How Predictive Analytics Helps eCommerce Order Fulfillment

Home  >  Blog  >  How predictive analytics helps e-commerce order fulfillment

Table of Contents

Did you know online shopping accounted for nearly one-fifth of the global retail sales in 2023, and that figure is only expected to rise? But how did we nearly triple this figure in under six years? The answer to this mystery is Artificial Intelligence! Chatbots and language models might be what comes to your mind when you think of AI, but we’ve been experimenting with AI since the mid-1950s, their development followed a sharp curve in the 2010s, revitalizing industries, and bringing in millions of dollars by helping businesses and services deliver a better experience to their customers.

The purpose of this guide is to fully explore the depth and profound effects of predictive analytics in e-commerce, future projections, and much more. Continue reading if you’d like to learn more about how to unlock the potential of predictive analytics in fulfillment.

unlocking the power of predictive analytics in ecommerce fulfillment simple global

Predictive Analysis: An Outline

Predictive Analysis is the practice of using old data, patterns, and trends and processing them to create future projections using statistical algorithms and machine learning techniques. Take YouTube for example. Do you ever wonder why people can spend hours scrolling through reels on the application? Why is the next video so attractive to you? It all boils down to personalized display of content to each user. YouTube takes your information and processes it to predict what you like and dislike, adjusting the content according to your preferences, and prolonging the time you spend on the application.

How does it apply in e-commerce? Let’s address that.

Pick, Pack & Ship Affordably
Trust Simple Global with all your fulfillment needs for your e-commerce business.

Predictive Analysis in eCommerce Explained

Websites like eBay, Amazon, and Alibaba use various techniques to promote their presence and increase their business activity. Besides methods like newsletters, target campaigns, and social media marketing, they depend heavily on personalized recommendations via Artificial Intelligence and Machine Learning.

Components and Steps of Predictive Analysis

The process of Predictive Analysis is quite extensive and includes several comprehensive steps, which we will briefly examine.

Procuring the Data

E-commerce websites and companies invest considerably in obtaining raw data about their customer base so they can analyze and get to the next step.

Data Analysis

The raw data is then processed using algorithms, software, and artificial intelligence. THey use this data to predict which products will appeal to which consumers, as well as to gain insights and patterns in establishing relationships between the product and variables such as gender, age, location, and personal details.

Segmentation & Campaign Strategy

First, people are divided into groups based on their characteristics, such as “Frequent Shoppers” or “New Customers.” From here on, each demographic is treated differently to optimize sales. Like the ‘Frequent Shoppers,’ might get more emails about new products or discounts.

Split Testing & Iterative Development

Websites continually monitor and test the effectiveness of their campaign strategies to identify the best way to promote their services and improve the model where they don’t see any progress.

How Does Predictive Analytics Solutions for eCommerce Fulfillment Work?

There are many data-driven fulfillment strategies for e-commerce hat e-commerce platforms have adopted to enhance and uplift the customer experience. Let’s look at some of the most prominent and effective ones.

Product Recommendation

Many websites like Amazon or Netflix use predictive analysis to recommend products to customers based on their previous purchases, browsing history, and other interests.

Optimize Inventory

Many e-commerce businesses use past trends to forecast which goods will be in high demand. They can use this information to stock up on particular products so they don’t run out and capitalize on increased demand to generate profits. If you have the data, external services can make this part relatively easy.

Dynamic Pricing

This was popularized by Airlines and hotels, which began to adjust their pricing in real-time using predictive analysis. They determine the price of their services using data from previous years, upcoming events, and other factors, maximizing e-commerce efficiency with predictive analytics as a result.

Churn Predictions

For subscription-based platforms like Amazon Prime, Hulu, or Netflix, predictive analysis is used to determine which users are likely to terminate their membership, and these users are then targeted with retention offers and discounts to keep them.

Optimize Shipping and Delivery

By harnessing the power of predictive analytics, e-commerce businesses can determine the most efficient and cost-effective shipping method, saving time and resources.

The Role and Impact of Predictive Analytics in eCommerce

Predictive analytics has drastically changed the e-commerce landscape, allowing businesses to mitigate the disadvantage of not being able to physically interact with their customers. Take Amazon for example, renowned for its massive predictive analytical schemes and strategies, which has grown to become the world’s largest online store. It started as a simple bookstore in Jeff Bezos’ garage and evolved into the mammoth we know today after only a few years.

In 2022 alone, it generated over $500 billion US dollars in revenue, a whopping 700% increase from the previous decade. This shows that if implemented correctly, predictive analytics can be a game-changer for your business.

Similar cases have been observed with other leading e-commerce brands like eBay and Walmart. Here are some interesting facts over the years pertaining to the impact of predictive analytics in e-commerce fulfillment.

Pick, Pack & Ship Affordably
Trust Simple Global with all your fulfillment needs for your e-commerce business.

Advantages and Disadvantages of Predictive Analytics

Like any other technology, reviewing the positives and negatives of predictive analytics plays a crucial role in reshaping its elements to ensure its longevity in the market. Let’s give a retrospective look at some of the pros and cons.

Advantages

  • Improves marketing – effective marketing strategies prevent funds from being wasted in general ad campaigns and marketing models.
  • Fraud Detections – avoid fraud and spam purchases by tracing activities, and suspicious activities.
  • Capitalize Effectively – businesses can successfully harness the potential of historical trends and patterns, to make smart decisions, boosting sales and profits.

Disadvantages

  • Privacy Concerns – the unprecedented use of Predictive Analytics has pushed platforms and companies to collect vast amounts of data, raising concerns about security and privacy breaches. Recently, Luxembourg, among many, fined Amazon US a whopping $887 million US dollars, showing governments aren’t hesitating to crack down on privacy violations.
  • Increased Costs – predictive analytics uses an iterative process and takes time to work. It takes time, and a lengthy investment period, with little returns.
  • Impaired Data – massive amounts of data, whose integrity can be questioned, are needed for predictive analytics. In such circumstances, decision-making may be ineffective due to unreliable and skewed results.

Conclusion: What to Expect

It is clear that predictive analytics has drastically improved the status quo of e-commerce, refining its efficacy to an unmatched level. Like a double-edged sword, predictive analytics has not only enhanced business models and marketing techniques but also uplifted security, boosted customer satisfaction, and reduced costs.

However, with governments and regulatory authorities cracking down on businesses over privacy concerns, there is an imminent need for dialogue over the ethical and social concerns of this technology. Although it appears that predictive analytics is here to stay and will continue to have a profound impact on the e-commerce industry, the outcome will only become apparent with time.

If you want to improve global shipping, optimize warehousing, and boost e-commerce fulfillment? Contact Simple Global today to open the door to a world of logistics solutions.

Inquire Fulfillment Services
Grow. Scale. Go Global with Simple Global

Speak To A Fulfillment Expert!