Future Trends of E-Commerce with AI: Comparison between Developing and Developed Countries

Introduction 

The beginning of the digital era has brought about fundamental alterations like trade. The E-commerce business has grown from a fledgling fad limited to a few technologically competent nations to a worldwide phenomenon that simplifies buying for billions of people. But the development of the internet didn’t end there. With the introduction of artificial intelligence (AI), the world of e-commerce is witnessing yet another radical upheaval that promises improved personalization, effectiveness, and innovation. Developing countries are just a little behind developed ones in adopting AI-driven E-Commerce models according to their distinctive market dynamics and digital trajectories and their advanced technology infrastructure.

This study tries to delve deeply into these changes by contrasting the adoption, difficulties, and prospects of AI in E-Commerce across established and emerging economies. It does so to offer insights into the future of a market that is more interconnected but also more diverse than ever.

E-Commerce

Since its initial description in the 1980s, e-commerce has evolved into a global trend and is now one of the most active online activities. The development of the internet and the enhancement of technology have made a huge impact on consumer behavior. Currently, the E-Commerce industry is worth US$3.64 trillion. 

E-commerce, short for electronic commerce, is an online platform where sales transactions of physical goods occur between a business and the end consumer (B2C). This emphasizes that the purchases occur via desktop/laptops and mobile phones, through accessing a website or an application. The E-Commerce Market includes all types of businesses belonging to a wide range of industries that have an online presence and are selling their products online. It also includes businesses with a physical presence; that is, they can sell their products online. The rise of E-Commerce has enabled businesses to reach customers all around the globe, which not only increases their sales but also their innovations and research and development to keep pace with their competitors.

E-commerce has brought many advantages to not only businesses but also to consumers. A few of them are listed below in the form of a diagram.

E-commerce is the result of economic, scientific, technological, and cultural development. The development 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. As the usage of the internet is increasing, the E-Commerce industry is also increasing and providing a competitive advantage to all the seller who are selling their products online. Not only that, but consumers are also changing rapidly and are demanding different products, which is becoming challenging for businesses. Hence, all the businesses that keep their products up to date according to consumer needs and demands are successful.

Artificial Intelligence:

AI is the discipline that aims to understand the nature of human intelligence through the construction of computer programs that imitate intelligent behavior. Developers have successfully applied AI techniques in numerous fields such as science, engineering, education, and business. As technology advances at an accelerated pace, people worldwide are adopting AI. In recent years, experts have employed AI in knowledge-based systems for recommendations.

However, currently, AI has evolved a lot, and it has become more human and more capable of solving problems, learning, manipulating objects, and navigating physical space. 

Many different industries and businesses have adopted Artificial Intelligence due to its advancement. E-Commerce is one of those industries which are adopting the use of AI. For example, currently, AI is being used by many auction-based websites to automate systems for businesses. 

E-Commerce in Developing and Developed Countries

Though the e-commerce industry is having a huge impact all over the world, however, its impact in developing countries and developed countries differs from each other. If we see the graph below, it shows that most of the developed countries had the most sales growth in the retail industry in 2023.

E-commerce Business has a huge impact on both Developing countries and Developed Countries, but what it’s bringing to both types of countries is not the same. E-commerce transactions have different benefits to both developing countries and developed countries. For developing countries, E-Commerce has brought a way by which they can boost their economy.

In the last few years, E-Commerce transactions have rapidly grown in developing countries. As the vast number of population is exploring and adapting to the online shopping. This has been increasing at a rapid rate in the last decade as the use of smartphones has increased. Because of this, the majority of e-commerce businesses are adopting the mobile-first strategy. This is where they provide mobile-based applications or websites first to grasp the customers in these developing countries.

However, developing countries are adopting the E-Commerce Industry and online shopping. However, a lot of countries still prefer to pay in Cash. Hence, the E-Commerce industry cannot let go of the Cash on the Delivery system as of yet, as this might lead to losing customers. The graph below shows the list of countries where cash payments are still being preferred.

Though the E-Commerce Industry is growing rapidly in developing countries, they still have many issues that they are facing. A few of these issues are shown in the diagram below:

Infrastructure: 

Unlike developed nations, developing countries do not have good infrastructure to handle the E-Commerce Industry, that is, they do have internet access, but the connectivity is bad, which makes the businesses have issues while handling their websites, customers, and poor communication with logistics. However, they do try to overcome these issues by outsourcing their logistics or by using local facilities. 

Trust Issue: 

Though developing countries are adopting online shopping, a few customers still don’t trust the transaction processes, especially first-time customers. Many customers face concerns regarding payment security, product authenticity, and the reliability of returns and refunds when shopping online. So It is important for E-Commerce Firms to gain Consumer Trust.

Cultural Diversity: 

Because emerging countries have such a wide range of cultural, linguistic, and geographical variety, e-commerce platforms must prioritize localization. Offering regional language interfaces, curating product lines that appeal to local tastes, or even altering marketing efforts to fit local festivals and customs are examples.

Just as the E-Commerce Industry plays a vital role in developing countries’ economies, it also has an impact on developed countries as well. In developed nations, most individuals have integrated e-commerce platforms into their daily lives. The rapid increase in the use of smartphones has significantly impacted people in developed countries to shift towards online shopping for even the smallest product. 

Developed countries have advanced infrastructure, which helps the E-Commerce industry in these countries to be more competitive. There are proper measures for logistics for E-Commerce businesses in more developed countries. Having a robust transportation system helps businesses to fulfill their orders accurately and efficiently. Moreover, they have more diverse payment methods, giving customers multiple options. Having digital wallet systems and contactless payment systems boosts customer satisfaction, and they feel safe in using online transactions.

