The retail industry is undergoing dramatic change, driven by evolving customer behavior and major technology trends. Conversational AI is at the center of this transformation.
With 87 percent of retailers already using AI and 60 percent planning to increase their investments in AI in the near future, one thing is clear: conversational AI in retail is now essential for companies that want to improve customer experience and optimize operations.
In the article Artificial Intelligence in Marketing, we looked at the benefits that artificial intelligence can bring to this industry. In this article, we will delve more into conversational AI for retail, looking at the different ways it can be used to add value. In particular, we will look at the main use cases of conversational AI in retail.
What is conversational AI in retail?
Conversational AI in retail involves the use of AI-based software, such as chatbots and virtual assistants, to interact with customers. Conversational AI models combine technologies such as natural language processing (NLP), machine learning (ML), generative AI and speech recognition. This enables chatbots to interpret customer needs, provide human-like responses, and adapt to individual preferences.
The adoption of conversational AI in retail has surged in recent years due to changing customer expectations. After the pandemic of COVID-19, online shopping has surged in popularity. In 2023, 20% of retail sales were made online, and this figure is expected to increase to over 22% by 2027.
At the same time, customers are demanding more from retailers. They expect human-like interactions, personalized recommendations, and 24-hour instant assistance. This is where conversational AI in retail can be a game changer.
Conversational AI’s ability to deliver brilliant, personalized interactions enables it to disrupt a wide range of customer-facing processes. Below, we will explore some of the most powerful use cases of conversational AI for retail.
Customer Care
Customer service is perhaps the most obvious and widespread application of conversational AI in retail. AI-powered chatbots are now considered standard, and 73% of customers expect websites to offer them. They are also very popular: 74% of Internet users prefer to use them for simple questions.
AI-based customer support is a win-win for retailers and their customers. The former can streamline call centers by automating the handling of low-complexity problems and referring more complex ones to human staff. The latter get instant answers to questions at any time and on any device. Walmart, for example, has handled millions of customer inquiries by providing chatbots that offer instant answers to questions about order status.
Personalized purchases
Conversational artificial intelligence does not just improve traditional services. It offers new ones. Customers can now receive personalized product recommendations based on their purchase history, product research and market trends. For companies, this means endless opportunities to add value.
Beauty retailer Sephora, for example, allows its customers to take a quick skincare quiz. Based on the answers, artificial intelligence creates tailored product recommendations that suit a person’s skin type and needs. The result is happier customers, higher engagement and higher conversion rates.
Order and return management
Conversational artificial intelligence ensures that retail customers are always informed with real-time updates and order tracking. If a product arrives and doesn’t go well, customers can be quickly guided through the return process by a chatbot instead of filling out complicated forms.
Inventory and availability of products
If a customer sees the perfect jacket but wants to try it on in person, they need to know if it is available in the nearest branch. With conversational artificial intelligence technology, customers can get instant answers to questions about inventory. They can also reserve items through simple conversational chatbots or ask questions about sizes and fits.
Marketing and promotions
When it comes to retail promotions, personalized offers consistently outperform generic offers, improving margins by up to 3 percent. Customers also like personalized marketing communications-71 percent expect them and 76 percent are frustrated when retailers don’t offer them.
How do personalized marketing and promotions work in practice? Imagine an AI-powered chatbot that processes user data and browsing history, combines it with data on inventory levels and market trends, and comes up with an offer tailored to that pair of sneakers the customer has their eye on.
Feedback and sentiment analysis
The sale does not have to be the end point of an interaction. With a retail chatbot, you can follow up with customers to ask them about their shopping experience with you. Artificial intelligence can then combine data from countless customers to provide useful information about sentiment and satisfaction. This helps you understand what you are doing well and where you could improve.
In-store assistance
Conversational artificial intelligence in retail should not be limited to e-commerce. Customers visiting physical stores can benefit from virtual assistants accessible through digital kiosks and interactive displays. These virtual assistants answer customer questions, provide product recommendations, and help customers locate or order specific products.
Appointment scheduling
Conversational AI can help customers book appointments. Instead of outdated web forms, customers can simply converse with AI to specify their availability and appointment needs. In this way, high-end retailers can book customers for styling sessions, dress fittings or virtual consultations without lifting a finger.
Loyalty and reward programs
Artificial intelligence can improve customer loyalty programs. For example, a conversational artificial intelligence system can suggest personalized benefits within the application or alert customers when they are eligible for certain rewards. This helps increase customer engagement in loyalty programs, encouraging repeat sales that lead to profitability.
Support for payment processing
AI chatbots can guide customers through the payment process, helping them choose the right options and troubleshoot failed transactions. AI-powered chatbots reduce the time it takes to complete an order by up to 70 percent compared to traditional apps.
Starbucks, for example, introduced an AI-powered chatbot to simplify customer orders. Customers can talk to the chatbot and tell it what they want without having to type anything. The chatbot then forwards the order to the staff for processing.
Omnichannel customer engagement
The great thing about conversational artificial intelligence is that it can be used simultaneously across multiple channels. This way, whether customers visit a retailer’s website, app or social media channels, they will have the same flawless interactions.
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