part of a Spotlight series on social commerce in APAC.
The main aim of c-commerce is consumer delight, but guardrails are needed to ensure safety of info received, get consent to T&C.
It is an alternative to third-party cookies by nudging consumers to intentionally/voluntarily share their info for relevant services.
AI-powered chatbots will handle most customer conversations in future but there is a danger of implicit biases and discrimination.Conversational commerce (c-commerce) is the intersection of shopping and various means of digital conversations, making it an integral part of social commerce.
In Southeast Asia, high-end luxury brands like Dior and LV have been using messaging apps for years to communicate their story, close sales and provide exceptional and timely service. On the other hand, micro-sellers like mom and pop stores, hyperlocal and community-based sellers in the region have been conducting their own form of one-to-one c-commerce through messaging apps before e-commerce platforms became popular, opening direct lines of communication for shoppers to get more information on products, exchange payment information and receive order updates.
With a paradigm shift in consumer behavior over the past few years, conversational commerce has gained significant traction in SEA, transforming the way consumers engage with brands and businesses and make purchasing decisions. Worldwide, c-commerce is expected to grow into a US$130bn market by 2025, multiplying by more than six in emerging countries like Brazil, India, Indonesia and Thailand.
Despite the growth, large FMCG brands in the region continue to rely on messaging apps or chat functions for basic customer support – conversational commerce has not yet been tapped fully as a large-scale commerce-driving mechanism.
It is important for brands to look beyond chat as a means to support transactional queries or customer support. It is increasingly an instrumental aspect of building a relationship with the customer. It supports a full-funnel journey, seamlessly moving from providing relevant recommendations and personalised engagement to influencing purchase intent, helping shoppers complete the purchase within the same ecosystem.
Consumers are looking to interact with businesses on messaging apps
In Southeast Asia, it is common for consumers to use seven or more apps, with one to two apps prevalent on nearly every smartphone and popular messaging apps being used multiple times a day from communication and finance to shopping. Consequently, apps are stepping up their offering to keep up with consumer demand. Whatsapp, Instagram and Messenger serve capabilities to integrate with AI.
Regional apps like Line and Zalo started with messaging as their primary offering and slowly transformed into superapps, offering multiple services, in-app checkout, integrated payment and order tracking. Line and Zalo are second in line to dominant social media apps such as Facebook and YouTube, with over 40% users agreeing that it is good for purchasing products directly. Line claims that businesses on its platform track a 45% conversion rate through conversational commerce.
Over 65% users of these apps from Thailand and Vietnam claim that they are likely to purchase more via a messaging app/chat function in the future versus other online shopping destinations. According to Consumer Eye:
Over 50% have enquired about product or pricing information
Over 40% enquired about ongoing promotions/discounts and sought personalised product advice
This gives us a great opportunity to be where our consumers are, meet the demand for personalised recommendations and upsell and cross sell products to drive sales.
Conversational commerce supports a full-funnel journey
One of the biggest advantages of conversational commerce is its capability to help influence purchase intent through engaging conversations without making it an overbearing means of driving sales. It seamlessly moves the consumer from every touchpoint of the funnel, communicating the brand purpose and increasing trust through interaction.
It can help drive awareness by connecting with consumers to answer questions instantly. Resolving customer queries contributes to an increase in spending by existing digital shoppers of up to 3.9x (Meta x BCG study).
Through personalised advice and timely recommendations, it improves engagement and builds purchase consideration.
It can nudge consumers who haven’t yet decided but are still on the shopper journey by giving out exclusive vouchers and discounts.
It can help reduce cart abandonment and alleviate customer concerns on shipping, product quality and refunds.
Post-purchase, it can actively track the last mile delivery and collect feedback.
It can help with repeat purchases through recommendations for the next purchase and surprise them with samples, gifts and offers.
It is important to remember that the main objective of c-commerce is consumer delight, and we need to be mindful of risks and dependencies behind implementation. Before anything else, brands need to put in guardrails to ensure safety of the information they receive and collect consent and agreement to terms and conditions.
Do not lose sight of the objective: When setting up a full-funnel journey, it is easy to also connect promotions and discounts as an incentive for other objectives such as gathering data or building the 0/1PD base. Narrow down to the single main goal of what your c-commerce campaign is aiming for, measure and monitor metrics to optimise for performance.
