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Top 9 Applications of Data Science in E-commerce for 2023

12th Sep, 2023
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    Top 9 Applications of Data Science in E-commerce for 2023

    Every time someone uses the internet, more data is added. We need assistance from various Data Science methodologies to make sense of this enormous amount of data and use it for the company's objectives, etc. Data science for eCommerce has been one of the most impactful technologies in recent years. Businesses use data science applications in e-commerce and machine learning to improve customer experiences and keep website visitors interested.  

    On Flipkart's website, you see many recommendations when looking for a product. Machine learning algorithms produce these suggestions. It gains knowledge from the user's prior actions and purchases. The companies record every click a consumer makes, read reviews, etc. They utilize this information to learn more about their customers or build a platform to assist new ones.  

    Do you wonder why a product appears in a specific manner on an e-commerce platform or why the object knew what I was looking for? All these questions can only be answered by data science. E-commerce is one industry that most uses data science and machine learning techniques.

    In this article, we'll talk about the top 9 applications of data science in e-commerce, How can company may use them to improve the consumer experience and revenue. It is necessary to pursue an industry-based curriculum to upskill in data science. You can check out Data Science course fees in India to start this journey. 

    What is E-commerce Data Science?

    Data Science and Machine Learning applications can help e-commerce increase sales through personalized recommendation lists, dynamic pricing, and customer behavior forecasting. These models can be used individually or in combination to address various business objectives. They are used effectively by e-commerce businesses for marketing and operational goals. 

    Some of the popular Data science projects for eCommerce: 

    • Recommendation systems 
    • Market Basket Analysis  
    • Warranty Analytics  
    • Price Optimization  
    • Inventory Management  
    • Location of new stores  
    • Customer sentiment analysis 
    • Merchandising  
    • Lifetime value prediction  

    In this article, we will talk about the top applications of data science in e-commerce, data science case studies, etc.,

    9 Interesting Applications of Data Science in the E-commerce

    We will be discussing nine fascinating data science applications in eCommerce : 

    1. Recommended Engines

    Recommendation engines are essential tools in a retailer's arsenal. Retailers use recommendation engines to drive customers to purchase a product based on their previous buy patterns. Providing recommendations helps retailers increase sales and dictate trends. 

    Sound familiar? Thinking about Amazon and Netflix? That's precisely how search recommendations work. 

    How do they do it? 

    It's simple; the engines consist of complex machine learning and deep learning algorithms designed to record individual customer behavior, analyze their consumption patterns and make suggestions based on that information. That's why every time Netflix recommends a movie or TV series, it's probably something you'll watch! 

    The same is true for Flipkart and Amazon; Flipkart offers recommendations and discounts on products based on your past searches, inquiries, reviews, and purchases. Because, let's face it, who among us cannot purchase an item they have always desired, especially when it is on sale? 

    This procedure is tricky and requires extensive data reading and filtering through a machine learning algorithm. 

    2. Market basket analysis

    It is one of the most traditional data analysis tools, and retailers have profited from it for years. 

    Market basket analysis is based on the concept that a customer is more or less likely to purchase another set of related products after purchasing one set of products. For instance, you are more likely to order a main meal or dessert if you have ordered appetizers or appetizers without drinks at a restaurant. The set of items that a customer buys is called the item set, and the conditional probability that the customer orders the main course after the appetizers is called the confidence. 

    In retail, customers buy items on impulse, and market basket analysis works on this principle by predicting what the customer is most likely to purchase and for which item. 

    In e-commerce, the best place to look for potential impulsive buys is in consumer data, which typically involves how retailers sell a product. Like search recommendations, market basket analysis utilizes a machine learning or deep learning algorithm. 

    3. Warranty analysis

    Analyzing warranty data helps retailers and manufacturers check their products, the potential lifespan of their products, issues, returns, and even check for fraudulent activity. Analysis of warranty data depends on estimating the distribution of failures based on data including the age and number of product returns and the age and number of surviving units in the field.

    After analyzing the data, retailers and manufacturers check how many units were sold and how many were returned due to problems. They also focus on detecting anomalies in warranty claims. It's an excellent way for retailers to turn warranty calls into actionable information, value their warranties and offer them as a bundle to customers to purchase their goods.

    4. Price optimization

    Selling the product at the correct price to the customer and the dealer or manufacturer is an important task. The price must include the cost of manufacturing the product and consider the customer's ability to pay for the product while keeping the competitor's prices to make a profit.

    Again, all this is calculated using machine learning algorithms; the algorithm analyzes several parameters from the data, such as price flexibility, customer location, individual customer buying attitude, and competitor's price. It then comes up with an optimal price that can benefit all parties.

    This is another powerful and vital tool for retailers to market their products correctly with an optimal price that aligns with the company's business goals. It is necessary to pursue an industry-based curriculum to upskill in data science. Check out Python Data Science Bootcamp to accelerate your journey.

