How Amazon Is Using AI To Better Understand Customers

amazon drone delivery

Amazon always had a competitive edge in adopting AI to increase the efficiency of its business operations since it was an early adopter of artificial intelligence and automation. It has been putting a lot of effort internally while also utilizing AI to improve its customer experience.

By automating the ability to predict consumer demand, evaluate product availability, optimize delivery routes, and customize customer communications while tracking the entire supply chain, Amazon uses AI to increase supply and make sense of the data.

The company uses artificial intelligence to calculate the number of units of a product it predicts customers will buy and to forecast customer demand and product availability. This then influences where the product is stocked to ensure that it is as close to the potential customers as possible.

Personalized communications: As the source of 35% of Amazon’s revenue, AI plays a significant part in the recommendation engine. The recommendation engine customizes the list of products clients might be interested in buying by gathering information from specific customer favorites and purchases.
Optimize delivery use: The transportation execution procedures take control after a shipping label is applied to the package and apply machine learning to identify the package’s best path from point A to point B. Depending on the shipping method, speed of delivery, and location, the package is subsequently delivered to a trailer that is standing by.
Ensuring one-day delivery: For one-day shipping, machine learning and optimization algorithms improve each warehouse procedure.
“When most people see an Amazon Fulfillment Center, they picture all the items that are stored inside. According to Russell Allgor, Chief Scientist for Amazon Worldwide Operations, when I look at it, I see data.

Alexa voice assistant, which enables Amazon Web Services users to use cloud-based resources, enables customers to pick up things and rapidly leave the Amazon Go store while instructing the robot to charge. Alexa is provided by Amazon as an alternative performance and learning capability. The personnel at the fulfillment center receives direct deliveries of product shelves, among other things. Although this technology is crucial to Amazon’s large business, its application is still staggering.

Workers walk to cast their votes over whether or not to unionize, outside an Amazon warehouse in Staten Island on March 25, 2022. (Photo by Ed JONES / AFP) (Photo by ED JONES/AFP via Getty Images)

The foundation of Amazon was built around data and has one of the largest hosting platforms known as AWS. The team had to create a data set in order to train the system, which was the first step of the procedure. Based on frequent product inquiries, the team compiled a list of 173 context-of-use categories that were split into 112 activities (such as reading, cleaning, and running) and 61 audiences (like a child, daughter, male, and professional).

They developed names for the terms they used to represent the categories using common reference books. For example, they put terms like “dad,” “daddy,” and “pops” under the category “father,” or they included terms like “mum,” “mommy,” and “mom” under the category “mother,” and then they utilized their own information to correlate millions of their items with specific query strings.

Additionally, they looked through internet reviews of their items to categorize and alias them, a process known as simple binary classification. Affinity scores, which range from 1 to 15, are used by Amazon’s internal dataset to associate query phrases with products. A low score denotes a poor correlation. However, to train their context-of-use predictor system, Amazon researchers developed a different set of data in which each entry was marked with three data items: a query, a product ID that was added by context-of-use categories, and the affinity score obtained from the in-house dataset.

Amazon Recommendations
Amazon product recommendation

By effectively anticipating customers’ requirements through tailored product recommendations, Amazon is able to maintain its current level of customer satisfaction while while gaining a larger part of the market. Item-to-item collaborative filtering is the basis of Amazon’s recommendation engine.

Researchers who worked on Amazon’s recommendation system wrote in a report that the algorithm matches each user’s prior purchases to related products. It then creates a recommendation list for each user using these related products. Instead of providing recommendations based on the purchases of other customers who are similar to the user, the goal is to produce recommendations that are more closely matched to what the user is likely to purchase.


A consumer will get different recommendation headers as soon as they sign in. They will be directed to another page where their tailored product recommendations are listed and may be filtered by several factors, such as product category, customer ratings, and more, when they click on one of these headlines, such as “Recommended for You.”

This is just one illustration of the numerous ways in which customers are given recommendations on the Amazon website, mobile application, and even emails.

