What Is Conversational Commerce—and Should Small Retailers Care?

By: on May 11, 2018

The commerce space has seen a great increase in the rise of AI-powered chatbots over the past two years. They share a similar popularity and conversational interface as virtual personal assistants (VPAs) and voice-controlled devices.

Consumer expectations are evolving around the use of these technologies—so retailers need to find a way to be present there because [spoiler alert:] commerce is finding a new digital home.

Any retailers serious about the long-term success of their digital business (which should be all retailers) must immediately start building a conversational commerce strategy or risk losing out on the channel to competitors, enterprises, and new marketplaces.

Need some data to pull you down this path? Well, Gartner research shows that by 2020:

  • At least 60 percent of organizations will use artificial intelligence to support digital commerce.1
  • 30 percent of digital commerce revenue growth will be attributable to artificial intelligence technologies, such as those that power conversational commerce.1
  • 5 percent of all digital commerce transactions will come from a smart machine, such as those that power conversational commerce.2

In this report, we define exactly what is conversational commerce, why it matters and what SMB retailers can do now to prepare for adoption as the technology and vendor offerings continue to improve.

What Is Conversational Commerce?

Strike up a conversation with a customer in your store. Help said customer purchase something while continuing the conversation. You’ve mastered conversational commerce, right?

Not quite.

Conversational commerce is a new, highly viable digital* channel on which to engage consumers and sell your products.

*”Digital” refers to e-commerce. So if you’re not up yet on e-commerce, you should start here: Everything Retail Stores Starting An Online Business Need To Know

As defined by Mike Sommers, senior vice president of product management at ShopKeep, “conversational commerce is the ability to offer a personalized ‘chat-like’ shopping and buying experience using advanced communications technologies, primarily via messaging apps.”

Current conversational commerce engines are powered primarily by AI-enabled chatbots that process consumer messages and offer relevant responses.

In other words, conversational commerce is an automated customer engagement/sales platform. You don’t need to invest in employees to be on the other end answering and responding to every interaction.

Louis Vuitton’s new conversational commerce engine, powered by mode.ai, is a great example what this new engagement channel looks like:

As you can see, conversational commerce is much more than in-store conversations with customers. It uses the channels where your customers already are to engage, sell and personalize experiences—and with the right system in place, it does all this automatically.

Small Retailers Need a Conversational Commerce Strategy to Keep Up With Customer Expectations

If these benefits aren’t enticing enough to get you on board, here’s a reality check: Enterprises are rapidly rolling out this technology, which means that SMB retailers must keep pace or risk losing customers due to subpar experiences.

Consumers don’t care what size of business you are. They want to browse and transact in the manner of their liking. And if you can’t offer that shopping manner, they’ll go elsewhere.

So, between the potential of conversational commerce and the importance of meeting customer expectations, you should immediately identify this as something you should care about.

If you don’t, then it might be time to rethink your retail operation. Why? Because research on retail customer experience by Salesforce found that, of consumers:

  • 77 percent say they avoid going to stores
  • 64 percent want personalized offers from retail brands
  • 56 percent are willing to share data to receive faster, more convenient experience

Conversational commerce hits all these points.

It’s the next great frontier for retail experiences. It’s here now and growing rapidly. You must care about it and invest in a digital strategy with conversational commerce as a central pillar. Not doing so will erode tons of business potential.

Now that you see how important this tech is, read on to see more examples of conversational commerce in action and learn exactly what’s powering the paradigm-shifting platform.

Today’s Conversational Commerce Is Powered By Chatbots

Improved chatbot capabilities will spur more rapid adoption and influence consumer expectations—which means you must have a strategy for chatbot integration to stay competitive in this brave new world.

“With chatbots, you can push images, hyperlinks, multiple-choice questions and a variety of other types of content to help the buyer make the right choice.”

Mike Sommers, SVP Product Management at ShopKeep

According to a Gartner report by Kelsie Marian, principal research analyst, and Miriam Burt, managing VP, these chatbots will be widely adopted among retailers by 2020.