Ensure the shortest shoppable journey: Having a long path to purchase with multiple questions can lead to a high bounce rate and drop off percentages. If the flow requires a simple conversation or coupon disbursement leading to e-commerce platforms, it is worth considering a chat function with a simplified decision tree to enable faster redemption and drive higher cost-efficiency.
Customer delight is key: Some of the biggest reasons users cite as barriers to purchasing on messaging apps are all related to customer support – late/no response from sellers, lack of personalised responses from chatbot, uncertainty if product/seller was genuine or confusing purchase processes. This demonstrates the importance of setting up the right conversation flow.
Ensure consistency and contingencies: Troubleshoot and test various iterations of personalised recommendations. For example, if a chat function offering beauty analysis offers different product recommendations each time, shoppers are bound to abandon cart or mistrust the brand. Have a plan B if the main messaging platform fails due to tech and logistic requirements or if lack of media investment inhibits its potential to drive higher consideration and engagement due to the low percentage of traffic it receives.
Conversational Commerce also adds to the element of fun
Through rich and embedded experiences, c-commerce can be a great source of customer delight, engaging customers through entertaining questions, interactive media formats like lists and stickers, quizzes, virtual makeovers and more.
Quizzes have proven to be an engaging format for Unilever. In a campaign for Magnum Dulce in Singapore, users were prompted to guess the ingredients of a newly launched ice cream. It received positive reviews with users completing 60% of the chat flow and three in five users who started the Dulce quiz reached the purchase part of the journey.
In 2022, for International Day of Happiness, Selecta launched a Happinas campaign with a new chatbot to spread happiness through personalised Happinas cards. As a part of the c-commerce journey, consumers interacted with the chatbot on Messenger and uploaded a selfie to create a ‘Happinas Card’. Upon sharing the card on messaging apps, the consumer could choose a retailer to redeem a free voucher. The campaign spread over 700k ‘moments of happiness’, delighting users.
Conversational commerce also complements ‘brand as a service’, such as beauty tech, an emerging trend revolutionising skin analyses and hyper-personalised recommendations for users through AI and AR-led virtual diagnostics. Many do it for fun, attracting all age groups, genders and ethnic groups alike. In collaboration with Shopee and Messenger, Pond’s launched its Skin Advisor Live (SAL) across nine markets globally, setting up an AI-powered beauty tech solution to help consumers develop a deeper understanding of their skin type and drive sales. 98% of consumers cited that they enjoyed their interactions with SAL, generating 15x higher purchase intent.
Conversational Commerce can be inclusive to a diverse customer base
Conversational commerce is a great opportunity for brands and businesses to tailor experiences for its diverse set of customers, leading initiatives in DEI (diversity, equity and inclusion) spaces. This can help them resonate more with regional audiences and drive more inclusive growth.
Caters to local expectations: South Asian economies are expected to grow by 7.4% in 2023. Regions like Vietnam are expected to grow faster at 8%, with government efforts to fund education and decrease this poverty gap in rural populations. This rural segment continues to be extremely critical to future growth. Therefore, it is important to cater to their requirements and expectations with accessibility (language, local information), retail readiness (stock availability, free shipping) and flexible payments. Credit card penetration is low in these regions (11% in Thailand, 4% in Vietnam, Indonesia and Philippines at 2%), making it imperative for brands to offer multiple routes including COD and wallets through its conversational commerce set up.
Multilingual conversations: To serve the functional needs of consumers, we will need to be mindful of the diversity of languages and cultural nuances in Southeast Asia. While the grammar, syntax, tone and cultural aspects differ by region and by language, oftentimes there are differences in emotiveness and accents within the same country. Did you know that APAC is the top region for the use of voice assistants? Users in the region increasingly use voice assistants on their smartphones as they find voice to be a simpler form of messaging than texting in their local language. Yet, voice tech has not taken off and IoT as a way to shop is non-existent. New chatbot startups like Thailand’s Zwiz.ai are developing technology that can capture local slang and dynamic speech patterns to ensure contextual and relevant output from chatbots. This is a great opportunity for brands to use voice support, AI and natural language processing (NLP) models to comprehend and generate the right responses.
Inclusivity: An interesting prospect of c-commerce is its capability to drive inclusivity. It can help reach the percentage of users that are new internet and smartphone users but are less likely to use text as a way to communicate. Building a capability to have voice-based conversations can feel like a personalised experience that adds more value and convenience.