Amazon

Amazon uses product recommendations to generate purchases before the user even decides what they want to buy. But what if a consumer does discover? What happens when a consumer looks for a particular product?

42% of the time when a customer uses Amazon’s search box, they click over to a purchase. In contrast, only 16% of consumers who conduct product searches on Walmart ultimately make a purchase. Even terrible are Best Buy and Etsy. Only 13% and 12% of their customers’ queries result in clicks, respectively.

When clients expressly want certain things, it should be simple to deliver them. This is obviously not the case in reality.


Why is Amazon so effective at search? As it turns out, Amazon employs over 800 engineers that are skilled in search relevancy. These AI-savvy experts spend their entire day figuring out how to use natural language processing to comprehend the meaning of client queries, statistical analysis to evaluate the relevancy of potential results, and web activity to understand the context of searches.

Amazon is able to employ AI to turn 3x more searches into sales than their rivals, showing that all of that labor is well worth it. According to Amazon’s sales volume, this translates to an extra $800 million in revenue each month, or around $10 billion annually, from the company’s AI-enhanced search tools.

Amazon AI

Amazon is able to match the appropriate products with the right customers owing to its precise suggestions and robust search. Since 89% of consumers say they are more inclined to purchase goods from Amazon than from any other platform, it is clear that this has won over users to the website. What is sometimes forgotten, though, is how appealing this makes Amazon to advertisers.

Amazon possesses the two key elements that advertisers seek. One, a sizable and devoted consumer base that may be targeted by marketers. Additionally, it excels at acting as a matchmaker by directing adverts to the appropriate customers using AI.

Amazon is used by advertisers to promote their goods on a pay-per-click basis. It’s a victory for marketers who are certain that their products are only being displayed to browsers who have a high possibility of purchasing, and it’s a major win for Amazon because the corporation gets to double-dip on sales. In addition to making billion-dollar sales, Amazon also receives billion-dollar payments for doing so.

This profitable advertising industry has been expanding quickly. Amazon is on track to generate $20 billion in “other” revenue by the end of 2020, a category largely made up of money from advertisements. This means that in addition to the approximately $60 billion in sales that Amazon’s AI suggestions and improved search generate, $20 billion more in potential revenue is made possible by AI-targeted marketing.

Amazon Alexa
Voice based shopping using Alexa

Instead of clicking or touching on a screen, Amazon claims that its voice assistant Alexa enables users to browse products, make purchases, and navigate the checkout process. According to Amazon, this enables users to manage their checkout process without having to use their hands.

Overall, this AI tool intends to make Amazon shopping more convenient for users, from making a shopping list to getting Alexa recommendations. By retaining a lead in convenience for customers, Amazon can use this investment in AI to try to further cement its position in the market. Amazon describes the general operation of Alexa by saying that:

Built-in technology on [Alexa-enabled] devices compares what you’ve said to the audio patterns of the wake word. The device sends your request to Amazon’s secure cloud when it discovers the wake word, and the cloud’s more potent capabilities validate the wake word as your request is being processed. Your request is confirmed, and you receive a response. For instance, when you ask Alexa to play the top songs from Amazon Music, we record your request and play the top songs for you on your device using the information from Amazon Music.

When new Alexa-enabled gadgets were released in 2018, Amazon researchers wrote about Alexa’s capabilities. They described how the “voice-only model,” which recognizes and groups utterances based on two criteria they refer to as “intent and slot,” is one of the ways the Alexa team trains the neural networks. The action the user wants Alexa to take is related to intent, and the slot provides the model with more information about intent.

For instance, the recognized intent for “play” in relation to a movie would be “play” if a client asked an Alexa-enabled device to play Harry Potter. The consumer would specify “Harry Potter” as the name of the movie they would like the Alexa-enabled device to play in the slot value instead.