Marian and Burts’ report “Conversational Commerce Is an Emerging Strategic Retail Channel for Building Customer Loyalty” (available to Gartner clients) identifies two main factors for the coming wave of chatbot-enabled conversational commerce adoption:

1. Evolving Customer Communication Preferences

The dominance of mobile and social communication channels is changing how people communicate and consume information.

Consumers are using memes, GIFs and emojis—rather than text—to convey messages. This marks a sea change in how everyone expects communication to unfold.

You want to make it as easy as possible for a customer to buy your products, right? Perhaps the most sensical expression of this retail principle is speaking the same language as you customers. Conversational commerce offers the communication lines and the language for this brave new world of digital engagement.

2. Advances in Technology

Improved natural-language processing (NLP) capabilities is resulting in a rise in successful conversational commerce use cases. More advanced NLP systems support improved responses to consumer questions and requests.

Match these enhanced responses with ever-improving artificial intelligence tools, and chatbots are seeing increased accuracy in product catalog searches.

Chatbots are far from perfect and will continue to advance in coming years. But they’re not the only engine powering conversational commerce.

Voice-Activated Devices Will Drive Conversational Commerce 2.0

Voice-activated devices have exploded onto the scene in the past few years. Amazon, Google, Apple, and other companies have flooded the market with speakers with built-in virtual personal assistants (VPAs).

amazon voice shopping

Conversational commerce dialogue via Amazon Voice Shopping

Gartner predicts that by 2020, consumer adoption of these VPA speakers will easily top 60 million users. And even just by the end of 2018, Gartner says over 2 billion consumers will interact with these voice-activated devices on a regular basis.

With these adoption and usage rates, you should fold a plan for these voice devices into your conversational commerce strategy—even though there’s still advancements that need to be made, as noted in this Gartner report (available to Gartner clients).

However, the report continues that current VPAs still offer value, just in a limited capacity that’s not truly conversational. Take Domino’s DOM app for example:

Domino’s first released this technology in 2014, only four years after Apple acquired and debuted Siri. In its first year, the voice-activated DOM app received over half a million orders.

But Domino’s didn’t stop there. They’ve gone on to show just how pervasive conversational commerce can be—and how it’s a channel that business can lay on top of existing ones.

dominos anyware site ordering

Domino’s supports ordering on all these channels via Domino’s Anyware site

Domino’s Anyware highlights the full potential of a conversational commerce strategy. Its deployment across today’s most popular channels enables it to meet the customer on the device, platform or app they’re already using.

It’s a true omnichannel, fully unified experience, and a strategy you should study when building your own plan.

So when it comes to your conversational commerce strategy, you’re probably thinking “I get it, but I can’t focus on this right now.” Unfortunately, you don’t have that luxury.

How Do You Start Your Conversational Commerce Journey?

As you can see, conversational commerce offers a ton of business value to be excited about. We’re still early on in conversational commerce, but it’s developing quickly.

Mike Sommers highlights an important point:

As a small retailer, you most certainly don’t have the resources to build your own conversational commerce system. So you’re dependent on retail vendors developing an effective and affordable system.

All of this assumes you already have some foundational retail and e-commerce systems in place—especially a detailed inventory management system.

You need detailed, pinpoint accuracy with your inventory system so the conversational platform you adopt can quickly scan, find, and return relevant products. Such a system is hugely beneficial on its own, but it’s an absolutely necessary foundation for launching a conversational commerce strategy.

This is easy to say, but actually choosing the best software for your operation is a daunting task. That’s why Software Advice is here. Our team of expert retail advisors work with you to pinpoint the best systems for your unique retail needs.

We’ll then pair with those vendors so that you can choose the best option to grow your business and launch new tech like conversational commerce. Start your journey today.

1: How to Apply Artificial Intelligence to Digital Commerce, by Sandy Shen, Research Director, and Jason Daigler, Research Director

2: Innovation Insight for Conversational Commerce, by Mike Lowndes, Research Director

You may also like:

Future-Proof Your Business With Machine Learning in Retail

What You Must Know About Augmented Reality in Retail

Improve Customer Experience in Retail Stores With New Technologies

Visit Our Retail Software Market Page