Culture: By being the voice of a brand, c-commerce can promote social trust and personalised advice can help consumers in these regions feel like they are receiving high return on investment. According to the Meta x BCG study, 35% of shoppers value c-commerce for the capability to discuss and negotiate with sellers on price and offers.
Conversational Commerce can be part of a cookieless strategy
As the cookieless world slowly starts to become a reality, brands need to adapt quickly. All potential customers are concerned about internet privacy and wary of sharing too much personally identifiable information or being tracked online.
This makes it important for brands to set up transparent processes of gathering data for successful marketing activities. Through a two-way dialogue, c-commerce provides this alternative to third-party cookies by nudging the consumer to intentionally and voluntarily share their information to provide relevant services, providing explicit permission to connect with them in the future.
With the goal of driving zero-party data, Baby Dove launched a chatbot in Messenger in the Philippines to drive signups to a community called #RealMomsVillage, a community that offered childcare content to mothers tailored to their motherhood stage.
Compliant with personal data requirements, Dove worked with 3P developers and Meta to set up an engaging conversation flow on Messenger. Curated content and product recommendations nudged users to share zero-party data, giving them the freedom to choose what they opt-in to, how much data they want to share with the brand and what next steps to take. It also incentivised them, enlisting qualified users to a raffle, offering new users five U-Coins (Unilever’s digital rewards program). The campaign was hugely successful in gathering high-level information on young millennial moms and first-time parents, with Baby Dove rising to be one of the top baby brands in the country.
The future of Conversational Commerce
The need for real-time communication is here to stay and AI-powered chatbots are expected to play an important role in c-commerce, handling 70% of customer conversations by the end of 2023.
With apps and platforms serving capabilities to integrate with AI, supporting checkout flows and in-app payments, and enabling rich embedded experiences to customers, brands and businesses can streamline full-fledged customer journeys within a single interface without the user ever having to leave the app.
Dominant pure play e-commerce platforms are coming up with AI-led chat functions like Lazada’s Lazziechat and Shopee’s Skin Filter. But their transactional nature and sales-driven environment deter adoption amongst consumers.
Social media is catching up, with apps like TikTok testing their new AI chatbot Tako for answering user queries about videos and suggesting new content. The natural progression to this move will be for TikTok to monetise the incremental time spent and offer new ad formats.
As consumers increasingly value real-time interaction, community influence, authenticity and convenience when it comes to making purchase decisions, the increase of AI-led conversations is going to be instrumental behind driving convenience in shopping and healthier brand relationships. However, ensuring user trust is essential for deployment and acceptance of these AI chatbots. In the face of rising concerns on the privacy and usage of AI chatbots, brands will need to be cognisant of the challenges that come with them.
While AI can mimic human behaviour, it can often fail to understand human emotions and ambiguous questions. This can cause errors in interactions, leading to potential loss of consumers and damage to a business’ reputation. While AI bots can be personalised, when chatting with irate customers or where the conversation takes an ambiguous path, the bot may not be able to be empathetic or adapt to the situation accordingly.
Further, a danger of AI chatbots is their tendency towards harmful biases. Even if not trained so, AI can pick up on implicit biases and turn discriminatory. On the same lines, 10–50% of users’ interactions with chat functions are abusive, according to research by Dr Sheryl Brahnam at Missouri State University, and bots will need to be trained to recognise inappropriate content and respond responsibly.
The biggest concern is cybersecurity and data privacy risks posing a more direct threat to people and businesses. Chatbots collect personally identifiable information and user’s browsing activities and without the right controls, run the risk of exposing private information. While the benefits of AI are innumerable, it is imperative to proceed cautiously and ensure safety of such sensitive information.
While SEA’s eCommerce landscape has been fragmented in the past, c-commerce is a great opportunity for brands to build meaningful relationships with consumers. The increase of AI-led conversations can help drive convenience in shopping, which is what consumers are mainly asking for.
AI-led chatbots, chatbots based on advanced natural language processing (NLP) and machine learning models have the capability to deliver high-level insights to provide relevant and localised service. It can help break down the walls between physical and virtual spaces, be more inclusive through conversations with AI-based virtual assistants that can help provide the right answers to shoppers’ questions, offer recommendations based on their preferences and past purchases, and help complete the purchase journey efficiently.
This is an exciting space and the possibilities to mould technology to meet business objectives and drive customer delight are endless.