    5. Inventory management

    Inventory refers to the stock of goods that an organization stores to ensure a rational supply chain. Inventory management is vital because the organization/retailer has invested money in purchasing stock, and that capital sits idle. Retailers should be able to stock merchandise in the correct quantity to provide it to the customer when that product is in demand.

    Powerful machine learning algorithms thoroughly evaluate item-to-offer data to find patterns and correlations between purchases. The analyst then examines this data and develops a plan to boost sales, ensure on-time delivery, and control inventories.

    6. Location of New Stores

    Location analysis is an essential part of data analysis for eCommerce companies. A company must conduct extensive research and determine the ideal location before locating its stores.

    This algorithm is straightforward but efficient. The analyst concentrates on demographic analysis. The understanding of market potential is based on an examination of demographic and zip code data. Additionally, a study of the retailer network is done. After considering all of these factors, the algorithm produces the best results.

    7. Customer Sentiment Analysis

    Analysis of customer sentiment has long been practiced in the corporate world. However, modern machine learning algorithms assist in simplification, automation, and time savings while delivering reliable findings. 

    Social media is the most accessible instrument for an analyst to analyze customer sentiment. It determines words bearing a favorable or unfavorable attitude of the buyer toward the brand via language processing. The company uses this feedback to serve customers better to develop new goods and services. 

    8. Merchandising

    Merchandising is an essential part of any retail business. The goal is to develop strategies to increase the product's sales and promotion. 

    Merchandising helps influence customer decisions through visual channels. Rotating merchandise helps keep the assortment fresh and new attractive packaging and branding help to attract customers' attention. 

    Merchandising algorithms filter through data, gather insights and create customer priority sets based on seasonality, relevance, and trends. 

    9. Lifetime Value Prediction

    You spend money to acquire customers, and your business model can only be profitable if the customers you accept contribute more than what was paid to acquire them. The money your customer spends with your business, from the first transaction to the last, is called customer lifetime value, or CLTV. 

    Businesses typically calculate CLTV after they acquire customers. However, this is not a very efficient approach as it is more reactive, and you could spend more to acquire a low-value customer and affecting your profitability. You must be proactive to ensure your business model maintains good progress and generates appreciable profit. 

    Data science can help you proactively use predictive analytics to calculate CLTV. It helps collect, clean and generate critical insights from customer data such as their preferences, behavior, frequency, recency, and quantity of purchases. Based on this data, machine learning algorithms churn out a presentation about the potential lifetime value of each customer. 

    With this information, you are better prepared to focus your marketing spend on customers who promise a higher return and build a more sustainable and profitable business model. For example, predictive analytics has informed you that the CLTV for customer type A is around $200, while for customer type B, it is about $1000. Now you know that you need to spend less than $200 trying to get A customers, and you can spend a little more on B customers. 

    By predicting CLTV, data science can help build a marketing strategy with a positive return on investment. 


    This article has highlighted many initiatives for eCommerce businesses. These nine are crucial for any eCommerce company. Every technology area may benefit from data science, which enables businesses to make better decisions. The nine applications mentioned above are well-known and significant in the e-commerce industry. Some people might desire to upgrade their skills to use the applications, as mentioned earlier. Check out KnowledgeHut’s Data Science Course fee, this course comes with no prerequisites and helps you get hands-on learning data science with python skills.

    Frequently Asked Questions (FAQs)

    1Is Data Science Good For Ecommerce?

    Data Science in eCommerce helps companies provide a deeper understanding of the consumer's behavior, their interaction, and the events that occurred in their lives, which led to the purchase of a product or service by capturing, filtering, integrating, and analyzing the data.

    2How is Data Used In Ecommerce?

    Data is used by eCommerce businesses to make better decisions that will boost sales, provide better customer support, and run targeted advertising and promotion campaigns. Customer data analysis can predict trends or the following top product.

    3What Type of Data is Used for Ecommerce?

    Retail data, in-store data, shopper data, brand data, consumer review data, product data, and other related data categories are similar to eCommerce data and are used in eCommerce analytics and marketing.

    4What Does an Ecommerce Analyst Do?

    E-commerce data analysts are specialized analysts, knowledgeable about eCommerce businesses, their systems, and the data these systems produce. The main responsibility of a data analyst is to transform this data into significant insights that businesses can use to improve their decision-making processes. This could entail figuring out how to price new materials for the market, how to lower transportation costs, how to address problems that cost the business money, or how many people should be working on a project, among other things.

    5How do you Analyze Ecommerce Data?

    There are four types of data analysis for eCommerce data: Descriptive Analysis, Diagnostic Analysis, Predictive Analysis, and Prescriptive analysis.


    Amit Kishore


    Experienced R&D Data Scientist with a demonstrated history of working experience in predictive analytics, deep learning, and Business Intelligence. Hands-on experience leveraging machine learning, data modeling, cloud computing, business intelligence, deep learning, and statistical modeling to solve challenging business problems with value addition.Strong engineering professional with a master's and bachelor's in Industrial and Industrial Engineering and Management from the Indian Institute of Technology, Kharagpur.

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