Implementing Artificial Intelligence Consumer Experience Tools in Supply Chains

In the e-marketplace, consumers can know how products fit their preferences using artificial intelligence consumer experience tools (AI-CE), which have been adopted by the retailer and/or supplier. Motivated by e-commerce practices, the question of who provides AI-CE is optimal for the supply chain remains unclear. We evaluate the impacts of implementing AI-CE on the supply chain. The supplier sells two horizontally differentiated products. One is sold through the retailer, and one is sold directly on the supplier's own channel. Our analytical results show that the optimal AI-CE implementation strategy of the retailer and supplier depends on consumer sensitivity toward the privacy of using AI-CE. To realize a win-win outcome for the supplier and retailer, the retailer (supplier) should implement AI-CE, but the supplier (retailer) should not when consumer sensitivity toward privacy is low (high). Surprisingly, when consumer sensitivity toward privacy is moderate, neither the supplier nor the retailer should implement AI-CE. The reason is that joint implementation will eliminate the positive effect of comparative disadvantage and channel competition. Moreover, we find that the enhancement in the precision of AI-CE may either benefit or harm the supplier and retailer. Our study guides AI-CE implementation in e-commerce supply chains.