The machine learning process behind Alexa-enabled voice shopping is similar. Once Alexa is activated, the user can start naming things they want to look up, purchase, or add to their shopping list. Customers who use Alexa voice shopping can view a written version of their shopping list in the Alexa app and make modifications at a later time.

According to David Limp, Senior Vice President of Devices and Services at Amazon, more than 100 million Alexa-enabled items have been sold globally since their original release in 2014. Despite this assertion, our secondary research did not turn up any quotes from the firm regarding the growth rate of Alexa-enabled product purchases as of 2021.

Amazon automated robots processing orders

A group of Amazon orange robots are dancing deep inside the 855,000-square-foot logistics facility of the online retailer in Kent, Washington, 18 miles south of Seattle. Each orange machine has a yellow pod on top with nine rows of shelves for product packing on either side. Each robot will now immediately start working when someone places an order on Amazon.com in the Pacific Northwest thanks to artificial intelligence, and each robot can now autonomously avoid other robots to get to the terminal end. A gated robot park where staff members pick up problematic items, put them on a conveyor belt, and send them off to another team member who packs them in boxes.

High efficiency is crucial for processing orders on Amazon. Every year, there are millions of new orders, and even a small improvement in savings per purchase can have a significant impact on revenue.

Amazon Go
Amazon's in house store. Amazon Go

Customers now have new options owing to Amazon’s cutting-edge retail store, which launched last year. Customers can now use their cellphones to browse products, choose what they want, and check out without having to wait in huge queues. In order to give customers useful information, Amazon GO—the first easily accessible store in the tech giant’s history—makes considerable use of computer vision and in-depth learning techniques.
The full store, which sells everything from groceries to ready-to-eat meals, can be accessed with an Amazon account and the simple-to-install Amazon Go app. Prior to January of this year, the test was exclusively accessible to Amazon workers.

Amazon Go uses artificial intelligence, computer vision, and data from several sensors to ensure a flawless experience for customers, and it has a huge plan to create more than 20,000 outlets in the coming days.

Amazon featured image
Amazon delivery person delivering products

Amazon Logistics aims to provide customers with a different choice for same-day shipping and delivery. But only Prime members are eligible for these perks. These benefits are also available to non-prime members, but only after making an extra payment.

Deliveries are made every day of the week, from early morning to late evening, making it ideal for packages that require a signature. Every delivery person is treated as a third-party service provider hired through Amazon.

Amazon Shipping
Amazon One day Shipping

As Amazon continues to improve its algorithms, customers shopping on Amazon will see increasingly relevant shopping recommendations. Such a study, in the opinion of Amazon, may create entirely new opportunities for customized digital assistants. It is remarkable to watch how Amazon keeps surfacing with inspiring innovations to improve the customer experience in this dynamic world when digital titans are still battling internal bureaucracy and technological barriers.

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FAQ's

Amazon utilizes AI algorithms to analyze vast amounts of customer data, including browsing history, purchase behavior, and interactions with the platform. This data helps Amazon predict and recommend products tailored to individual preferences.

Machine learning algorithms power Amazon’s recommendation systems, enabling the platform to learn from past interactions and continually improve its understanding of customer preferences. These algorithms adapt over time, delivering increasingly personalized recommendations.

Amazon employs NLP techniques to analyze customer reviews, feedback, and social media conversations. By extracting sentiment and identifying key themes, Amazon gains deeper insights into customer preferences, pain points, and emerging trends.

Through predictive analytics and AI-driven forecasting models, Amazon can anticipate customer needs and trends before they arise. By analyzing historical data and market trends, Amazon can proactively stock inventory, optimize pricing, and tailor promotions to meet customer demand.

Amazon prioritizes customer privacy and data security, implementing robust encryption, access controls, and compliance measures to safeguard sensitive information. Customer data is anonymized and aggregated for analysis, ensuring individual privacy is protected.

Yes, Amazon provides customers with options to manage their privacy preferences, including opting out of personalized recommendations. Customers can adjust their preferences in their account settings to control the level of personalization they receive.

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