The graph below shows different types of e-commerce product revenue growth in 3 different Developed Countries.

Another graph below shows the revenue generated by Canada in US Dollars. 

Though developed countries have better infrastructure and facilities to cater to the E-Commerce Industry, e-commerce businesses still face a few challenges. A few of them are shown in the diagram below:

Cybersecurity: 

Many small businesses lack proper measures to defend their websites against cyber-attacks, leading to problems such as stolen customer data and increased website downtime.

Product Liability:

 As sole proprietors usually run these businesses, they are liable for any kind of damage done by their products, marketing, or any other manufacturing-related activities. Most businesses don’t have proper legal teams or personnel to look at these things, which results in owners being unable to handle such claims or actions taken against them. 

Violation of Intellectual Property: 

Most small businesses use images from online platforms for displaying their products, which also results in lawsuits.

Comparison between E-Commerce Platforms

The E-Commerce Industry has been growing rapidly all around the globe in the last decade. Currently, there are multiple different platforms and applications for customers to use for online shopping and other activities such as cloud storage, website development, purchase and selling of used and new products, etc. The graph below shows a few e-commerce platforms with the highest market cap worldwide.

The graph indicates that Amazon holds the majority of the Market Cap, positioning itself as the top E-Commerce Company. Whereas the second best company is Alibaba, which has a Market Cap of US$615 Billion, making it less than half of Amazon’s Market Cap.

Adoption of Artificial Intelligence in the E-commerce Industry

Artificial intelligence can take several forms. When it comes to software artificial intelligence, this includes so-called virtual assistants, image analysis software, search engines, and speech and face recognition systems. Artificial intelligence built into material devices includes robots, self-propelled cars, and drones. 

AI Assistance:  

Artificial Intelligence in E-Commerce is mainly used in assistance. It helps in interacting with customers in their small queries. Also, it helps consumers find suitable products, check the supply situation of products, compare various products, and help consumers pay.

Optimal Pricing: 

Artificial Intelligence can continuously evaluate market dynamics and change the competitive environment to solve the problem of optimal pricing according to Customer behavior. 

Intelligent Logistics: 

Intelligent Logistics uses information technology to make logistic equipment and controls mechanically intelligent. This helps in replacing people with technology.  In the face of continually changing demand and competitive marketplaces, forecasting inventory is difficult. However, artificial intelligence and deep learning algorithms can discover the important variables of the order cycle and quantify the effect of these factors on turnover and inventory through the model. Machine learning systems benefit from becoming wiser over time, making it easier for firms to estimate inventory demand.

Customer Relationship Management: 

Artificial intelligence in e-commerce can forecast how customers will act when shopping, what items they will pick, and how the organization can create and maintain the greatest possible connections with them. A corporation may use artificial intelligence to gather data on customer satisfaction and carefully plan how to respond to client demands and expectations, independent of time or scenario.

Visual And Voice Search In E-commerce

Another method that is commonly used by E-Commerce companies is Visual and Voice Search. Visual and audio searches are based on image and sound processing algorithms. Customers do not need to type keywords in the search; instead, they may use a picture or voice to find the goods. Instead of a standard word search, a potential buyer utilizes an image or photo as input in a visual search. The consumer selects an object or text or uploads a picture, which the search engine recognizes and displays in the search results. Users can utilize spoken language as input for voice search. Once the machine transcribes a voice inquiry, it displays the results. The graph below shows customers’ usage of Visual and Voice Search usage for different categories of products.

Comparing the E-Commerce Industry before and after adopting Artificial Intelligence reveals a significant revenue increase for E-Commerce businesses using AI. This can be seen in the graph below.

As the graph above shows, from 2016-2020, the use of Artificial Intelligence was so low that very few companies were able to generate revenue by using it. However, after 2020 it skyrocketed till 2023; it also shows the future trends that are to be expected in 2024 and 2025. 

According to the graph above, it shows that overall E-Commerce businesses have generated around US$ 21 billion in 2023, which is a lot more than US$ 2 Billion in 2016 when Artificial Intelligence was just introduced in this market.

Conclusion

The development of e-commerce was a watershed point in the sphere of trade and commerce, but its convergence with Artificial Intelligence (AI) is what is presently determining the industry’s future. Developed nations have smoothly integrated AI into their e-commerce landscapes, giving enhanced customer experiences through sophisticated recommendation engines, optimal pricing, and superior logistical solutions. Businesses use AI not only as a tool but as a revolutionary force, even as businesses face obstacles like cybersecurity risks and intellectual property issues. In contrast, underdeveloped nations, while quickly adopting the e-commerce trend, confront fundamental hurdles such as infrastructural gaps, cultural differences, and persistent trust concerns. Nonetheless, the rise of mobile-first tactics in these countries implies a booming potential and a developing market ready for AI integration.

As the involvement of AI in e-commerce becomes more prominent, it’s clear that this synergy has both improved customer experiences and increased income streams for businesses. The revenue trend beyond 2020 attests to AI’s massive influence on e-commerce. While specifics remain uncertain, the future promises a tighter integration of AI and e-commerce, introducing more personalized shopping experiences, innovative business strategies, and new challenges. Both industrialized and emerging countries, albeit at different rates, are on the verge of a thrilling digital transformation fueled by the convergence of business and cutting-edge technology.