Conversational commerce is not a new concept, it was first brought up by Uber’s Chris Messina in 2015. In a nutshell, it refers to online shopping through conversation on messaging apps. So why do we want to talk about it again six years later?
Compared to 2015, the current online business environment has been changed by COVID-19. According to Statista, global ecommerce sales almost tripled from $1.5 trillion USD in 2015 to $4.28 trillion USD in 2020. The ecommerce share of total global retail sales jumped from 13.6% in 2019 to 18% in 2020, and is expected to exceed 20% by 2022.
Asia, as the biggest ecommerce market, is not only leading the current growth, but also spearheading it in the next decade. McKinsey forecasts that Asian consumers will account for 50% of the global consumption growth with up to $10 trillion USD opportunity in the next decade.
This fast acceleration raises new consumer needs and calls for new ecommerce channels in Asia. One such channel is conversational commerce.
Why conversational commerce in Asia?
Compared to other regions, Asian consumers are more mobile-native. The global smartphone penetration rate increased from 49% in 2016 to 78% in 2020, mostly fuelled by Asia. Countries like South Korea have up to 65% of total online transactions through mobile.
Thanks to COVID-19, the growth of mobile users in Asia is driven by Gen X and Baby Boomers, as most of the major cities were locked down during the health crisis and they were forced to purchase online. Baby Boomers are said to drive 30% of consumption growth in Asia for the next decade. Different from Gen Z and Millennials, they are used to having conversations with merchants and inquire for information directly instead of searching online by themselves.
Conversational commerce perfectly fulfills this user behavior with direct chat between consumers and customer service. All in all, research shows that Asia has the highest messaging population around the world and conversational commerce can convert these populations to business opportunities.
Corresponding to this digital adoption explosion, the Asian consumer behavior also evolved to a new level. Asian consumers are known to be the most demanding. Generally, we want:
- more information about the products, such as detailed size charts and high-resolution lifestyle images;
- product reviews;
- cheap prices and high quality;
- fast delivery with free shipping.
Now, Asian consumers are demanding personalized service on demand. We desire a 24/7 customer service that can answer all our questions instantly and we have zero tolerance for friction. PWC interviewed 15,000 companies globally and found that 90% of APAC companies believe that consumers are more impatient than ever before and 50% believe that digital customer experience is the top trend for APAC.
So how can companies cope with this changing force? The answer is conversational commerce.
The original conversational commerce was simply selling products through messaging apps, for example by sharing product links through WhatsApp; Then it consolidated more functions such as order status update and payment. However, it was still not the major channel for online shopping.
But now, with the power of AI, conversational commerce is able to provide the whole online shopping journey, from product inquiry, product information search, to placing an order, payment and delivery tracking, without any friction. What’s more, it can also incorporate customer service or chatbots to provide personalized service on-the-go and be available 24/7 whenever consumers want. It comes as no surprise then that conversational commerce leads to a higher conversion rate, higher average order value and higher customer loyalty.
How to do conversational commerce?
One obvious way is to adopt business solutions from messaging apps. Facebook for Business, WhatsApp for Business, WeChat for Business and major Asian messaging apps all launched business solutions for brands to start conversational commerce quickly and easily. However, are they really quick and easy? The answer is yes, if you are an MSME and you’ve just started your online business, but it’s no if you are an established enterprise and already have a live ecommerce site.
To help you navigate a conversational commerce implementation, here are three things to keep in mind.
1. Don’t separate the conversational commerce channel from your main ecommerce site – keep them integrated!
One common mistake for companies undergoing digital transformation is having multiple platforms for different functions that don’t integrate with each other. Consumers will come from different channels and will also switch mid-way between them. For instance, one customer can place an order from the desktop web store and ask for a refund through a messaging app. If your CS team operates different systems for desktop and messaging apps, how much trouble will it create?
The bottom line is to provide a seamless experience for consumers through all channels. Therefore, it is crucial that all your digital channels integrate with one another for a successful digital transformation. And to achieve this, you need a true multi-tenant API-first digital commerce platform that is capable to support all types of business.
2. Don’t jump into conversational commerce right away – pace yourself!
Some companies tend to get overexcited about new technologies and dive all in without proper evaluation of the impact. Conversational commerce is a great solution to keep your customers close but it can be costly and in need of a lot of adjustments to the existing business units. Customer service agency fees have been increasing along with the growing labor cost and good ones especially require a lot of investment. Even if you use AI technology, it also needs substantial human data training before high performance.
Moreover, launching a new sales channel takes time and restructure of the existing operation, otherwise it will result in employee unhappiness and organizational chaos. Therefore, it is wise to have a reasonable timeline and evolve the conversational commerce step by step: from a simple messaging app chat integration to a fully-integrated conversational commerce channel. And you need a digital commerce platform that is compatible with these different stages and a good supporting team to guide you each step of the way.
3. Don’t get frustrated if your conversational commerce doesn’t work – it takes time!
Conversational commerce is a great tool but not a magical tool. It is unrealistic to think that once you engage in conversational commerce, sales will skyrocket automatically. In order for conversational commerce to be successful, tests and adaptations are needed. This is a new consumer segment with different demands from your traditional sales channels and special promotion mechanisms and product offerings must be set up. So don’t get frustrated if your conversational commerce doesn’t work instantly, re-evaluate your designed user journey and give the proper incentives to convert. Once you develop a good practice, conversational commerce will not fail you.
It’s time to look into conversational commerce again, this time perhaps more closely. And remember – if you are close enough to your consumers, you will never lose them.
