products certain groups of custom-
ers will choose and what steps should the company take to build and maintain the best
possible relationships with its customers. Using artificial intelligence, a company can
gather information about customer satisfaction and carefully plan how to respond to
customer needs and requirements, regardless of time and situation. Artificial intelli-
gence helps people build a balanced environment in which man and machine work
together to make a profit and sell [35,46].
10

2.2 Machine Learning Use in E-commerce.

Machine Learning is used in the e-commerce business to optimize prices, segmen-


tation, personalization and targeting of customers, search results, product recommen-
dations, predictions of customer behavior, automatic completion of site search, A / B
testing, inventory management, customer support, strengthening omnichannel market-
ing, fraud protection and image and sound recognition and processing [49,50].
Machine Learning offers a number of benefits (Fig.4), especially for online retail-
ers. The capability of algorithms to understand a wide range of data is invaluable.
Machine Learning helps increase conversions, run more relevant campaigns, im-
proves internal operational efficiency, improves decision-making, helps with person-
alization, fraud detection, and improves customer service [37,49].

Increased
conversions
More
Better fraud relevant
detection campaigns

ADVANTAGES
Better FOR RETAILERS Better
customer internal
service efficiency

Better
Better
decision-
personalization
making

Fig. 4. Advantages of Machine Learning for Retailers.

Martinez et al. [51] in their study focused on the development of the Machine
Learning Framework, which focused on predicting customers' shopping behavior over
the next month. The main attributes they used were the number of purchases, the av-
erage time between purchases, the time since the last purchase, and the average value
of the purchase. Cui et al. [52] developed a model using Machine Learning, aimed at
predicting future product returns. They examined the variables of sales, time, product
characteristics, vendor, production process and resources, order of several products
and historical revenues, with sales proving to be the most significant attribute. Orogun
and Onyekwel [53] also developed a model for predicting consumer behavior using
Machine Learning. The predictive attributes they used included invoice number, in-
voice date, transaction time, product code, product description, price, customer ID,
and country. In his research, Piramu-thu [54] focused on the development of a model
11

that would use Machine Learning to predict supply chain problems when placing an
order, taking into account the supplier's options.

2.3 Perspective of Artificial Intelligence in E-commerce

Human intelligence often seems to be limited in performing certain tasks in e-


commerce. This concerns in particular the forecasting of demand and supply chain
mechanisms. It is in these cases, which pose a serious challenge for businesses, that
artificial intelligence appears to be an appropriate tool [55]. Shankar [56] states that
artificial intelligence helps increase the profitability of e-commerce through all avail-
able tools, helps improve personalized referrals and payments. It also improves cus-
tomer relationship management, logistics management and inventory optimization.
Artificial intelligence technologies have been integrated into marketing and retail,
where Big Data analysis is applied to create personalized profiles of customers and
predict their shopping behavior. Understanding and forecasting the demand of shop-
pers through integrated supply chains is more important nowadays, and artificial intel-
ligence technology is expected to be an essential indispensable feature [57]. The ad-
vancement and application of artificial intelligence requires a high level of acceptance
of this technology in the future. With it, traders can match product information with
information that consumers are looking for in order to assure the efficient consump-
tion of products or services [58,59].
Juniper Research [60] reports that the demand forecast using artificial intelligence
will increase between 2019 and 2023, and that chatbot interactions will reach 22 bil-
lion from the current level of 2.6 billion over the same period. This research under-
lines that organizations are investing extensively in artificial intelligence to enhance
trend analysis, logistics planning and inventory management. Innovations based on
artificial intelligence, like Virtual Mirror and Visual Search, are tailored to boost in-
teractions with customers and reduce the disparity between physical and virtual shop-
ping experiences.
According to forecasts made by the consulting company Gartner [61], most organi-
zations that use artificial intelligence on their e-commerce platforms are projected to
achieve an increase in customer satisfaction of at least 25% by 2023. This will also be
accompanied by an increase in revenues and a reduction in costs. By 2025, it is also
expected that 70% of companies will be forced to focus on small data instead of big
data.
Scientists say it is likely that the relationship between artificial intelligence will
lead to cooperation with humans rather than to the replacement of humans. An im-
portant step to success is to create partnerships in which artificial intelligence works
and predicts while humans clarify and decide on appropriate measures [62,63,64].
The great potential of artificial intelligence is unquestionable, but many challeng-
es still need to be met in order for solution to be put into practice. Shankar [56] rec-
ommends researching the consequences of the unintentional impact of artificial intel-
ligence on customers. Luo et al. [65] recommend that attention should be paid to re-
search on improving bots and eliminating their shortcomings, as that could strengthen
consumer confidence. They also state that businesses should focus on streamlining the
12

use of artificial intelligence in social networking. According to Moriarty [66], the


connection between artificial intelligence and virtual reality applications should be
researched as well. According to Tousignant [67], further research should also focus
on examining the relationship between artificial intelligence and online evaluations, in
particular the identification of false reviews.
Kumar and Trakru [45] point to possible risks and challenges for e-commerce
companies that constrain the efficiency and effectiveness of artificial intelligence in
fulfilling business expectations. For this reason, it is necessary to explore the possibil-
ities and opportunities in view of the changing requirements of consumers in e-
commerce. In order to support progress in research on the application of artificial
intelligence in the business sector, it is necessary to examine the effectiveness of arti-
ficial intelligence in a multidisciplinary context. Based on comprehensive knowledge,
experts and researchers will be able to set priorities and tasks to manage effective
investments in important aspects of artificial intelligence, including e-business [68].

3 Conclusion

The aim of the paper was to outline the essence of e-commerce, artificial intelligence,
machine learning and the benefits they bring. The paper also provides an insight into
the evaluation of the importance of artificial intelligence, machine learning and their
use in the future in the context of e-commerce based on an overview of available stud-
ies on this issue.
In the current world of commerce and digital technology, people use the Internet
every day, are willing to test new products and brands, but at the same time they are
critical in this regard. In this case, e-commerce seems to be a suitable way to satisfy
their requirements. The use of artificial intelligence and its tools in electronic com-
merce has become the subject of interest of many scientists and business experts.
Previous research has highlighted the need for further research that would contribute
to the development of knowledge and strategies in the application of artificial intelli-
gence in e-commerce. It is expected that artificial intelligence will continue to be used
in electronic commerce and will become an integral part of all e-commerce compa-
nies.

Acknowledgments

This paper is one of the partial outputs under the scientific research grants VEGA
1/0609/19 “Research on the development of electronic and mobile commerce in the
aspect of the impact of modern technologies and mobile communication platforms on
consumer behavior and consumer preferences” and VEGA 1/0694/20 “Relational
marketing research—perception of e-commerce aspects and its impact on purchasing
behavior and consumer preferences”.
13

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