Conversational commerce: Opportunities and risks

Conversational commerce is a way of selling through which companies communicate with customers directly through text or voice messages in real-time. This is achieved using messaging apps, chatbots, notifications and AI assistants, among others.

In these communicative instances, customers ask about products, recommendations, product usage guidance, and also about shop locations, opening hours and dispatch dates. These interactions usually occur via a mobile phone. As this communication is a humanized experience, when done well, conversational commerce delivers an excellent feeling to the customer and greatly enhances the customer relationship.

According to the Humanizing Digital 2020 Report, consumers are looking for five elements in business:

1. Trust;
2. Frictionless experience;
3. Assistance and support;
4. Self-service;
5. Innovative customer engagement.

In this article, we will answer how conversational commerce responds to these current needs by analyzing opportunities and risks.

Seven opportunities of conversational commerce

Conversational commerce has plenty of opportunities. Here are seven of them:

1. Omnichannel

The business can - and should - exist in all interfaces where the customer is. According to Yalo, people spend 84% of their phone time on messaging apps and 65% of millennials and centennials communicate more via chat than in person. Therefore, conversational commerce can cover a gap by integrating yet another channel, rounding up the full context of your customer.

1. Customer-centricity

Closely related to the point above, by taking into account where they are and how they navigate, this commerce method adapts to the customer, their needs, their habits; not only in terms of purchasing, but also in terms of life. So even if businesses have proprietary apps, some customers might as well prefer sticking to the familiarity of messaging apps or opting for live chat at various points in the customer journey.

1. Best of both worlds

With conversational commerce, customers have an experience close to what they have in a physical store, with personalization, recommendations, benefits and humanization, but with the speed and immense catalog of ecommerce.

1. Assisted purchases

Regardless of whether the purchase is assisted by an artificial intelligence, a real person or a mixture of the two, the shop has their purchase history and knows more or less what they are interested in, so the conversational experience is much more personalized.

1. Non-conversational minimum for B2B

Dealing with a sales assistant has been the modus operandi for B2B buying for as long as the world has existed. In that sense, conversational commerce has been around before it even had a name.

With the rapid growth of messaging apps, it was quite normal for support to move from physical to phone and from phone to WhatsApp and other chat apps. . And for those who sell B2B specifically, it is a powerful tool to have all the customer's history and give them more appropriate recommendations, both in terms of product mix and restocking times.

1. Automated and asynchronous customer support

Traditionally, after-sales customer service is a phone number that an angry customer calls to complain. And, once the business answers, they are prompted to dial several other digits only to finally get to the dreaded moment: the elevator music.

How long will they have to wait?Are they going to answer at some point? They don't know. Anxiety builds and so does anger, without a guarantee that their problem will be solved.

This whole process can be automated through messaging. Additionally, the customer can do more than just wait on the phone and can also decide when to interact and when not to, overall improving customer satisfaction.

1. Democratized access

80% of users do not have a data plan and 93% of users have a mid-low range smartphone. Conversational commerce reaches all phones, and WhatsApp in particular is an application that consumes very little data and is often included in data plans in different countries.

This means that not only do the businesses have the opportunity to make themselves available to millions of potential customers in one go, but also that customers have little to invest for a superior shopping experience. Win-win!

So, what about risks?

Conversational commerce has its risks and below you'll find five of them. However, worry not, there are also ways to address them.

1. Unhuman artificial intelligence

It is necessary to have artificial intelligence with models that allow a humanized experience that is also attentive to the customer's needs. As Balakrishnan highlights, however, this artificial intelligence has a disadvantage: it can fall into an uncanny valley, where it is almost human; or it's not human enough, thus often becoming very uncomfortable for the customer because it's too basic and robotic.

This is a process that has to be watched, monitored and developed with clients anyway.

1. Underdeveloped artificial intelligence

Algorithms used to make recommendations or predict customer decisions in interaction instances can lead to customer behaviors that imply biased choices. This can be a barrier to customers continuing to purchase through this medium.

One way to improve this aspect is to make the algorithm transparent to the customer, in order to respond to customer concerns (e.g "You asked me about blue blouses, so I can recommend this list of products").

1. Lack of specialized workforce

A significant number of people are needed to service a new sales channel. These people are in various roles and could be difficult to define.

Once the business needs are clear, though, this workforce can be trainable at low cost, as Rabassa mentions. Moreover, this new channel opens up the possibility of an accessible and inclusive labor pool, depending on different business situations.

1. Complex processes to automate and protocolize

The more you engage with customers, the more you will notice that certain questions or requests are repeated, and you start to get a clearer picture of what you need and where and just how more complex the process gradually becomes.

You need to know how to use all the information available in your multiple sources of truth to be able to meet the needs of your customers in an automated way as far as you can, ideally logged.

1. Perceived customer risk

According to Pal's research, there is a risk when the customer perceives that there is little transparency in the processes. This often arises when they do not know the reason behind an interaction or whether their data is secure and their privacy respected, which negatively impacts trust in the business.

Another risk on behalf of the customer is that they feel they lose control over their purchases - that shopping seems too easy and that they are tempted to buy things they do not need. One of the last factors described by customers are technical limitations that could make the information presented incorrect.

In these terms, the most important thing is to look at how the information reaches the customer and how transparency of processes is evidenced or improved.

How can businesses take advantage of conversational commerce?

Businesses have to be very clear about what kind of changes, positions, people, technologies and implementation times they are going to need to be able to cover this opportunity, which is ultimately a new sales channel.

This is not just WhatsApp. They need a platform that can integrate with all the tools they use to offer this service. The platform needs to be able to carry the information back and forth so that you have the complete information. This is really an omnichannel experience, where you connect your warehouses, your shops, your logistics; what happens in the physical world with the digital world, your marketing strategies, your social networks, your artificial intelligence in messaging service, your mailing platforms…

So your ideal conversational commerce platform, especially if your company is a complex enterprise, is truly an omnichannel one. Make note of this and do not miss out on one of the greatest opportunities of commerce for the years to come.

DISCLAIMER: It is important to note that historical financial information or operational KPIs may not be comparable with publicly-filed information at SEC, since VTEX did not report its financials in accordance with International Financial Reporting Standards (IFRS) prior to 2019 and certain KPI definitions may differ from publicly-filed information. You are cautioned not to place undue reliance on figures published before July 21st, 2021 as they may not be comparable to the metrics disclosed from the IPO onwards.

Written byGabriela Porto

Gabi is a curiosity-driven journalist interested in telling great stories about the future of ecommerce, technology, innovation and everything related to this universe.